It seems that the small business landscape is looking optimistic right now with 67 per cent of businesses seeing conditions as “good or excellent”, up from 60 percent a year ago according to Capital One’s latest Small Business Growth Index.
It remains that small businesses have the ambition to grow but even with such optimism, there is the potential for growth plans to be foiled time and again. The result is that only a small per cent actually achieve growth at the level they aspire to, largely because the reality is a world away from the desire.
In fact, the barriers to achieving business growth are very real, whether this be down to cashflow issues, access to working capital or supply chain problems. But as every business is unique, the challenges to achieving growth can be very different.
And in a lot of cases, the main growth hurdle is actually the business itself and the fact that, operationally, it is simply not ready. The right team and skill sets may not be in place, competitor and market intelligence may be lacking or the right processes may not have been implemented yet.
Here’s a round-up of five of the most common challenges to small business growth and how you can prepare for them:
- Responding to business indicators
The operating patterns of your business can be the best tell-tale sign of where and how you should seek growth. Regularly monitoring key areas such as the sales pipeline, conversion rates, costs per sale, market demand and competitor trends will help you to identify the most viable opportunities to grow.
This could mean that you spot success in a particular market or location, and therefore the potential to expand into another. A large sales order in a particular industry may open the door for other similar deals. A sales pipeline that is trending favourably means you are consistently closing some deals at a profit and should do more of the same.
Being familiar with the way in which your business is operating and the trends it is displaying puts you in a great position to spot growth opportunities. But ignoring these key indicators could leave you unable to prepare for growth, meaning that you can’t grab opportunities as they arise. Or worse, you pursue growth based on preference rather than insight.
- Cashflow demands
Cashflow dilemmas, whether foreseen or unexpected, are up there amongst the most common causes of small businesses failing, alongside a lack of demand and poor management.
Although planned as part of a long-term strategy, growth comes at a cost and businesses generally have to spend money to make money; stock must be procured, marketing campaigns executed, and new employees hired. If this increase in outgoings becomes higher than your income, even temporarily, then paying your bills can become impossible.
In preparation for growth, you need to create a cashflow forecast for the next few years. This will not only help you to manage your money but will start to prepare your business for external investment should you need a cash injection at some point. Invoice financing, crowdfunding and business lines of credit are all viable short-term solutions for fixing a cashflow dilemma.
- Managing your competition
Being in competition is a healthy state for most businesses and can be a great driver for growth if it is approached correctly. Striving to be better than your competitors is a given but can also be pointless without the full knowledge of where you stand against them.
Whether you are already in the market or are the new entrant, a robust competitor analysis is essential to understanding the position you currently hold versus the one you aspire to. You need to define where your opportunities lie in relation to others as well as the threats you might face in a competitive environment.
The truth is that most businesses are actually unprepared for the realities of fierce competition and quickly lose their way in an effort to firefight this new challenge. You need to be able to differentiate yourself from the competition and be clear about the value you provide in comparison to them.
Maintain a clear focus on what you do best and always communicate this to your target audience. But be sure to regularly review your proposition against your competition to validate your offer and make sure it still has comparable merit.
- Nurturing talent and culture
Surrounding yourself with a great team is essential to achieving successful growth but don’t leave it too late to define the skills needed to achieve this. Securing and nurturing the best (and the right) talent is not always easy (or quick) and you need to forward plan to make sure your key roles are filled with the best resource.
A positive working environment is also essential. It affects, and is affected by, everyone in your organisation and the more you grow, the harder it is to keep this under control. From the outset, you need to define clear value and vision statements for your business and build a team that champions these – with allies on your side, the business culture you’ve created will flourish.
- Growth associated risk
Any phase of growth, regardless of age or size of business, will carry an element of risk simply because you’re planning changes to your business. A robust growth strategy should therefore carry a ‘Plan B’ for various scenarios along the way, allowing you to navigate any hurdles you may come across.
You should be able to identify the obvious risks (and threats) from your overall business plan meaning that you can be prepared for, and in some cases control, the consequences. The biggest challenge is often making sure you can afford to grow in the first place and having a strategy in place to fund the risks involved.
Demands such as expanding your team, improving manufacturing capabilities, meeting additional (and unexpected) expenses and controlling cash flow are all risks you will need to take in order to grow. The challenge is not only being prepared to take them but doing the planning in advance to successfully overcome them.
In summary, the key to overcoming growth challenges is to set milestones and be prepared. And it’s not always the long-term planning that counts. There are a lot of factors (including external) that will impact a growing business, and this can make predicting the next 5-10 years difficult. Go for a handful of short-term goals and make sure they are specific, achievable and measurable to give you and your team a realistic focus.
If you’re looking to grow your business but need some advice on getting yourself prepared, including how to approach investors, speak to one of our advisers for some expert guidance on how we could help.