A strong SME sector is important politically too. The employment generated by SMEs leads to an increased middle class. In most countries the middle class drive economic growth.
The Centre for American Progress says a strong middle class is necessary for entrepreneurship and innovation. It is a forebear of constituencies that hold progressive values around society and education.
In the 1980’s Harvard Business Review conducted an in-depth study with small companies leading to the identification of five stages of growth. They continue to ring true for SMEs in many industries:
Existence: initially small business owners are concentrating on building a customer base and successfully delivering products or services to them. These early days are often fraught with concern around the viability of the business and whether they have enough resources to meet their needs. SMEs that successfully achieve this for a sustained period of time can look forward to moving to the second stage.
Survival: once the basic business concept is proved successful the next stage is to find the balance between revenue and cost. At this point owners and management are most concerned with earning enough to break even and covering unexpected costs. They may also begin to forecast when growth might be possible so their business can reap the economic and employment rewards.
Success: moving out of survival is a pivotal moment for owners as their business has become economically healthy. SMEs may choose to take a risk and finance growth or maintain the status quo and maintain itself indefinitely, once external factors allow. Some SMEs choose to merge or are acquired by bigger businesses at this point.
Take-off: SMEs in this phase have to work out how to grow quickly but most importantly how to finance their growth. This is a challenging period for many SMEs as they grapple with the financial and operational costs associated with expanding. Important decisions have to be made relating to the structure of the business and aggressively managing finance.
This is a point at which a proportion of SMEs may look to international expansion to grow their client base. Failure at this juncture often occurs if the business runs out of funds or is unable to delegate to other employees in the business.
Resource Maturity: at this point SMEs have the structure, financing and staff to conduct detailed strategic planning. All of the processes and experience should be in place for the business to continue to succeed. The primary threat to growth and success at this point is a corporate culture that does not innovate or take risks. For this reason developing a company culture that is agile and adaptive is critical.
Understanding why growth matters and what it looks like is one thing but how to get there is the most difficult question to answer for most SMEs. Unfortunately, there is unlikely to be many quick wins or easy answers if you are scaling a business.
Like most things in life, scaling a business takes time, consistency and resilience.
It is rarely easy and there are likely to be setbacks but if you are working in a small or medium sized business you truly believe in, it will be worth it. If you really want to see the benefit of the work you are doing try not to get caught up in the short-term results, instead focus on bigger picture goals and how day to day work is helping you get there.
Similar to developing your business plan when you started your business, create a written SME growth strategy containing SMART goals that you can measure progress against.
1. Utilise software: your small business may have started tracking customers and completing accounts manually, this becomes very unwieldy very quickly as you try to scale your SME. For example the right Customer Relationship Management (CRM) tool tailored to SMEs will help you consolidate marketing, sales and service on one platform. The right software for your business will depend on the industry you are in but there are lots of options out there.
2. Build a sales funnel: one of the benefits of utilising a CRM is it will allow you to more easily build a sales funnel for your products or service. In order to do this successfully you must understand your core target markets, develop buyer personas and map out each stage of their journey to buying your product or using your service. This will help your SME create marketing and sales material to help your target audience find your business and move to the next stage of becoming a customer when they do.
3. Research competition: it is essential for your SMEs success to understand who you are competing against, locally and as you scale nationally. It is also worth further dividing competition into online and off-line particularly if you are operating a commodity for sale.
4. Identify opportunities: the customer analysis and competitor research may help you identify additional opportunities your business could provide. For example, if your business provides a service, could you also provide training in that service to others as an additional revenue stream?
5. Leverage platforms: if you are selling a commodity and find yourself competing against global players like Amazon or Ebay, consider joining Amazon’s FBA service to get your products in front of those searching for items on that platform.
6. International expansion: last but by no means least, consider expanding your SME internationally to access new markets. Would your product work as well in Asia, Europe or North America? Once you have a profitable business in your home country, it is something worth considering. Going global will require investment and risk but the potential for profit is significant.
If you do make the decision to expand your SME internationally and discover there is regular international travel involved it is important to protect the health and wellbeing of your employees. Standard travel insurance will not cover medical costs while you are working overseas, for that, you require specialist SME business travel insurance.
Growing any business is challenging but particularly an SME where finance and resources are more likely to be scarce. Let us take some of the worry out of travelling overseas for business with our specialist travel insurance product for SMEs so you can focus on getting the deal done.
