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The Fish-Pond Ratio: Is Scaling Up The Best Business Move?

How ambitious business owners can break through the growth glass ceiling.

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How ambitious business owners can break through the growth glass ceiling.

Opinions

The Fish-Pond Ratio: Is Scaling Up The Best Business Move?

How ambitious business owners can break through the growth glass ceiling.

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SME business owners face difficult questions when managing their businesses. Is this the best financial decision? Is this person the right cultural fit? Will this make my business more successful? But the question of whether or not they should be working towards growing their business may seem to have an obvious answer. Of course you go for growth, right?

In reality, the decision to scale your business requires a lot more thought and self-reflection than many attribute to it. Ultimately, when a business owner reaches this crossroads they need to ask themselves: do I want to continue running a big small business, or do I want to grow it into a small big business?

Plan for success

Research* conducted by Haines Watts revealed that 36% of the business owners surveyed feared they would cause their own business to hit a growth ceiling. This gap in experience and skillset can significantly restrict successful transformation.

Strong leadership unlocks business potential, and this stems from the business owner’s assurance that they have the knowledge and support they need to move the business forward.

UK business owners also struggle to find time to think strategically about the future of their business, with four out of five spending 10% or less of their time during the work week planning for the future.

Having a clear plan will help you to map out the future you hope to create and allow you to see the areas in which you need to seek guidance. Without this it will be challenging to fully realise whatever you are aspiring towards.

Exploring your own personal destination is the important first step in this longer-term planning process and this is what we encourage our clients to do at Haines Watts. Success doesn’t look the same for everyone, and it can’t be defined by just one number.

While an increase in turnover, profit, people and markets are important, these are not the only important things to measure. As a business owner, your work often touches many parts of your life and the way that you live.

Before making the choice to scale up, it is important to have an idea of what success looks like to you. Think about where you want to be in five years time, how running a larger business may affect your lifestyle and your appetite for risk.

Leading transition

The growth of a business will inevitably change the organisational structure and processes, but the biggest impact it will have is on the leadership and decision making matrix. The transition of your role as a business owner can be one of the hardest aspects of a scale up to successfully manage.

As an MD of a small business, you often have sole control of big decisions, making the business more flexible and agile. Recruiting a management team and learning to share decision making with them can be hard to accept.

Management teams can ease a lot of pressure off the business owner, but simultaneously it can also make the decision making process less streamlined and in turn, more complicated.

Losing control and learning how to let go can also be difficult for owners when scaling their business. Many business owners struggle to do less of the day to day running of their business.  Putting a management team in place invariably means the loss of some of the control they once held.

Having a management team or directors also means that you may need to review your existing remuneration to fund this, which can often result in restrictions on what you can take out of the business.

This can be a hard process to get your head around and is an area that requires a lot of consideration before making the big move.

5 areas of assessment

Below are five key areas to explore, which will help you decide if scaling up is the right decision for your business.

●        Lifestyle: Do you live and breathe your business or is it a way to fund your lifestyle? Do you enjoy being challenged at work? Do you want work-life balance with time to spend with your family or doing other hobbies you enjoy?

●        Money: Do you need to consistently earn the amount of money that you are today to fund your lifestyle? Or are you willing to earn less in the short term to potentially achieve greater gains in the future?

●        Team player: Do you enjoy making decisions as part of a team? Or do you enjoy having the ability to make decisions by yourself? Do you enjoy delegating to other people, or would you rather be involved in all aspects of the business?

●        Agility: Would you cope with having an organisational structure within your business, or do you prefer a more agile, flexible way of working?

●        End result: How do you see yourself exiting the business? When would you like to retire? Do you plan on passing on the business to the next generation or do you need to build a team for a potential management buy out?

Even though it may feel like the pressure is on to grow up and scale up your business, SMEs are hugely important to the UK economy and will continue to be in the uncertain times that we have ahead.

In recent history, SME’s have often been labelled as the heart of the UK economy. In research conducted by Hampshire Trust Bank and the Centre for Economics and Business Research (CEBR), it revealed that SME contributions to the economy will grow by 19% from 2016 to 2025.

The process of scaling up isn’t right for every business or individual and it’s valuable to remember how important SMEs are and that big isn’t always better.

Chris Timms is a Group Board Member at Haines Watts.

* Survey was be conducted among 500 business owners of UK companies, from £1 million to £50 million in turnover and with between 10 and 249 employees.

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The Fish-Pond Ratio: Is Scaling Up The Best Business Move?

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