What’s holding your business back?
6 main barriers to business growth
Like that spindly-looking, slug-chewed rose at the bottom of your garden, your business just isn’t growing.
Maybe you don’t even know why – or maybe you do but you’re just not sure what you can do about it.
Read on for our take on some of the main barriers to business growth – and the types of TLC that might help a company survive and thrive.
Problem 1: Legislation
Storage firm Safestore published research a few months ago which indicated that small business owners felt legislation and the economic climate were the two biggest obstacles to growth.
Legislation was the obstacle cited most often in seven of the eight sectors surveyed.
While legislation is largely out of your direct control, there are things you can do to protect yourself from being affected.
Joining a professional body which represents your industry and to whose lobbying and research you can add your voice, is one. This is also useful in that it helps you to learn from other companies in your sector who probably face similar issues to you.
Writing to your MP about your concerns is another – as indeed is using your vote carefully at general and local elections.
Problem 2: Finance
Lack of access to finance was another major issue that came up in Safestore’s research.
To grow, a business is likely to need money upfront to invest in hiring new people, opening new premises or carrying out research and development.
Cash flow problems are the downfall of many an expanding business too – the owners invest in growth but aren’t left with enough cash to keep the business going long enough to reap the rewards.
Waiting until you’ve saved up enough money is very difficult for many business owners, so you may prefer to get hold of some loan capital. This can come from your bank, through an overdraft, a business loan or revolving credit – where the bank provides you with ongoing credit in return for interest – or from investors or peer funding, where people club together to lend money to a business.
Problem 3: Staff
Finding the right people is another of the key factors for business success.
Again, it may be out of your hands to some degree but we’ve discussed in some of our other posts how you can ensure that your company is one that people want to join.
This is partly about offering decent pay but it is about lots of other things too and is very much dependent on the individual.
For most people, a happy, healthy working environment, free from bullying and unpleasantness, is crucial.
Having the right managers in place is an important part of growth too. Managing a large or expanding organisation requires a strong team at the top with a particular set of skills.
Problem 4: Product demand
If a new product isn’t selling well, you have to ask yourself the tough question: is it actually any good?
And if it is, is there a demand for it – a demand which isn’t already being met by other businesses in the same market?
If the answer to both these questions is honestly yes but sales are stalling, then you might need to look at whether your product has the right image and whether it’s correctly positioned; in other words, whether it’s priced, distributed and marketed in a way that accurately describes it to customers.
For example, if you advertise a face cream as a luxury product but sell it for £2, your pricing undermines your advertising message and customers may opt for more expensive alternatives, believing they are more likely to deliver the quality they’re after.
Growth may also stall because of changes in the marketplace. Demand for a great product may lessen as technology moves on and tastes change.
Two well-known examples of this are Kodak, which filed for bankruptcy in 2012, having failed to keep up with the advent of digital technology and Blackberry, which was once one of the world’s biggest smartphone manufacturers but stopped making phones in 2016 after being overtaken by competitors using touchscreen technology.
Problem 5: Insufficient understanding
Adapting too eagerly can be a barrier to growth too if you haven’t first properly assessed the market or geographical area you’re moving into.
Being successful with one product or service doesn’t guarantee you’ll be successful with another, or in a different region or country, especially if other businesses are already very successful in that market. Tesco found this out the hard way when it lost well in excess of £1 billion trying to expand into the US with its Fresh & Easy stores.
It can be difficult to foresee all the issues you might encounter (Tesco did a huge amount of groundwork) but you can increase your chances by researching the market, your target customers and your competitors.
Problem 6: Culture
Harvard professor and entrepreneur John Kotter, writing on forbes.com on the demise of Kodak, argued that one of the lessons CEOs can learn from the company’s bankruptcy is to make sure that forward thinking people in your business are listened to.
“It’s these people – those excited about new ideas within your organisation – who keep your company moving ahead instead of falling behind. One key to avoiding complacency is to ensure these innovators have a voice with enough volume to be heard at the top,” Kotter wrote.
Growing any business means taking risks and finding new ways of doing things and this means encouraging new ideas and taking them seriously.
You need to have a culture in which your team aren’t afraid to try things and to fail and in which senior people can be challenged
We have seen from examples in this article that senior people can and do get things wrong.
At THP Chartered Accountants, we’ve helped many small companies across the south east jump over the hurdles in their way and sprint on into successful growth.
Call us on 020 8989 5147 to chat about our accounting services and how we can help your business reach its potential.