Growth is the goal for many entrepreneurs but building a much bigger business is no easy feat. Top business mentors Robert Craven and Mike Southon tell Rachel Miller just what it takes to become the boss of a much bigger enterprise.
David Cameron has pledged to help more small businesses to grow, creating a UK version of Germany’s “Mittelstand” of medium-sized firms.
While business growth is undoubtedly a good thing, can any small business make the leap and become a significantly bigger player?
External factors are clearly important – including access to finance and support. And the opportunities must be there too; gaps in the market or growing demand, at home or overseas.
But the question remains – does every business owner have what it takes to grow and run a bigger business?
“The opportunities are legion at the moment,” says Mike Southon, business mentorand author of The Beermat Entrepreneur. “We are coming out of recession, people are starting to have more money to spend, interest rates are low, now’s the time to grow.”
But, he cautions, not every business owner can, or should, go for major expansion. “There’s absolutely nothing wrong with being self-employed or running a boutique business, keeping your business the same size and when you want to retire you can simply turn out the lights and go home.”
Robert Craven, the author of Kick-Start Your Business, agrees. “Not every small firm can grow and not every small firm wants to grow. 95% of business owners are happy to pay off their mortgage and then go home. If you can retire on a decent pension, that’s enough for most of us. We only need one bed to sleep in.”
Growing a business is difficult, he says. “How do you go from setting up a small record label, for example, to becoming Richard Branson?”
It’s also stressful. “The actual pain of growing and the risks involved can be extreme,” says Robert. “For some, it can mean the difference between employing about 30 people and having time to play golf at the weekend and employing 100 people and heading for an early heart attack.”
Running a bigger business
Some people are driven by what Robert calls the American dream. “You start at the kitchen table, then you move to the garage, then to a unit on an industrial estate and then someone buys you out for lots of money.” But, he says, “this happens so rarely.”
The point is that if you are going to grow a business you are undoubtedly going to have to run a bigger business too.
“Research shows that in terms of barriers to growth, internal factors far outweigh external ones,” Robert says.
Business owners need to ask not just whether their firm has growth potential, but whether they have what it takes too.
So what does this kind of business owner look like?
“They spend more time working on the business than in the business,” says Robert. “They spend tons of time thinking why people should buy from them and not from their competitors.
“They are obsessed with strategy, with their customers, with marketing and with building the right team,” he says. “On top of that they are willing to take external advice. They recognise that they can’t do it all themselves.”
Perhaps the most important lesson is that you have to know your own weaknesses and hire for strength says Mike. “If you want to build a company, you can’t do it all yourself, otherwise there’s no scalability. Why buy a dog and bark yourself?”
“The first thing I say to businesses is start hiring grown-ups and get them to do the things you are rubbish at,” Mike advises. “Get a good accountant; get people who can ensure all your promises are being kept. There are bored grown-ups all over the place in big firms that would love a job with an entrepreneurial business.”
You will also have to systemise your business, he says. “You have to measure things and put processes in place. You need a proven business model and clarity about your strategy.”
So do you scale up, export, innovate, branch out? “All of the above,” says Mike. “You try everything, but sensibly. Try things that make sense and listen to customer feedback to guide you.”
What kind of business owner are you?
The question you need to ask yourself, says Robert Craven, is: are you an owner manager or an owner director?
“If you are an owner manager, your phone is ringing all the time, your inbox is full, you’re active on social media and you are working all hours. But as the business grows, you can become the bottleneck. You need to be able to step away from the machine.”
By contrast, the owner director is thinking strategically, they’ve got systems in place and they have created a professionally-run machine that they can scale up.
And that is the crucial difference between working in the business and working onthe business.
With growth comes a different kind of mindset, Robert says. “In the early stages you are in love with the business, you’ve got puppy-dog enthusiasm, you are the gutsy British amateur. As you grow, you need a professional manager. Otherwise you can easily head towards a crisis of delegation or a crisis of systems.”
And with growth comes accountability, he adds. “When you are small you say you are going to build a new website or go to a conference but then you never get round to it because life gets in the way. But if you are bigger, you have a board and everything you do is scrutinised and judged.”
Growth also changes the atmosphere. The tight-knit team, the drinks on a Friday night – all these will be affected as the business expands. “You’ll have departments and you won’t know everyone in your business any more,” says Mike.
“And as you get bigger your original team, which may have been like family to you, may not be working,” he adds. “There may even be someone without whom you could not have built the business but who now needs to move on. So you may have to nicely fire them. You can’t have passengers in a growing business.”
Just how easy is it to identify businesses that can go the distance?
“It’s about the people,” says Mike. “I can spot winners at 500 yards. I can tell by the way they talk to me.”
Mike cites Priya Lakhani, founder of Indian food brand Masala Masala. “She came to me for a chat when she was starting out. I tried to dissuade her saying, with respect, the only way you can succeed is to get the manufacturing right and then get the product into Waitrose which is incredibly hard. She did both in less than a year.”
What Priya has, says Mike, is “gumption”. What’s more, she was prepared to listen. “The classic warning sign,” he says, “is when you give someone advice and they keep saying ‘yes but’.”