Expanding your business

By KATIE TAYLOR FOR MAILONLINE
Updated: 07:28 EST, 22 May 2006

ONE in three firms fails in the first three years, but those that make it past the danger period have great opportunities for growth and can considerably increase their enterprise and earnings. But boosting your business to the next level takes serious extra investment.

This week, Financial Mail helps companies find the best source of funding. And business owners can learn how to plan for expansion and support their staff through the upheaval that accompanies a period of growth.

The business has survived the start-up phase, it's been trading for a few years and built up a strong customer base - now is the time to think about growth.

While securing finance for development is vital, the real key to expansion is good planning.

But many small business owners overlook the need for a growth strategy. Neil Cunningham, who runs Cunningham Business Development Services in Sunderland, Tyne and Wear, says: 'Many see opportunities for growth and set out to capitalise on them without first establishing whether they are in the best position to do so.

'Before expanding, a business owner must address key questions: where is the company now and where does he want it to be in five years? Will expansion be within the current sector or are there opportunities in other areas? And what resources are needed to achieve growth?'

Owners can conduct simple diagnostic tests to assess their business's strengths. In particular, they should ensure that staff and production equipment can cope with increased business.

Business owners must understand their market, know where the opportunities are and what the competition is doing. 'You must be up to speed on pricing,' says Cunningham. 'The only way to gain an advantage is to watch competitors.'

Red tape and tax remain two of the biggest barriers to growth, so owners must be aware of new regulations or initiatives. Business growth invariably means bringing in new blood, though it is important not to lose the culture that created a company.

Direct Response, a call centre business launched by four entrepreneurs from a garage in 2001, now employs 30 in its head office in Hammersmith, west London. It operates in the capital and Ipswich and is on target for turnover of £4m this year.

Sales and marketing director Ian Mitchell, a co-founder, says: 'We have grown quickly and recruited quite a lot of staff. Bringing in new people can lead to problems and that was something we were determined to avoid by making sure we found candidates who shared the values of the company.'

But achieving a high level of workplace commitment is not easy in an industry with a high staff turnover. 'It's a challenge,' Ian admits. 'But driving sales is critical to our growth, and the key to finding and retaining people who can help us to achieve that is to motivate staff through recognition and reward.'

This includes presenting awards and trophies for such things as reaching targets and for 'employee of the month'.

Growing businesses can benefit from outside help and guidance, either from a business adviser or mentor. The regional network of Business Links and Enterprise Agencies are a good starting point for smaller firms.

George Derbyshire, chief executive of the National Association of Enterprise Agencies, says: 'When a business starts to grow, the role of the founder changes. They spend less time working in the business and more time working on it, a fact that many either fail to anticipate or struggle to adapt to. Mentoring can help by raising questions, highlighting key issues and acting as a sounding board.'

Even when planning for growth, small business owners must stay focused on the present. By throwing everything into winning new customers, a growing business risks losing its existing client base.

Cunningham believes that the best defence policy is a customer satisfaction survey, a simple exercise that asks for feedback on performance.

• For more information, visit nfea.com, businesslink.gov.uk and iba.org.uk.

MAKE SURE YOUR SALES TEAM SHARES THE SAME GOALS

CENTRAL to any expansion plan are sales targets and having people who can achieve them. This could mean recruiting a new sales team or developing the skills of existing staff. But when money is tied up in preparing for expansion, owners may see investment in training as a waste.

Rob Barham, chief executive of sales and marketing training company Tack International, says: 'When companies start up, owners sell through passion and enthusiasm - they know their product or service better than anyone.

'As they start to grow and additional sales staff are required, it is vital to maintain the same level of understanding of the business, products and, most important, customers.'

It is possible to increase sales without recruiting extra staff, by using self-employed sales personnel and paying them commission.