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Strategic Business Growth resources

Strategic Business Growth resources.

The Entrepreneurship Centre has created a series of videos and articles on key topics of interest for companies with the aim of helping CEOs and management teams achieve their potential, overcome challenges and grow their businesses. The resources provide advice on various areas whether it be establishing ambitious growth targets, attracting the right people, innovation, establishing a credible business plan or investment.

How to attract the right people

[MUSIC PLAYING] Many people cite that one of the challenges for SMEs is that they cannot get good people. Let me turn this around and say, do startups get good people? Startups are even poorer than SMEs. They have even fewer resources. They pay their people even less well. And startups are able to get very good people. Why?

For two reasons. Because there is an upside. The upside may not be salary, but it may be shares or bonuses or something else. And there is excitement. And so the answer for SMEs, can they get good people? Yes, but they have to give an upside in some form, and they have to give excitement.

And what that means for the management, for the top manager of the SME, what you cannot do is invite good people in and then treat them very badly because you’re a tyrant, and you are monopolising control, and you don’t want to delegate then you cannot get good people.

But if you give them an exciting atmosphere, you give them the feeling that they can accomplish something, that they can look at the entire business, which in a large company, they cannot, because they’re compartmentalised. You can give people those upsides, and so SMEs can get good people, but they have to think about it creatively and very hard how to give people the offers that attract them, even though they can make more money in a larger company.

In order to grow you need to let go

There is something well-known in small companies that grow, which is the founders limit. Small companies sometimes quite often fall into the trap of one charismatic person who starts it all up and then doesn’t want to relinquish control. And at some point, they can’t handle the complexity anymore of the growing business. And then they drop the ball, and the business falls into a deep crisis.

So the challenge for SMEs to learn management is, you have to learn how to delegate. You have to learn how to let go. You have to learn how to start using systems in order to be able to scale up the systematic way you are conducting your business. The biggest enemy is that everyone in your organisation reinvents the wheel all the time. You actually have to learn as a person, as the leader of the SME, you have to learn what leadership means and how you need to change your behaviour.

And the other thing you need to learn is, it’s not just, this is what we do and we add little incremental pieces to it. You need to learn how to explicitly articulate what your strategy is, what your position is, why customers are actually looking at you rather than at your competitors. And if you can’t explain it, then sooner or later your customers are not going to come to you anymore.

And the last thing, which is part of that, is you also need to acquire the discipline of looking at your business from the outside in, through the eyes of your customer, rather than always describing what you see, because that’s not necessarily what they see. And if you don’t understand really what customers see, then you’re not going to be able to articulate your strategy and your positioning right.

Every SME can be innovative

[MUSIC PLAYING] Innovative SMEs are those who are the minority of SMEs who actually have the ambition to grow. And the statistics show that most SMEs are actually happy to not grow or grow very slowly. And only between 2% and 5% of SMEs really grow. And those are the ones that have to use innovation in order to accomplish that. Innovation doesn’t mean that SMEs invest a lot of money in technology.

Innovation means that you really understand your customers, going beyond just asking them what you want because they will just tell you short-term things, looking at the long-term opportunities to change customers lives and then using this insights, this understanding in order to change the way you, as an organisation, operates. That means mobilising all the people in your organisation to change the aspects of how you relate to your customers, of how you execute your internal operations, of how you relate to your suppliers, and relentlessly making the service to your customers better. That’s what innovation, in essence, means.

Improve your chances of getting funding

[MUSIC PLAYING] One of the most widely seen challenges for SMEs is that they have a hard time to get access to capital. And this is true in the UK, as well as in all other countries. And the reason for that is very simple. SMEs are entrance-bound to investors and banks.

Entrance-bound means the banks don’t know what’s going on. The reporting standards for SMEs are lower than for large publicly-traded companies so less information comes out. It is less standardised, so you don’t know what it means. And a bank that gives that SME money and the SME looks good today, they may find out in two weeks that the company is actually going bankrupt. And that is a risk which simply deters banks and investors.

So the way for SMEs to get more access to capital is transparency. They need to be willing to open up and show the investors what they’re doing. And if it’s bad, well then, it’s bad. But if it’s good, then it really means something. And the lender will then conclude that they can give you money. So transparency is one of the key drivers in that problem for SMEs.

Innovation does not need a big investment

Growth from technology is a big misnomer and I think a very widely spread misunderstanding. When people talk about innovation, usually what they have in mind is it’s got to be investment in new technology. And that is way too narrow a conceptualisation of what innovation is.

Very large companies develop their own technology. SMEs don’t. They don’t develop technology. They don’t have the resources to do it. They buy technology from the outside. They buy IT systems from an IT supplier. They buy machines, artefacts, which embody a new technology from a printing company, from machinery companies. SMEs get new technology from the outside.

And then what the good ones do is, they use this technology in clever ways. They use it in unanticipated ways that even the vendor of the machine didn’t foresee. And they tinker with it. And they do small changes all the time, all the time, all the time, in the interest of their customers.

And where SMEs innovate is in the processes that they apply, how they treat their customers, how they use the technology, what additional service they can offer, how they change their own processes and set-ups in order to be more useful to the customer. That’s where SMEs innovate, modifying the technology that they buy from the outside in small ways and becoming ever more useful to their customers. That’s innovation in an SME.

So to stare at where are you investing in technology for an SME is the wrong way of doing it, because technology development is so risky and so expensive. And there’s plenty of it around. You get it from the outside. And you think very hard how you use it.

Ambitious growth targets are essential

[MUSIC PLAYING] Many SMEs don’t grow. And therefore people feel that setting ambitious growth targets for SMEs is not realistic. But we need to turn this question on its head. The empirical evidence across the board shows that unless an SME has ambitious growth targets, it will simply not grow. So the answer is you need to set ambitious growth targets to have a chance to grow.

And these growth targets can be revenues within your current customers and with your current products. And that’s the easiest and immediate. But you can also target some slightly different customers which are a bit different from the customers that you have now and try to capture some of those. You can also say that, well, to the customers who I know but I could offer them a slightly different service.

So there are different ways of doing this. And none of them requires that you do something revolutionary. But this is possible for SMEs. And you have to give yourself that ambition because otherwise you’re going to stay where you are.

Credible business plan needed for funding

[MUSIC PLAYING] It’s really important that SMEs can attract the right type of funding. Because, essentially, that’s going to be the rocket fuel that allows them to grow in the future. From my perspective, and from Santander’s perspective, I think it’s all about the credibility of their plans. And a lot of that will be the culmination of how that SME’s grown in the past to the point that we’re in discussion.

So we can review their track record, assess the capability of the management team. I guess most importantly, look at their plans for the future and, again, assess how credible they are. The whole area of SME growth is one that’s very close to Santander and that’s why we have our breakthrough programme. It’s also why we’re so pleased to be working with The Jones Institute on their CEO growth challenge.

Having witnessed some of the trading that they’re providing the companies that were involved in the SME Growth Challenge, it’s clear to me that these are covering some of the key disciplines, which will culminate in these businesses being able to attract funding in the future is, obviously, really important.

And I think the whole credibility around their business planning, their innovation, their ability to take products to market are all really key and, ultimately, will be the story which allows these businesses to attract funding in the future and, hopefully, grow bigger, attract good talent, and become real success stories.

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