Moving on up: A growth strategy for sole traders and SMEs

Here, we look at how to manage a growth plan in your small company.

In an ideal world, both for the economy and for owners, the UK’s 4.8 million small and medium-sized enterprises (62.7 per cent of which are sole traders) would develop and expand. They would grow from being sole traders, to taking on their first employee, then ten and beyond. Government peer Lord Young states in his Growing Your Business report that, ‘If we helped even a small portion of sole traders to become employers, it would improve the unemployment figures and our prospects for the future’.

There’s no shortage of SMEs wanting to grow either; Lord Heseltine outlined in the No Stone Unturned, in Pursuit of Growth report that 74 per cent of SMEs aspire to expand over the next two to three years. However, reaching this goal is proving elusive for many businesses, with only about a third actually managing to increase turnover.

While small businesses can benefit from flexibility and speed, these advantages come with the drawback of limited resource. If too many orders come in at once, production capacity is quickly exceeded and customers can be annoyed at delays. On the other hand, if the phone can’t be answered because time is being spent on production and delivery or doing the yearly accounts, then new orders might dry up. It’s classic catch-22. So how can small businesses manage their growth more easily? Lord Young’s report provides an answer:

  • Increasing adoption of technology to innovate, raise finance and find new customers
  • Increasing use of shared services and outsourcing specialist functions, enabling business owners to keep costs down, stay nimble and respond rapidly to new opportunities.

It seems technology is leading the charge, or it could be if business owners know how to take advantage of it. As Rory Whelan of eReceptionist points out, ‘The use of technology can definitely help small businesses to grow, especially when they’re not ready to employ more people, because looking and acting like a larger organisation can help them win new business that they might otherwise lose to larger competitors.

‘It’s critical to give the impression of being a professional, well-resourced organisation but a casual or inconsistent image will quickly put off new customers. Even a seemingly simple task such as answering the telephone, often the first point of contact a potential customer has with your business, needs to be consistent and handled with professionalism if you are to look and sound like a credible option.’

But hold on! Before rushing out and buying the latest laptop or VoIP phone system, the first step is to get a growth strategy in place, because you don’t want to leave this to chance. In principle, it consists of answering the following questions: where are you now? Where do you want to be? And how are you going to get there? The answers to all these questions will of course be unique to each business, but there is an answer to the third question that is generally applicable to all businesses:

The adoption of technology and shared services Lord Young talks about simply helps you implement one of those options – technology isn’t a replacement for a strategy. Each way of growing comes with its own set of risks too. Buying another company will need a lawyer and serious investment and perhaps even involve a change of company status and come with a whole new set of obligations. Striking up a partnership might also need a lawyer to help you draw up a non-disclosure agreement or service level agreements.

Employing people might seem like the quick and easy option but it still needs careful thought. It will require time and energy to find the right person with the right skills, experience and attitude. And if you are a sole trader, will you trust them to get on with the job or need to oversee them every minute of the day? Learning to delegate and relinquishing control is no trivial matter. Most sole traders started up because they wanted to be their own boss so you need to remember why you started up; was it to grow, which implies hiring others to help you achieve your goals, or was it more of a very personal lifestyle choice? A good alternative to hiring directly is to outsource, sub-contract or hire freelancers. This can buy you time and save you a lot of administration until you truly are ready to hire your first, or next, employee.

Help is at hand though. If you’re ready to grow, or find yourself struggling with developing a strategy, or simply want to plan your approach with expert help, you could tap into services like Growth Accelerators which aim to enable businesses to develop new connections, sources of investment and ideas.

One thing’s for sure, the consequences of not growing aren’t complicated to foresee: things will stay exactly as they are. You won’t grow, you’ll still be doing 60-hour weeks, and you’ll continue to bear all the responsibility and stresses, even if you do enjoy all the profit.

Further reading on growing a company

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