A recent survey from Hitachi Capital Investment Finance found that 27 per cent of SME owners don’t plan to invest at all in their businesses over the next 12 months. So does this mean they’ve turned their backs on growth, asks Martin Vessey.
I don’t think this is the case. A more likely explanation is that although they have every intention of expanding, they’ve done absolutely no planning into how they’re going to get there.
Busy SME owners all too often fall into the trap of just expecting growth to happen ‘naturally’, without taking active steps to prepare for or nurture it. Too caught up in the day-to-day running of their businesses, they fail to put the steps in place that are essential for steady and sustainable business growth.
Where is your business now, where do you want it to be and by when? Set yourself a target in terms of revenues/margin, new customers or additional sales to existing customers. By setting a tangible goal you are then able to review your progress on a regular basis and make any changes as you deem necessary to keep you on track.
Research your market sector and current customer profiles to ensure that you fully understand who you are selling to. This will help to put you in a position where you can target new business, or upsell to existing clients with relevant products and services. It will also be useful to identify who your competitors are and what they are doing well – and badly.
Review your current customer list to evaluate the growth potential within it. It is an easier win to sell more to an existing customer than to find a new one. But bear in mind that you are making yourself vulnerable if any one customer provides more than 15 per cent of your sales revenues. A sustainably growing business never puts all its eggs in one basket. A common cause of business failure is losing a customer who provides a significant proportion of your turnover.
Do you have the right people in the right roles to support business growth? Prepare for your progression with a review of your current internal teams, suppliers, partners, IT and operational processes. Run meetings on a regular basis for all concerned and delegate roles to those people most suited to achieve the objectives.
Getting ready for growth will have an impact on the finances of any business, whether it is new stock provision or additional internal and external resources. Prior to the growth activity it is prudent to plan for the additional costs incurred in developing new business and how this will be funded.
Use of bank overdrafts, self-invested funding or additional bank funding tends to be a first port of call. Alternative sources of funding for small and medium-sized firms include peer-to-peer lending and angel investors.
A big question to ask yourself is if you can sustain the level of growth you are planning for. Areas for continuous review include cash at the bank, sales activities for new business acquisition, marketing actions such as digital media activities, lead generation, conversion rates and average order values with new clients.