Five speakers presented on a range of topics, which are summarised below.
SMEs are the lifeblood of the UK economy – according to the Federation of Small Businesses there were 5.82m small businesses across the UK at the start of 2019. 59 per cent of these were sole proprietors. The ScaleUp Institute’s Annual Review 2019 reported that 36,510 SMEs “scaled up” (i.e. grew by more than 20 per cent in turnover and/or employee numbers) in 2017. In the same year, they contributed £1.3 trillion to the UK economy.
The report also notes that scaleups contributed nearly 70 per cent of SME turnover output in 2017, which emphasises their importance. Here we take a look at some of the ways to help your SME grow:
Key areas to focus on
To scaleup successfully you need to focus on three key areas – yourself, your people and your business.
To be a good leader you need to ensure that you have the right capabilities, capacity and level of confidence – it’s not for everyone. Make sure you have the necessary skills, or access to those skills, to lead the business forward. Look into how you can network with peer-to-peer support and learning groups, especially linking in with those who have faced and overcome similar challenges. Look at ways to streamline your workload, delegating wherever possible so as to ensure you can concentrate on the most important business matters.
Businesses grow by having the right people behind them. Recruit, up- and reskill employees in ways that support your business and supply chain. Look for ways to capture their passion for the work. Having the right attitude, aligned to business success is key.
Scaling up comes with risks. In particular, it can increase pressure on cash flow, which is the lifeblood of a viable business. Ensure you have clear business vision and values, and the mechanisms in place to scale up safely, effectively and in ways that protect your reputation. Planning is essential. Make sure you have clear goals with milestones – written down and measurable.
Baxall Construction - case study
The IET is developing a series of case studies focusing on SMEs that have scaled up successfully, highlighting how they have achieved significant growth, and the challenges they have faced in the process. Baxall Construction’s MD Malcolm Clarke discussed the company’s strategy for improvement and growth, which includes BIM 1, sustainability, staff training and development. These were captured in a recent video that you can watch online.
The IET 2019 Skills Survey
Having the right talent propels businesses forward, but the engineering industry chronically needs to boost its skill supply to maintain future success and competitive advantage. The 2019 IET Skills Survey highlighted that 48 per cent of companies reported difficulties recruiting people with the right skills. Furthermore, the survey found that that the biggest anticipated barrier that businesses believe they face in achieving objectives over the next three years, is finding engineering and technical staff with the right skills (60 per cent of respondents).
Apprenticeships and the introduction of T Levels could help to meet skills needs going forward. Employers should also take advantage of the growing range and network of flexible approaches to upskill current staff. This would be particularly beneficial for SMEs where resourcing pressures, capabilities, size or location may preclude traditional training approaches.
To widen the talent pool, we also recommend engaging regularly with the local education system; visit schools to inspire the next generation, as well as linking up with local colleges and universities. Taking on students for placements can help you fill important skills gaps and engender fresh thinking, while also helping them gain essential experience. The IET has also produced the report Bridging the Innovation Gaps, which provides advice on growing businesses through better ecosystems and support.
Finance, funding and other support for SMEs
Commercial funding is one way to help your business develop, whether for property purchase, loans for growth/expansion, refinancing or MBO 2/acquisitions. All deals are different, but you obviously have to meet some key criteria to demonstrate your credibility. When looking at loan requests, lenders consider the following:
- Do you have relevant experience? You’ll have more luck gaining funding if you can prove you have the necessary knowledge and experience to make the success of your venture more likely.
- Is there security/collateral? You’ll be expected to provide a 25 per cent cash deposit or other security. Be aware that how much you can borrow is directly proportional to the amount of cash you currently have.
- Does the deal make sense? You need to prove to a potential lender that you will be able to pay back the loan. Allow for such costs as valuations, legal fees and stamp duty. Lenders take account of stress testing – even with historically low lending rates in 2019 3, you will need to prove you can afford to pay interest at an average base rate of 3.5 per cent. Typically a new bank customer would be charged twice that rate.
To help with applications it’s recommended that you:
- Keep business expenditure down
- Settle any existing business debts
- Use accounting software that enables you to access financial information easily
- Apply the same principles to your personal finances.
Other forms of financial support available include peer-to-peer funding and business grants.
There are also funded support schemes such as workshops in 2020 on the new ‘Digital Breakthrough South East’ project, which is run by EDGE Digital Manufacturing. This is a project for SME manufacturers and their suppliers and customers in Kent and Sussex and is fully funded by the Department for Business, Energy and Industrial Strategy.
This free service helps businesses learn about how new technologies of all kinds can help their business grow. It includes collaborating with colleagues and peers on a digital business strategy and roadmap for technology and organisational development. Knowledge Transfer Partnerships and the network of Local Enterprise Partnerships are also available to support business growth and development.
The IET would like to thank the Kent Invicta Chamber of Commerce, Simon Teague from New Levels Results, Malcolm Clarke from Baxall Construction, Alex Milham from ASC Finance for Business and Steven Barr from Edge Digital for their valuable contribution to the event.