7 ways to scale your small business to £1m
Most companies will remain small, but how do you take your lifestyle business to a big turnover milestone? Entrepreneurs share their tips here
So you started a business, created a product, made some money and steadied the ship. Congratulations – but what’s your next move?
Going for growth is a brave decision, but now could be the right time to do it. Below, we hear from successful business owners with their been-there-done-that advice for scaling up, without breaking down.
For many micro and small businesses attaining sales of, say, £250,000 or £500,000 is like reaching Everest’s base camp. It’s certainly an achievement, it’s a comparatively comfortable place to stay, but it’s not the end of the journey and you can climb a lot higher.
In the post-recession world you would be forgiven for hoarding cash and insulating your business from further shocks. But the UK left the downturn behind years ago and the economic data has become – broadly – very positive, so now is a good time to shift up a gear.
Growing a micro-business into a business with a turnover in the millions is a complex task. You must create new demand and satisfy it while simultaneously scaling up the machinations of your business to cope with the additional pressures that accompany growth. Here’s how:
1. Create a clear value proposition
To grow your business it is important to identify a clear value proposition. Is there room in the market and do people want more of what you want to sell them? Mark Pearson, founder of Myvouchercodes.co.uk, created a crystal clear proposition for his site in which all parties benefitted.
“Our growth was fuelled by the fact there was value for everyone involved,” he says. “The website visitors save money by using our vouchers and offers. The retailers make more money because we send them customers and the business makes money because the retailers pay us a commission on sales generated.”
This virtuous circle saw sales double monthly initially. In the first year turnover hit £300,000 on a £300 initial investment; by year four the figure was £10m. A large part of the business’ growth story to this day is that it satisfies genuine demand.
2. Experiment with marketing
Having the guts to try and fail is an essential part of being an entrepreneur. With recession still vivid in the memory, though, this might not feel like an instinctive path to take. But by experimenting, analysing results and then going again, businesses can find the most efficient pathways to growth.
Mark Pearson used experimentation to perfect his marketing strategy while transforming his business: “I tested just about every marketing channel, but once I had data I could focus my growth strategy for the maximum return on investment.
“The statistics help you make decisions on where to focus your time, resources and budgets. Don’t be afraid to trial, test and take some risks. You must know when to cut what is not working and when to scale up the things that show early traction.”
3. Export to new territories
Tyrrells crisps is a British snack brand with world renown, but it only started exporting in 2002 not long after the company founded. The business that began life on a small firm in Herefordshire now exports to more than 20 countries including Russia, China and Australia.
Tyrrells’ CEO David Milner says the first rule of exporting is to identify demand in new territories. It sounds like an obvious point, but Milner argues too many firms focus on ‘easy markets’ which are geographically closer or share language and cultural attributes. These are not necessarily your best bets.
“Exporting your product to the closest countries or English speaking ones may seem like the simplest option; however actual demand for your product could be in a different or unexpected country. So consider looking further afield – you never know, your product could be more popular in Swaziland than it is in France.”
4.Prove new markets in person
“For small businesses paying a company to complete market research can be expensive as well as time-consuming,” advises Milner.
“At Tyrrells, we suggest simply booking a plane ticket, visiting the country in person to gain first-hand knowledge of the markets before entering. For example, if you’re in the food and drinks sector, visiting the main supermarkets in each individual country is a great way to ascertain who holds the most market share, price points and who your main competitors are.”
5. Invest in process management
As a small business owner you probably have direct lines of communication to all of your employees. But as your business develops you must turn your attention to strategic questions and leave the day-to-day operations of your business to others.
According to Andrew Laurillard, founder of the Giggling Squid chain of ‘Thai tapas’ restaurants, understanding the value of company processes was vital to its growth. The business founded in 2008 and today has 12 restaurants across England with five further openings planned.
“As the company grows and the directors spend less time at the sharp end, it’s essential to invest in information reporting and process management, to know what’s going on,” says Laurillard, who employs 300 staff at the Giggling Squid. The business grew profits 123% and sales 93% last year alone.
“Processes, once a dirty word, are now essential for keeping control of quality. The trick is to retain the same small company culture as processes step into the role that regular direct contact with the owners used to do.”
6. Outsource as much as you can
Transaction software business First Data Merchant Solutions recently commissioned YouGov to find out the biggest struggles facing small and mid-sized businesses in 2014. It discovered that daily administrative tasks were taking up too much of their time, at the expense of activities that encourage growth strategically.
The survey found that nearly seven in 10 business owners described running their operations as “a constant challenge” and a quarter admitted they spent less than an hour each day on “proactive business growth”.
If this describes your business, then look at outsourcing simple tasks to free up your own time to work on more valuable things. The internet, and most recently the Cloud, has given rise to a multitude of cheap services run by third parties in accounting, marketing and PR, customer relationship management and plenty more besides.
7. Stay agile
Related to the last point is the need for growing businesses to stay agile. Being stripped-down and streamlined means you can react quickly to new opportunities as they present themselves. This is the chief advantage of being a very small business; so it’s important not to throw away this natural benefit as you grow.
“Start-up businesses are of a size which is advantageous. Consider whether your business set up gives you the most flexibility to take advantage of new opportunities,” advises John Styring, CEO of IglooBooks, which founded in 2003 and now employs more than 100 staff with a turnover of £23m.
“It is the leanest, most adaptable companies that come out the other side as success stories. Business owners can increase their chances of getting there by streamlining their firm and adapting to the needs of the market.”