Practical steps to stay in control as your business grows

Growth is good, right? On the whole, yes… but growing too quickly can also cause some serious challenges.

Cash flow is the obvious and most cited issue for fast growing businesses – and being able to keep up pace with customer demand.

But there are other issues, which if left unchecked could be a barrier to future growth – such as staff and culture, systems, funding, expertise and planning because as Peter Allen, corporate partner at Kuits says, “when the management team are working to keep up with the pace of a company’s growth, it is the details that often get lost”.

It doesn’t have to be that way though – a business can drive continued fast growth if it plans ahead to ensure the right mechanisms and funding are in place for each stage of growth.

TheBusinessDesk.com’s panel event on business growth, supported by Kuits Solicitors, highlighted the growth stories of Abbey Logistics group and East Coast Concepts.

Around 100 businesses attended to hear how these two successful and fast-growing North West businesses stayed on top of their growth journey as they shared some of the things they learned along the way.

Abbey, a £57m turnover logistics business based in Bootle is headed up by chief executive Steve Granite, who has been with the company since 1995 and took over the reins in 2009.

It was the company’s private equity-backed management buyout in August last year that really bolstered its growth plans and has already resulted in an acquisition that will drive group turnover past the £70m mark.

James Hitchen, meanwhile, is the founder of East Coast Concepts and the man behind the Neighbourhood and Victors restaurant brands, having first opened in Spinningfields in 2009.

His business has grown to turnover £12m, most recently opening a new branch in Liverpool, following a multi-million pound private equity investment.

Both businesses have private equity backing from NorthEdge Capital and investment director Phil Frame was also on the panel to explain how private equity firms work with the companies they are invested in.

The panellists on hand with further advice were Peter Allen, corporate partner at law firm Kuits; Colin Abrahams, senior director at CLB Coopers; and Mike Rogers, senior relationship manager at Allied Irish Bank.

Business owners were given practical steps to implement, such as adapting to a change in culture as the business grows.

“It does mean some tough decisions and cutting chaff. But you have to have the right people for the future of the business,” said Granite.

People also need investment as the business grows and they are required to fulfil new roles such as specialist HR or marketing.

Hitchen said: “12 months ago the business was largely just me. Getting the right people around the board table has been crucial to building the business.”

CLB Coopers’ Abrahams underlined the importance of identifying the key people within a business and giving those people appropriate reward as a means to help lock them in.

But Kuits’ Allen said businesses can also suffer a crunch in relation to available talent – something that is particularly an issue for restaurant and leisure businesses, and even more so as the impact of Brexit on immigration looms.

Having appropriate systems for the business also came up as a top issue to addressed early on – what is suitable for a smaller scale operation cannot keep up as a company grows rapidly.

“When you are operating on a smaller you can touch and feel the business but as it grows and you have investors on board – they need more information and your existing systems can be unsuitable,” said Granite. “As a business grows you get more visibility through the systems than the people and you become more information driven.”

Hitchen said: “You’ve got to run the company in a correct and proper way from day one – if you are not doing that then you won’t get investment. Our due diligence process was painful but we were a business with a lack of systems and controls. That can make things hard and it puts banks off.”

North Edge’s Frame said that systems were one of the things his private equity house looks at when considering whether a business is an investable proposition.

“It is critical and if those things are not in place we will focus on that as a priority area. It’s not just IT but operational process and controls,” he said adding that systems are particularly important when looking to roll out a chain – as was the case for East Coast Concepts, whose Neighbourhood brand is looking to have six sites by the end of the year.

That brought discussions round to funding for growth. For Hitchen, the funding East Coast Concepts received was transformational and allowed it to grow from what he says was essentially a one-man operation.

Hitchen said: “It was not just the money but the mentoring on how to take a more measured approach and use the resource around me. It meant better resources at every level and an ability to broaden our horizons.

“The investment we first had was development capital, the money used to grow the business up to that point was from family and high net worth individuals.

“I wanted to build a business of scale and without private equity funding that would have taken a long time. I chose to sacrifice equity to have access to capital, not just the cash for payroll etc.”

Granite agreed that private equity funding in particular was about more than just the money – it unlocked access to expertise too.

But private equity isn’t for everyone and Kuits’ Allen talked about how the business owners need to have an open mind about the value private equity can bring.

“There is a shift in mentality needed for entrepreneurs and owner-managers to be able to take advice from others. This is often one of the biggest “hidden” challenges growing businesses face,” he said.

CLB Coopers’ Abrahams said: “You do find, particularly with tech businesses, that they need so many rounds of funding that by the time one round is complete it is time to start the next. You end up focussing on fund raising rounds not the business itself.

“If a business had more of an idea where it was going it could better align funds with growth.”

Planning – as far as possible – and the revisiting and tweaking that plan regularly – to anticipate future problems as the business’ needs grows was high on everyone’s list. That planning will ensure you are ready to deliver.

But there are times in a business’ journey when it is prudent to hold back and consolidate, even if that sometimes means letting an opportunity for growth pass by.

Granite said: “Things happen to change that plan. We have grown twice as fast as we had planned – we had a strategy but there were opportunities that were too good to resist but with hindsight we should have turned some away.”

Hitchen agreed: “We get offered lots of sites all over the country. The reality is that we are now in a period of consolidation before taking on additional sites. Some of the deals we were offered are too good to be true but we had to be disciplined to ensure managed, planned and measured growth.”