In a small and medium enterprise (SME), the need for growth comes with the territory – after all, nobody goes through the legwork and efforts of a business’s early days to not see revenue, headcount, profit – or indeed all three – strengthen.
But a sea-change is brewing in how and why SMEs seek growth. This is because so many factors are now acting as a brake on business performance – the aftermath of the pandemic, supply chain interruption, skyrocketing inflation, spiralling employment costs, crippling energy price rises – that in many businesses a minimum degree of growth is becoming necessary for survival, not just success.
Simply put, if you don’t grow – particularly with a recession in the UK predicted by the end of the year – you’re likely to go backwards, and that will not end well for you.
So what does growth look like, and how do you achieve it?
Here’s our guide.
Ten SME Growth Tips for 2022
- Tackle costs from new angles
Take decisive action against rising costs to prevent them strangling growth. This doesn’t just mean shopping around for the best energy and other supplier deals (although that’s critical!), it also means considering approaches like making larger purchases before prices rise again, outsourcing non-critical processes, or including clauses in contracts that enable you to vary prices more flexibly and at shorter notice, in response to changing market conditions.
- Keep pricing savvy
Prices are volatile at the moment, and are likely to be so for the foreseeable future. Customers will certainly appreciate your passing on decreases when they occur – but don’t just do that automatically. To underpin business growth, product development and innovation must still happen, and pricing needs to be kept at a level overall where it can still fund that investment. Small incremental price increases, where customers are likely to be less price sensitive, are better than no increment at all.
- Revisit your offering
A key driver of business growth is closeness of fit between what you sell, what customers need, and what trends demand – and this can change greatly over even a brief period.
Some focused market research and segmentation – coupled with some helpful strategic insight from experts outside your organisation who can bring a dispassionate view to the table – can help you upgrade your products and services and the messaging around them, driving the growth both of your existing book and net-new prospects, whilst also identifying opportunities for you to put up your price.
- Major on partnerships
Expansion, whilst it can deliver growth, can be costly, and comes with significant risk. But focusing on creating partnerships potentially delivers far more growth relative to the investment and effort involved.
Look for other successful and growing businesses within your industry, who aren’t direct competitors, that you could partner with to reach (and add value to) a wider audience in your target markets. Work out how the revenue share model should best work (seek advice on this from a Finance expert if unsure), and run an initial promotion to establish appetite.
Thereafter, if all good, rinse, repeat – and find the next partner.
- Diversify (the what and the how)
Growth can of course be about extending the range of items or services you can sell, but it’s also about finding ways to make their consumption by the customer more frictionless and financially accessible (for their benefit), and more repeatable and predictable (for yours).
A subscription model, for example, creates a revenue stream for the future through which any number of regular, repeat-purchase products and services can be diversified.
- Keep your eye on budgets
There’s no escaping this one, and it’s something of a vicious circle. Future growth is undermined by poor budget management, and periods of growth often result in bad financial decisions and slack budgeting because it feels like there’s money to burn. Which, of course, undermines future growth – and so on and so forth.
Strong budgeting and regular forecasting is the bedrock on which sustained growth in a healthy business is built, and if you haven’t got the Finance expertise in place to manage it, you’re probably going to need to look for some outside help.
- Don’t cut back on marketing!
Cutting back marketing spend during difficult periods and downturns can have the most negative growth consequences imaginable.
Studies (and empirical evidence) have consistently shown that, firstly, businesses whose brand has the credibility conferred by strong marketing convert sales more effectively, and, secondly, that share of voice during economically challenging times tends to equal share of market after them. Buyers ultimately come back to what they trust, as long as they’ve been effectively reminded of the reasons to trust it!
In other words, don’t plough your marketing spend into pure-play sales activities and expect revenue growth to multiply, because it won’t. (Even a Finance expert will take Marketing’s side on this one!)
- Cherish and retain employees
HR News tells us 2022 brings a “once in a generation shift in employee benefits and wellbeing… as SMEs review their benefits and wellbeing programmes in response to the pandemic or look to invest in benefits for the first time.”
So, what are you doing on this front – and in the face of the changes in office working practices – to contribute to your business’s growth?
How are you maximising your teams’ engagement and productivity through an effective, healthy work-life balance? How are you incentivising and rewarding them? How financially attractive is that package? What measurable returns does it bring to the business, and how tax-efficient is it?
Now more than ever, growth is a people thing – but like everything in business, the price tag and payback must come with a strong business case.
- Optimise cashflow
Cashflow is king, but this doesn’t only mean getting money into the bank rapidly and repeatedly. At its most effective, it means billing and converting sales to cash more quickly than you pay for the associated costs.
Businesses that can pocket sales revenue before they have to foot the bill for making the sale possible in the first place will do best!
- Glean insights – and make them pay
Good MI – Management Information – is the key to unlocking opportunities in your business, understanding where all is not what it seems, and analysing trends to ensure you’re prepared for what’s coming next.
Do you know your most profitable goods and services, so you can sell more of them, or cut out the least profitable ones? This is just one of many business-boosting insights that strong MI tools and processes will deliver – and the results will go straight to your bottom line.
For more information on how you can use EFM’s team of Finance and business management experts on a pay-as-you-go basis to help your business drive growth and deliver successfully in the most challenging economic conditions seen for many years, get in touch today.