What’s holding back growing businesses?

Findings from BDO’s bi-monthly survey of 500 mid-sized businesses reveals that business leaders are facing barriers to growth. Despite ambitious plans for expansion or investment, over a third (34%) consider accessing new financing to grow their business a significant challenge in the next six months.

Our research also lays bare the employment issues facing businesses. According to the survey, workforce pressures, such as hiring or retaining staff, are a top concern for 30%. Difficulty keeping up with salary expectations from new hires or existing staff is affecting a third (33%) of businesses, while changes to policy and regulation, such as skilled worker visas and employment contracts, are causing uncertainty for a quarter (25%).

These challenges resonate with growing businesses of all sizes across the country, irrespective of sector, but particularly those identified as ‘scale-ups’. The official definition of a scale-up from the Organisation for Economic Co-operation and Development is a business with annualised growth greater than 20% per annum in either number of employees or turnover, over a three-year period.

Scale-ups are pivotal to sustaining economic growth, creating employment opportunities and fostering innovation. These companies drive investment in research and development, resulting in technological advancements and increased productivity, as well as leading the way in accessing international markets, thereby enhancing the UK’s global trade relationships and competitiveness.

While scale-ups clearly look to achieve sustainable growth, we found that time and time again they came up against the same barriers to growth: Access to markets; access to skills and talent; access to finance and building leadership capability.
 

How to break through these barriers

There is no shortcut to sustainable growth; however, many businesses face similar obstacles in their scale-up journey. Summarised below are just some of these challenges and common pitfalls to avoid:

Access to markets

Expanding the business beyond domestic borders brings new complexities that require careful navigation; from selecting the right market and operating model to designing an efficient supply chain, moving employees overseas and getting to grips with cross-border tax.

Common pitfalls to avoid include failing to identify a clear market position, poorly designed supply chains, not identifying funding and working capital requirements or understanding tax and legal issues, and local cultures.

Access to skills and talent

Employees are the driving force to meaningful growth but finding and retaining the right talent can be a constant challenge. It’s vital to recognise that the skills and expertise required to scale are likely to be different at each stage of the lifecycle. Identifying and addressing these gaps is key to sustaining momentum and achieving long term goals.

Putting in place a ‘People plan’ and embedding Environmental, Social and Governance (ESG) policies are essential to hiring a resilient workforce and ensuring new recruits share the company’s vision and values.

Access to finance

Many scaling businesses are not only seeking more funding but also guidance on available options and investor connections. There’s a strong call for more consistent and supportive tax schemes alongside ongoing initiatives to unlock institutional capital.

Navigating the funding landscape and securing the right source of capital can be a daunting task. Raising too little, failing to invest in building trust with new partners and the wider business, and not managing investor relations are just a few of the common mistakes that lead to business failure.

Building leadership capability

Successful business leaders build the right level of support around them, including external advisers, non-executive directors (NEDs) and subject matter experts. A shift in mindset from making all the decisions to empowering a management team or board can significantly improve decision making by bringing in fresh perspectives and reducing bias.

Many scale-ups struggle with establishing effective governance structures. Without these frameworks, making quick, informed decisions can be challenging and slow down a company’s growth.
 

Our top tips for success

1. A key part of scaling a business is transitioning from a founder-led mindset of making all the decisions to building a strong management team and board; empowering this team and delegating responsibility as the business grows. Focus on building a team that’s deeply connected to the company’s mission and value.
2. Develop a clear strategy for attracting, retaining and engaging talent and invest in your people to drive the business forward.
3. Future proof the business and review all areas: people, product, performance and profitability. Use our free Business Lens diagnostic tool to help you objectively identity where to invest.
4. Take advice and get feedback. Seek out trusted advisers and partners who can offer fresh perspectives and challenge assumptions.
5. Don’t be afraid of making mistakes. Each one is an opportunity to learn, gain new insights and anticipate future challenges.

 

As a leading adviser to scale-ups, we are committed to helping businesses succeed and driving the growth agenda. Through our association with the ScaleUp Institute, we are working as a lead partner alongside organisations including The London Stock Exchange, BGF and British Business Bank to make the UK the best place to scale a business.