SME Scale-Up on a Budget: How to Grow Your Business Efficiently

Business success

Although SME business growth has slowed down over the last couple of years due to the effects of the pandemic, SME scale-ups are still going strong.

Growing your business can be an exciting yet taunting subject. We all want to bring out the best in our companies, but is it possible to accelerate too fast? Understanding your business’s limits is a must when trying to scale up efficiently.

In this article, we will discuss some tips to help to scale up business efficiently.

Ensure You Have Sufficient Cash Flow

It’s tempting to jump straight in when growing your company but rushing your growth strategy can lead to serious mistakes. Your planning phase should include more than just setting some vague goals. A concrete plan and an in-depth report on your current financial status should always be the starting point.

Insufficient cash flow is one of the main reasons businesses fail (and fail to grow), as illustrated by the fact that UK SMEs lose out on an average of £26,000 by turning down work due to insufficient capital.

As you scale, the increased demand and volume will require more financial resources; meeting these needs might be difficult if you are overly reliant on your current cash flow.

To prepare for a scale-up, business leaders should ensure that they have a sufficient growth reserve fund to finance these expenses. It is always useful to overestimate the costs and underestimate revenue to ensure that you won’t find your accounts in a negative balance.

Calculate Your Sustainable Growth Rate

In 2021, 18% of SMEs in the UK achieved growth in the previous 12 months. On the one hand, it’s a great indicator of success. However, on the other hand, you must ensure that you don’t stretch yourself too thin. For this reason, it is beneficial to calculate your organisation’s sustainable growth rate (SGR).

SGR represents the growth rate of sales your organisation can take on without being overly leveraged to a state of financial distress. Increasing your sales will bring along many production costs, such as labour, materials, and shipping, that can push you above your “ceiling,” causing you to run out of available operating cash flow.

Although it might be tempting to try to achieve as many sales as humanly possible, this can cause issues in the long run. Measuring your sustainable growth rate can set a healthy limit for your sales targets and keep you in line with your long-term growth.

This information can also be beneficial if you need to secure funding, as it shows that your company is efficiently maximising sales and managing inventory sustainably.

Monitor Your Growth

So, you have a healthy amount of cash reserve, and you calculate your ceiling levels for your sales. Does that mean you are set for success? Not necessarily.

You still need to carefully plan and actively monitor your performance metrics. An external financial partner can help you to keep a tab on your data, identify where to allocate your resources efficiently, and make the best use of your resources.

This will help you grow sustainably and give you solid ground to make financial decisions for your organisation. Monitoring your financial performance through regular reports can make a difference between growth and stagnation.

Avoid Excessive Debt

Carefully monitored sustainable growth should keep your budget in positive digits and help you scale at a rate that remains manageable in the long run without borrowing money through debt or equity financing.

However, debt can be a strategic tool if used correctly. As an alternative to traditional borrowing, you can negotiate with other businesses offering your services in return for theirs and build a valuable network.

In addition, there are several relatively untapped approaches to financing, such as crowdfunding, peer-to-peer lending, or angel investments. In the UK, 37% of SMEs sought alternative financing solutions in 2022 to finance their growth.

These sources statistically lend more to SMEs than traditional high-street banks due to their industry-specific approach and business models.

If you plan to seek financing, ensure that your financial reports are in order and you have an in-depth knowledge of the ins and outs of your cash flow. Investors often require these specifics before securing funds. Preparing in-depth financial reports will also help you identify the right lender that suits your business needs.

Find The Right System

The right accounting system will become the cornerstone of your business. Process automation can give you peace of mind and ensure that your accounts are in order.

Although a wide range of choices is available in the market, look for software that fits your needs and is compatible with your industry. Cloud-based systems are ideal as you can secure your data online and access it from anywhere, staying in the know wherever you are.

Automate segments of your departments, such as accounts payable or payroll, to minimise manual job handling and avoid costly manual errors.

Get External Help

Scaling your company can be an exhausting and stressful task that might require additional headcount in your teams in the long run. However, it’s essential to consider your options before starting hiring.

Onboarding new staff can bring increased financial responsibility, the demand for bigger office space, and a constant need for upskilling. If you are unsure how your cash flow will be affected for the time being, bringing on external consultants might be a more feasible approach.

Summing Up

Growing your business should be an exciting journey. Take the stress out of your financial planning, and let us help you to create sustainable plans for your business growth.
Are you looking to grow your SME but feeling overwhelmed by the financial side of things? Well, don’t worry, as that’s where Sanay comes in. At Sanay, we’ve got your back with our top-notch virtual bookkeeping, remote financial controller, and outsourced finance department plans. We’ll work with you to figure out precisely what you need and get you set up for success.

Get in touch with us today!