How SMEs can overcome common barriers to growth
Each business has a unique set of barriers which may be preventing them from looking to expand. Here are some of the most prevalent issues in the SME community.
In his blog for The New York Times, business speaker and entrepreneur Jay Goltz outlined the way in which businesses can fail. He wrote: "They can stay in business but fail to reach their potential, or fail to get beyond mediocrity, or just fail to grow."
Research from the Department for Business, Innovation and Skills (BIS) showed that in 2011 67% of SME employers had an aspiration to grow over the next two to three years, but only about 20% will grow each year.
Enterprise Nation, in association with Sage One, has launched a nationwide campaign to aid SME growth potential by 10% over the next year. "The measurement of growth has historically been focused on the performance of big businesses," said Enterprise Nation founder Emma Jones. "Yet all evidence points to the record number of small businesses that are on the verge of growth."
So what are the SME barriers which they face when looking to expand? Of course these differ depending on location, industry and business structure; however there are certain issues which all entrepreneurs with need to deal with.
Simon Veale, a director of Global Freight Solutions, believes that for product-based companies, lack of effective delivery operation is a big issue for businesses looking to grow - particularly for those trading online.
He says: "Companies may have fantastic products to offer but if they can't get them to customers - either consumers or other businesses - in an efficient and effective fashion, they risk being beaten to sales by those that can."
However, it's not just the reality of providing a service which can present growth barriers for SMEs. There are a number of aspects to do with running a business which the founder may not be qualified, or have the time, to deal with. It's important to ensure that these jobs are outsourced effectively in order to ensure growth.
John Hoskin is the director of online small business accountants, CleverAccounts.com. He says: "To grow a business, you need to focus on more than the service or product. The basics of business, such as bookkeeping, cashflow management, invoice-chasing, financial planning, VAT payment and personal tax returns are often the difference between failure and success."
There are businesses looking to grow that may not get this far before hitting a hurdle. Some of the best ideas are based around niche markets for specialised services or products. In this case, a business owner could consider widening their audience by exporting overseas.
Research from the Federation of Small Businesses (FSB) showed that 88% of firms are still reliant on the eurozone for their exports, and of those who don't export, some of the main barriers faced include access to finance and fluctuating exchange rates.
Mike Cherry, national policy chairman at the FSB, thinks small businesses need to be made more aware of the resources available to them via UK Trade and Investment. He says: "UKTI has clearly listened to the concerns raised by small firms and offers much wider support and advice to small businesses. Given the export growth potential among the smallest businesses they just need a helping hand to get on the way and be made more aware about the help that is out there for them and that it isn't just for big businesses."
Key to growing your business, whether you do so in your own town or across the globe, is making sure you're prepared internally. A big problem for SMEs growing organically can be the shock of suddenly having a large amount of orders or requests and no way to fulfil them.
Clive Rich, founder of the online legal service for business LawBite, says: "Taking on more staff, accepting investment or distributing shares among your fellow shareholders, building software, selling and distributing are all stages that most growing businesses pass through."
"Done properly and backed by by proper legal documents, they should be straightforward. But trying to draft important contracts yourself is not a good idea. Get it wrong and you could be exposing yourself to huge risks that could stop your growing business in its tracks - failing to protect revenue, margins or your valuation."
It's important to remember that in order to grow a business you will need to take risks and fear of doing so may be a big barrier to SMEs, which according to research from the Economist Intelligence Unit (EIU), have adopted a "notable conservatism" which is hindering their ability to grow.
Small businesses should be cautious, but also willing to take measured risks in order to expand, as long as they have planned well around logistics and management. Stewart Baird, managing partner of small business investors, Stone Ventures, encouraged business owners do just that.
He says: "Every business has skill gaps and it's vital that those gaps are plugged if it wants to move up a level. The gaps could be legal, accounting-related or marketing-based. What's key is that a lack of expertise in any one area does not hold a business back."
Content commissioned by Guardian Professional on behalf of FedEx Express
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