Somewhere in the DNA of even the smallest businesses is usually the ambition to become a bigger business.

And many are actually in quite hurry to get there. Indeed, according to an end of 2015 report by the British Business Bank (BBB), 59% of small businesses want to increase their turnover in the next year.

For most small or medium enterprises (SMEs), achieving real, appreciable growth means successfully scaling up operations while remaining profitable.

This is no mean feat. In most cases, scaling up involves far more than simply boosting sales. It requires that an SME take on more staff, expand its infrastructure and ensure it has the financial reach to see it through a new growth phase.

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Getting your staffing right

When taking your SME to the next level, it is critical that you have in place both the right people and the capability to manage them effectively.
In recruiting and training staff, you weave the very fabric of your company – it’s mission, values, vision, methods and goals. Some people like to focus most of their efforts in staff development on recruitment, while others see the nurturing of new skills as paramount.

The truth is you should be doing both and need to make sure someone is overseeing the process. The Chartered Institute of Personnel and Development (CIPD) shows more than half of SMEs don’t have anyone in a full-time HR role – but someone will in fact have to take charge.
The manager responsible – even in a part time role – must ensure the company is ready for the next stage in its evolution. That means establishing best practice guidelines for hiring and developing a new staff, as well as administrative processes and performance standards.

Clearing the technical infrastructure hurdles

Another big barrier to growth is the need to extend infrastructure, particular the technology necessary to propel rapid growth and support the new bigger structure that emerges.

There is an easy answer here: cloud computing. The cloud has become the SME’s best friend when it comes to scaling up the technology side of operations.

Cloud storage and Software as a Service (SaaS), have disrupted the infrastructure advantage held by big corporations over most SMEs by giving even the smallest business access to sophisticated applications and large-scale data collection. SMEs no longer have to predict their needs and then take on up-front software, equipment and support staff costs.

Instead, they can securely store and back up as much data as they need, while the SaaS subscription model allows them to tap into state of the art accounting, customer relationship management (CRM), enterprise resource planning (ERP), project management and data analytics applications. They can then ramp up the number of users in easy increments at each stage of growth.

Getting your finances in order

In noting that more than half of small business are aiming to boost turnover this year, the British Business Bank said in its report: “It is essential that suitable finance is available to support these growth ambitions.”

In other words, SMEs aiming to expand better get their working capital and cash flow in order. Lack of working capital and cash flow can be a killer for businesses that’s shifting into growth mode.

Many SMEs either never get to the growth stage because they don’t have the initial financing, or their business flounders as they run out of cash while expanding. A 2015 survey by the UK Bond Network revealed 38% believe their growth was being hampered by insufficient access to funds.

Bank business loans are not the answer for most. Getting a bank loan can be a slow, arduous and costly process for an SME at best, and a dead end many times – the BBB survey showed that start-ups, defined as firms less than five years old, experienced a 50% rejection rate from banks.

The key for many is to put aside as much cash as they can ahead of a planned expansion and get their payment process under control – cracking down on late payers and lining up other sources of finance, whether additional investment, a strong overdraft, or alternative financing.

Alternative financing can take the form of peer-to-peer lending, which allows borrowers to draw on a pool of lenders through an online company managing the process for a fee – which can at times be quite costly for a business loan.

Another version on peer-to-peer financing enables growing firms to tap into the funds owed by payment laggards is the online upgrade of invoice ‘factoring’, where a business sells its unpaid client debt to a bank or another conventional lender. The digital peer-to-peer solution, offered by companies such as MarketInvoice, allows invoice financing (usually for 1-3%) without the hidden fees, long contracts and slow decision processes of traditional providers.

The bottom line for SMEs scaling up is they have to be able to quickly tap into whatever sources of money they can access quickly when working capital reaches low levels and cash flow slows.

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