However, the reality of a small business in its first stages is much bleaker. Being a small business owner often involves doing debtors ring-rounds near the end of the month and being rebuffed by the banks they approach about a loan that would allow them to take on a couple of big new orders.
In the recruitment sphere, small companies have the added burden of being unable to rely on an HR department to help them find talented team members that would improve their processes.
According to the British Business Bank, this picture is characteristic of 33% of smaller UK business owners who want to grow, but are unsure how to do it.
In a recent report, the Association of Chartered Certified Accountants (ACCA) explored how small businesses can scale up by improving their productivity, turnover and job generation.
Barriers to growth
According to ACCA, the five main barriers for small businesses are: domestic market conditions; recruitment and skills; global trade environment; access to funding; and regulatory compliance.
Where companies might have limited control over external drivers such as the economy or industry in which they operate, ACCA’s report Scale-up success: What do SMEs need to supercharge their growth examines some of the behavioural steps that small businesses can take to overcome these barriers.
Based on a series of surveys and interviews with high-growth businesses, ACCA catalogued the strategies these firms applied and suggested that other companies should follow their examples if they wanted to accelerate their growth.
What success looks like
What growth looks like for a small company depends on its stage in the business lifecycle. Both start-ups and established businesses measure growth by their increases in profit and customers. However, high-growth small businesses also focus on indicators such as increases in productivity and research and development, or international expansion.
The ACCA report also suggests that staff and research and development are even more significant factors for companies that have seen a fast increase of 20-30% in their turnover.
How to scale up success
The ACCA offered the following recommendations for small and medium companies looking to scale up:
- Define the purpose and vision of the company: Leaders must define the purpose and vision of their organisation. These values must also drive employee targets and incentives. A strong company culture increases the staff’s commitment and keeps the organisation together during periods of growth, ensuring its foundations stay the same even when new people join or when operational complexity increases.
- Establish a governance framework: The organisation’s board can support the strategic direction of the business and help with the challenges that it might face, such as difficulties managing cashflow. If necessary, the board can also challenge executive decisions to ensure the company stays on track.
- Create a management team: The management team beneath the board should have a mix of skills and experiences to deal with the challenges the business might face during its lifecycle. Dealing with new products and suppliers, and managing the resources to deliver them can be difficult. Founders who want to keep control over all aspects of their business may struggle as the organisation grows or its customers’ demands change.
- Integrate finance: The finance function should understand the organisation’s wider goals and find ways to add value across the business. This is where a CFO or FD can help a rapidly growing business by bringing strategic support to bear and gaining access to new sources of finance. Handing over administrative tasks like payroll, credit control and management reporting to a virtual finance director or financial controller can be a cost-effective solution for small companies, which can also benefit from their strategic input and advice for a lower annual outlay.
- Use the right tech: Technology is essential for businesses that are in the process of scaling up, as they often need additional resources to manage the growing complexity in their processes. Small businesses need to integrate scalable technology and find the solutions that match their objectives.
- Find external advice: Companies trying to scale up can improve their resilience by obtaining professional advice from an expert business network.
- Build a funding network: Although small businesses usually presume external funding is not for them, research shows that high-growth SMEs are more likely to have obtained advice on external funding.
The most successful businesses, ACCA concluded, are the ones which articulate a purpose and vision that feed into the creation of a growth culture and overcome the challenges they will encounter throughout the growth process.