Many small firms struggle to achieve significant growth, staying pretty much as they were when the business started. Others move from small time to the big league, often very rapidly. So, what is the key to achieving significant growth and could your business make that leap?
We speak to two leading consultants and two successful entrepreneurs – Laura Tenison of JoJo Maman Bébé and Will King of King of Shaves, who have both steered their businesses onto phenomenal success – to find out the secrets of growing a small business into a much larger and more profitable venture.
Gerard Burke, director of Your Business Your Future Ltd and Senior Visiting Fellow at the Cass Business School
"Businesses of all types in every sector are capable of significant growth. The constraining factor isn't the business model – it's the ambition and capability of the owner-manager, although it may take longer to grow in some sectors and some business models can be scaled more quickly than others.
"Many owners simply don't want their business to be large. Most owners want their business to be better, but that doesn't necessarily mean significantly bigger. Also, the level of ambition an owner has tends to vary over the life of their business – and there's nothing wrong with that.
"Some owners with ambitious growth plans don't have the management and leadership capability to achieve them. The more far-sighted recognise this and invest in their own development.
"If you are to achieve significant growth, your processes and systems will need to change. And people who were right at the start may not be right as the business grows. The owner will have to change his or her own behaviour and move from 'hero' to 'strategist', which is a great challenge and often one of the biggest barriers to growth.
"To achieve significant growth, the owner must be passionate. They also need to be clear about their own personal goals and drivers, and be prepared to change their own behaviour and invest to make that change if necessary. They must also be able to articulate a vision for the business that inspires others and have a clear plan of how to get from where they are to where they want to be.
"Nearly 90% of successful growth businesses grow by selling more of their existing products and services to existing customers and others like them. Most businesses grow organically. You need to invest in the best people and master key numbers – cash and then profit.
"Growth puts strain on cash, that's why more businesses fail when growing than when shrinking, so having a rigorous cash flow forecast and monitoring it closely are key. You must also be able to fund your growth, of course.
"People are another vital part of it. When we ask successful owners what they would do differently if they had their time again, consistently they reply 'invest in better people earlier'. Growth is difficult, so, you really must want it passionately, understand why you want it and think through the implications fully."
"Some small business models just aren't scalable, while some owners simply don't wish to grow. It's a myth that all businesses have the potential to grow. Most are lifestyle businesses, owned by people who are content to earn enough money, pay the mortgage and send their kids to a half-decent school.
"And few owners have the skills or aspiration to be 'business growers'. The growth mindset is very different to the 'business as usual' mindset. You can divide business owners into 'lifestylers', 'business growers' and 'business harvesters'.
"As well as high-demand products or services, to really grow your business you need to take advantage of scale and often that requires working with a larger partner who has the required footprint and resources.
"To 'jump-start' one's growth usually requires significant additional resources – usually cash – but caution is advised. Many high-growth businesses go bust. The real issue is 'over-trading', when, despite rapidly growing sales, your cash flow falls apart because you can't fund the increased output.
"Running a larger business doesn't suit everyone and trying to get there can create an enormous burden on one's lifestyle. Growing a small business significantly is a major challenge and although it's something that many people aspire to, in truth – very few people succeed."
- Robert's latest book is Grow Your Service Firm: How to run a successful service-based business
Laura Tenison MBE, founder and managing director of JoJo Maman Bébé, the multi-channel mother and baby specialist
"There was no specific 'turning point' for my business. JoJo has grown organically from a kitchen table start-up with first year turnover of £30,000 to our current size with more than 70 UK stores and trade customers in 40 overseas countries.
"Re-investing in the business and not taking money out for the first 18 years was key to my success. Owners need to believe that their business is the very best place to invest; be patient, never greedy; and keep innovating. Never rest on your laurels – a business needs to grow and improve each year to survive.
"Taking a small business to the next level requires hard work, perseverance, great customer service and a good product – they're all key. I'm not a great believer in over-gearing a business; I prefer the manner in which we have expanded slowly and sustainably via organic growth and reinvestment.
"Having a great team is essential, too, but only invest in them when you can afford to. In the early years, have faith in your own ability and learn every area of the business. When you can afford to employ professionals, they will almost always do a better job than you did, so trust them and let them take the responsibility they deserve."
Will King, founder and CEO of King of Shaves
"When I started the business it was just me, a box bedroom and a computer running at 16Mhz. It was 1993. There was no web, no Google, all I really had was a phone and my brain.
"My first-year sales were £300 and my losses were £30,000. I remember, early on, spending two whole weeks filling 10,000 shaving bottles at my kitchen sink by hand, but that saved my business £2,000. Then we got into Boots, which helped to contribute to second-year sales of £58,000; then Tesco, and third-year sales of £250,000.
"Things have certainly changed. In financial year 2013-14, our turnover was £5.1m. Now, only Gillette and Nivea are bigger than us in the UK. The business has 15 staff and our key markets are the UK, USA, Australia, New Zealand, Turkey and Japan.
"How do you grow a business that quickly and significantly? First you must realise you can't do it on your own; you'll need a good team around you, although your knowledge of your business should be second to none.
"You then need to learn the art of delegating responsibility to great people. Finding great people is the key to success. It frees you up to keep imagining where the business has to be in two-five years. And, you can't do that if you're 'head cook, bottle washer, front of house and security'!
"So, if you find someone great – hire them. And you never know when you'll meet them – I met Andy Hill, my CTO, while snowboarding in Val d'Isère in 1993. Be cautious about bringing in people from big companies. Often they miss a lot of the benefits and struggle to understand that they actually have to do things, like selling, rather than just 'driving' spreadsheets.
"If you want to move from small time into the big league, you have to constantly enthuse about what you're doing and excel at doing it. And above all else – enjoy managing and developing your business. If it's a daily grind for you, you'll wear down others and never get anywhere."
- Will's book – How to Build A Great Business In Tough Times – is available from Amazon in hardback and Kindle versions.