The UK remains one of the most enterprising places in the world. According to Companies House, more than 670,000 new businesses were registered between 2018 and 2019, equating to 4.2 million companies across the country in total.
Each SME will be intent on achieving success, but while most will have a business plan, a growth strategy can be what sets the best apart. These comprehensive policies which focus specifically on expansion enable firms to succeed by defining their growth goals and, crucially, how they will accomplish them.
Choosing the best approach for you can be challenging. We consider some well-known growth strategies and explain their advantages.
1. Market penetration
For many SMEs, the most obvious starting point is to sell more products and services in their existing market. To do this successfully, businesses should have a sound understanding of their key market segments and customers, so they can identify where profitable gaps may exist. They must then improve their brand’s visibility within these spaces.
In B2B sectors, increased market awareness could be accomplished through mutual connections, by running an advertising campaign to increase inbound leads, or by using telephone prospecting to generate outbound leads. The ultimate goal will be to convert these leads into more sales.
Increasing market penetration is a low risk strategy, after all your target customers are tried-and-tested, but many companies will still need to free-up additional working capital to increase inventory or invest in support operations.
If your business requires additional funding to support growth, consider releasing cash from your unpaid customer invoices as soon as they are raised. Find out more about invoice discounting.
2. New markets and alternative channels
Another strategy to increase your sales portfolio is to expand into brand new markets. For example, if you’re a recruitment firm focused on construction contracts, is it time that you branched out into office-based industries? Or, if you have historically only worked offline, do you now feel the time is right to launch a website?
This tactic has clear advantages: it gives you access to a larger pool of customers, which has the potential for high sales growth, and you can be flexible in your execution, choosing whether to target a new geographical audience or a relatable sector.
Whichever way you decide to extend your work into new markets, we can help you minimise your exposure to bad debt when starting new contracts. Our credit management team will run credit checks on new customers, help you assess risks and support you in the event of a customer insolvency. Read more about our bad debt protection product.
3. Mergers and acquisitions
Mergers and acquisitions can be useful for expanding SMEs. This kind of growth strategy is often much quicker than organic development, and if completed correctly, offers a host of benefits enabling you to increase your market share and gain access to additional resources in one move.
In this scenario, a high level of planning is vital. Purchasing another business can be time-consuming and often requires high levels of financial support, so it is important to ensure all due diligence is completed and that the new SME will fit well with your existing firm.
Asset based lending (ABL) can provide higher levels of funding than invoice finance alone by securing borrowing against other assets, such as plant and machinery. If you’re looking to raise more than £2m, an ABL facility could be an ideal solution. Find out more.
4. Investing in talent
Recent research from the Close Brothers Business Barometer revealed that many SMEs believe that employees are the most valuable part of their business, so it may not be surprising that investing in talent can help with growth.
Unlike some other strategies for expansion, nurturing the skill-sets in your company may not generate instant results. However, when you align talent management with your overall commercial aims, you can create a team that is able to push your business forward or even form part of your succession plan.
Considering talent management, SMEs should focus on two elements: attracting the right people, and prioritising leaning and development internally. When this is covered, you can create a high-performing workforce which will ultimately contribute to sustainable growth.
At Close Brothers, we believe your funding provider should be part of your extended team. We’re proud to offer a people-led service and work closely with each of the businesses we partner with to ensure they have the support they need to thrive. Find out more about our customer service.