The Lloyds Bank - National Business Awards UK 2017   

 

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Achieving Scale-Up in your business

Focusing on ‘scale-up’ companies is critical to UK jobs, wealth and competitive advantage, according to a recent report from investor and entrepreneur Sherry Coutu CBE.

The UK now produces more start-up businesses per capita than the US. The report argues that, despite this success in creating new businesses, not enough of these start-ups are scaling-up into large companies, and Britain still has a lower proportion of large companies than the US and other nations.


The UK now produces more start-up businesses per capita than the US.


“We need to be more effective at identifying the companies that have the greatest potential, and making sure they can find the most talented people and serve more customers, in more countries, more easily,” says Coutu.

As a corporate founder of the newly formed Scale-Up Institute, Smith & Williamson is in a key position to help businesses achieve their scale-up ambitions, and drive those already achieving sustained growth.


The biggest challenge for any scale-up business is always the same; getting the timing right.


In this series we speak to experts on their experiences and advice for those looking to achieve sustained growth.

NBA: Hi David, thanks for talking to us today. Can you start by telling us about yourself?

DR: My name is David Roper I am a partner and head up Smith & Williamson’s Transaction Services team in Bristol and I am part of the National Entrepreneur’s Group.

Me and my team work closely with growing businesses assisting them with acquisitions, securing new debt facilities, strategic and business planning, whilst also advising on business valuations. 

"There is currently a broad range of funding solutions available...all with a strong appetite to support growing businesses"

NBA: In the economy’s current climate, what do you think are the biggest challenges for scale-up business?

DR: Currently there are a significant opportunities as well as threats for scale-up businesses. On opportunities, there is currently a broad range of funding solutions available with banks, specialist debt providers, private equity business angels and crowd funding all with a strong appetite to support growing businesses. There are also the latent opportunity where a lot of business owners would have liked to sell out some years ago but is only now that their businesses are in a position to be sold within a stronger and more buoyant economy.

Scale up businesses do have threats particularly with the potential impact of the Brexit referendum and the potential impact of the UK leaving the EU. Too rapid growth in itself can become a threat as it can put pressure on internal and accounting systems, cashflow and management efficiency. It is not uncommon for companies to double their turnover but make less profit, as overheads and margins get compromised in the growth cycle.

"It’s about being bold… but respecting the market and staff"

RC: At the larger end, Naim Audio are a client who have continued to expand their product range and into new territories, and have taken the bold step of focusing their recent efforts on their new MuSo and Mini-Muso products.  These follow a very different model from everything they have previously done, and early signs are this has been a highly successful move for them.

Although not a client, PampurredPets is another local business that has grown and continued to expand its store presence despite the economic conditions.  That group has just been sold to Pets Corner, a move that will see them having a combined store number of over 150 across the UK.

NBA : What learnings can we take from CoolLED or Naim?

RC: For CoolLED and Naim Audio I think it’s about being bold and willing to take a risk on trying something new, but at the same time continuing to respect the market, their staff, and their peers etc to preserve existing value.

"the customers themselves become the greatest advocates for business growth"

NBA: Do you have an outstanding example of scale-up, and what was different about them?

DR: A fantastic example of a fast growing company is a specialist food distributor, I can’t name them here though but let’s call them Company X.
Company X has found a niche market to provide a quality, focused product offering to. This business has at times recently been growing by up to 6% per month. The keys to its success are:

  • Identified the niche market and the characteristics which will appeal to the typical customer
  • Quality products with significant time invested into ensuring they have multiple sources of supply, availability to meet increased demand and continuity of supply, volumes sufficient to enable competitive pricing and strong gross margins
  • Highly efficient access to customers through social media so the customers themselves become the greatest advocates for the business growth with a community development
  • Efficient distribution and order taking supported by significant investment in strong IT systems and helping ensure stock holding is minimised.
  • Strong core management team
  • Strong cashflow as majority of sales are retail and pay up front with no credit risk


They’ve face challenges too including storage and supply, keeping to tight delivery schedules and promises, workforce and management as well as ongoing innovation and quality

"Winning would provide an exciting platform for future growth with the recognition of the company’s achievements to date"

NBA: 6% a month is incredible, how has X maintained this without falling apart?

DR: It would be easy for the company to start disappointing customers on product quality and delivery as well as struggling on stock holding and margins, but it has executed a strong strategy to ensure these have not been issues. It also has the risk that as it has such a strong social media following that if it were to start failing in some of these areas the news could spread fast.

NBA: So what learnings can we take from Company X and their impressive strategy?

DR: I’d say the key learning points are to work your market niche, become an expert be highly efficient in your route to that market, as well as managing your key risk areas early on.
Top tips for companies looking for sustained growth would be:

  • Ensure you have a strong product proposition
  • Know your market and ideally target a specific niche
  • Maintain your margins
  • Don’t allow overheads and typically cashflow, to get out of control
  • Critically examine your business plan and ensure you have contingency planning for areas such as lack of sales, supply bottle necks and labour and skills shortages.

“To achieve sustainable growth you need to have strong differentiators from the competition.”

NBA: As well as things to replicate, what should scale-up potentials be looking out for?

DR: There are still lots of “me too” businesses out there and to achieve sustainable growth you need to have strong differentiators from the competition. Price competition is a dangerous game to play and growing businesses can become busy fools if they are not careful.

NBA: What would you say to those looking to enter the Scale-Up category at this year’s Awards?

DR: Being the Smith & Williamson Scale-Up Business of the year would put a real marker down amongst competitors but will also provide an exciting platform for future growth with the recognition of the company’s achievements to date. It will be a fantastic showcase for the business with the endorsement of the expert panel of judges demonstrating why this a business for tomorrow – whether you are a customer, supplier, banker or investor.

NBA: Really insightful information David, thanks for your time.

DR: Thank you.

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“"It’s about being bold… but respecting the market and staff"”​

Rebecca Combes speaks about the need for a Plan B if things don't work out, the need to source talent for growth and the Scale-up energy in the South of the UK.

SCALE-UP INTERVIEWS PART 2

"Adapt, review and change as swiftly as possible whilst managing the risks"

We speak to Krista Woodman about getting the timing right to achieve sustainable scale-up and having the resources to back it up.

Jeff Seldon gives us his insight into growing businesses, and making the most of your advantages while you still can.

SCALE-UP INTERVIEWS PART 1

See the Scale-Up category

Find out what our judges look for in a Scale-Up entrant and see if you qualify to enter.

SCALE-UP OF THE YEAR AWARD

Smith & Williamson

The firm has a dedicated entrepreneurs group which understands the complexities facing growing businesses and their owners, providing end-to-end services to meet their needs.

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