Bend but don't break
John Antunes notes that flexibility can prove key to long-term growth for SMBs during tough economic times
Breaking out of the small business mind set and infrastructure to achieve growth is not easy, and getting the balance right between fast growth and long-term sustainability can be a challenge.
Post-recession, there has been much talk about the entrepreneurial spirit of British business owners. David Cameron has said on more than one occasion that the future of the British economy lies with the grafters, in small businesses, and that the country must support growing firms.
Furthermore, celebrity entrepreneurs including Lord Alan Sugar have maintained that even in an economic downturn, a determined individual may be able to start a new business and make it succeed.
But for organisations that manage to break through the barrier of initial investment and move past the start-up honeymoon period, what comes next? And does fast growth ever guarantee long-term business success?
I have gleaned some insights by looking at how fast-growing companies have performed in the past. Recent research we sponsored suggested that one in five of the UK’s fastest-growing companies in 2000 and 2001 is no longer in business today.
It also suggested that the growth rate of fast-growing UK companies declined in the second half of the last decade, as did the fortunes of certain industry sectors, such as manufacturing.
Certainly different sectors may favour stronger business performances over time. This phenomenon can be justified and explained by macroeconomic changes in the UK.
However, that is not the whole picture. The retail sector - despite struggling in the current economic climate - has become an enduring example of what constitutes high-growth business in the UK SMB space.
Very small businesses and the larger high street brands are exposed to the perils of consumer confidence, but it would appear that high-growth, mid-market businesses can exercise flexibility through independence while also retaining a stability that very small retail companies may not have.
Changing technological and consumer demands have sparked a transition to e-tail. Since 2008 the retailers present in the fast-growing-company category have included a mix of online and offline businesses.
Stay flexible and fit
Fast-growing businesses are not solely the product of the sectors they represent. And of course it takes more than mere ambition to achieve growth. There are certain characteristics which remain constant across successful businesses, such as innovation, niche activity, management, timing and flexibility.
According to our survey, the best-performing companies of the last decade shared certain characteristics. For example, during the economic peak of 2006, companies with timing and management strengths did well. Post-recession, fast-growing businesses tended to be innovators and niche players.
Agility and flexibility are routes to growth that favour SMBs, especially in a challenging market. And it is not simply about being light on infrastructure. Services businesses may not have the bulk of manufacturers or logistics companies, but at an industry level flexibility is relative.
Flexibility enables SMBs to bring in the processes to make their leap faster and more smoothly. We try to promote flexibility where possible. This could manifest itself in workforce flexibility, technology services or a supple infrastructure. Operational complexity should never obstruct growth.
John Antunes is channels and SME director at SAP UK and Ireland