Whether or not you agree with Lord Young's recent assertion that 'it has never been easier to start a new business than it is today', it is clear that setting up an SME is no way guaranteed to succeed; indeed one in three start-ups fail within the first three years. With this in mind, it is fundamentally important for the entrepreneurially-minded to consider the key elements likely to result in SME success, and the common pitfalls that consign a third of people's 'start up' dreams to the scrapheap.
To achieve growth in today's market, the minefield of issues faced by SMEs must be successfully navigated. While specific sectors clearly throw up unique challenges, the below includes tips that should provide any SME with the best start possible.
Investor relations - keeping a happy boardroom
Finance can be hard to come by in the post-2008 risk-averse world. In his response to Lord Young's 'out of touch' statement, Labour MP Paul Blomfield suggested that a lack of access to finance was the key reason behind many start-ups never getting off the ground. Private equity houses and venture capitalists have increased their presence in the SME world, supporting young businesses while banks continue to batten down the hatches. Further, it was recently reported that invoice discounting as a means of alternative funding has increased 16% year-on-year as companies struggle to acquire necessary finance. In such an environment, it is understandable that leaders of start-ups often jump at the first financing opportunity that presents itself - this can be a costly mistake.
You must choose the right investor rather than the one offering the first, or a seemingly attractive, deal. It is important to make sure the cultural fit between your team and your financial backers is as good as the deal on the table. They will be in your boardroom for the most crucial years of your growth.
Delegation - learn to cut the apron-strings
Once your business starts to take off, it is vital that you learn to take a step back and delegate tasks to others. This can often be difficult. As you watch your vision grow into a success, the temptation to micromanage can be overwhelming. However, if you try to remain at the centre of every decision, you will soon be overworked, stressed and start making poor choices. Businesses that are growing rapidly need direction - leaders must be willing to stand at the helm, oversee and direct.
Hiring talent - creating a narrative
In order to attract the best employees possible (always the most valuable asset of any company) it is vital that you articulate a desire for growth and offer new candidates a set of motivating challenges - the most valuable recruits always want to be part of something special. A great way of making your company attractive is to tell a story that excites the imagination. As with any great story, people should be hooked by the narrative and fascinated by the specific challenges that must be overcome.
Patience is a virtue
Ambition and vision are essential components to the success of any business however start-ups must show patience at the early stages of their growth - not dissimilar to a game of Monopoly, although the stakes are far from akin. Patience is essential, start-ups must learn from mistakes and constantly improve the service they offer - trying to expand too quickly can often lead to a frustrated, overstretched team and often burnout and failure.
Further, SMEs must monopolise a market niche. Originality is vital. Taking a foothold within a market by creating a necessary, unique offering can be extremely lucrative in ensuring both the success and longevity of an SME. SMEs should adopt a culture of staying close to both their industry and customers. The senior team must be passionate about their field and ensure that innovation, however exciting, does not come at the cost of seeming detached from the industry in which they operate.
Whilst there is, of course, no way to guarantee SME success, with the right investor, a niche of your own and real desire to integrate with the sector you serve, your chances will undoubtedly increase.