From Startup to Scale-Up: Tackling Small Business Growing Pains Head-On

We love small businesses. Small businesses are exciting, innovative, full of energy and enthusiasm and hope for the future. It’s thrilling, and it’s contagious, which makes working with SMEs an absolute dream. But if there’s one thing most of them have in common, it’s that they don’t plan to be small forever.

Like an adorable toddler, you love to see them at the start of their journey, taking their first wobbly steps out into the big wide world of business. But you also can’t wait to see who and what they become as they grow up. There will, of course, be stumbles along the way – they must rise to challenges, build resilience and face adversity. Growing isn’t always easy, but grow and evolve we must.

We want to help make it as easy as possible for SMEs to get out there with the big hitters, so we spoke to four business owners and asked them about their biggest SME growing pains. In this article, we’ll share some of their insights about the challenges they’ve faced.

Table of contents

• Timing
• Operational scaling;
• People
• Financials
• Technology and digital infrastructure
• The future is bright

Timing

Before we get into the depths of what lies in store once you’re growing, let’s talk about the first difficulty you’ll face. Often, the most critical challenge for SMEs looking to expand is knowing when to take that step. 

If you do it too early, the challenges you will face will be exponentially greater, both in number and scale. But if you act too late, you could miss out on huge opportunities to grab market share, or miss the boat entirely.

In recent times, there has been an added layer of complexity for UK businesses, with the economic uncertainties brought by Brexit and Covid-19. In a volatile business environment, it can be extra challenging for SMEs to plan and invest for growth.

There might be no ‘perfect time’, and there will always be an element of uncertainty – as the last few years have shown, we never know what’s around the corner. But you should keep one eye on the market and one on your internal operations, getting ready to act quickly if needed. 

A SWOT analysis is a super helpful tool that you can use to get the lay of the land and weigh up the opportunities versus the risks.

Operational scaling

Once you do take the plunge, you’ll really have your work cut out for you.

Expanding operations, including supply chain management and logistics, can be complex and may require significant investments in infrastructure and technology.

According to Julia Mathers of Pasha Funding, “One of the biggest growing pains during periods of growth is the ability to manage the increased workload. As the business grows, more resources are needed to meet the increased demand.” 

The key to dealing with this, she says, is “to ensure that the right processes and systems are in place,” so that the business can continue to operate efficiently and effectively as it grows.

Technology is your best friend here. There are so many tech solutions you can use to help streamline and automate tasks to make sure no balls get dropped, including inventory management and fulfilment software, organisational communications platforms, CRM software like Salesforce, and workflow and productivity management tools such as Trello. 

Getting to grips with some of these can transform your business, automating predictable or repeat tasks, lowering the admin burden and freeing up time that will for sure be needed elsewhere. This is crucial to maintaining quality (of service and product) as you scale.

As well as higher workload as a result of increased operations, there will be new tasks added to your plate as you navigate complex and frequently changing regulations. 

Smaller businesses are exempt from many of these burdens, but as your business grows you will need to be compliant in areas related to tax, data protection and environmental standards.

If you are selling a product, you’ll need to think about inventory, as you’ll likely need to hold a lot more stock. This was a challenge faced by Niall Lynchehaun of Midland Stones, a company selling natural stone products direct to homeowners:

“My most considerable growing pain was the challenge of scaling the inventory to meet demand. My products gained popularity, and so did the orders. Suddenly, keeping my shelves stocked with products became a logistical puzzle – to put it mildly – that needed an urgent solution.”

No business owner wants to find themselves in the position where they’re letting down clients, unable to deliver on what has been promised – the damage to your reputation can be hard to recover from. But maintaining a high level of customer satisfaction in a growing business is, as Niall found, “much easier said than done.”

Fortunately, Niall found a solution, investing in tech that streamlined his inventory tracking and order processing, leading to much smoother operations. Nevertheless, it was a difficult journey with some unpleasant moments: “I had to apologise to customers for delays, which was a hard pill to swallow.”

People

There are two main areas of challenge related to people: quality and quantity. Quantity is a fairly simple one to understand: as you grow, you’ll need more staff.

This can lead to big problems if you don’t scale your management processes to ensure they’re fit for purpose with a larger workforce. More staff means more management. More management means more work – more people to keep track of, check in with and organise.

Fortunately, there are loads of HR and management solutions out there to help you optimise workflows, communicate across the organisation (we love Slack) and schedule staff leave (including our very own Leave Dates).

For example, Carl Owen of WordMonster had been tracking employee leave on spreadsheets, a practice that became completely unmanageable when the company grew and the workforce got bigger.

But what about the quality of those people? Expansion and growth can really separate the wheat from the chaff. Some people will rise to the challenge. Others will resent the change to the status quo and drag their heels. 

First and foremost, you need to make sure you have the right people in the right roles, with the right skills. This might mean some level of restructuring and/or retraining. It also might mean hiring, which can be a challenge in itself, as recruiting and retaining talented staff is something businesses of all sizes struggle with, and competition these days is fierce.

Financials

Now the one you’ve been waiting for. With a bigger business and increased operations, comes more invoices and bigger expenses. Rapid expansion can strain cash flow, and SMEs may face challenges in funding inventory, hiring new staff and covering overheads during growth phases. Any cash flow issues will be much more pronounced and winging it just isn’t an option.

As Julia Mathers told us, you need to ensure “that the right financial strategies are in place to manage the increased financial demands in a sustainable manner.”

There will be things you have to think about that you didn’t before – reaching the VAT threshold is likely to be one of the first of these financial challenges. It’s an important milestone and in many ways something to celebrate, but it comes with a whole lot more accountancy too and may require an extra hire.

Carl Owen from WordMonster highlights new and/or multiple invoicing requirements as another financial pain point when a company grows. This is something that can become a real burden, where customers request different invoicing styles, processes and terms. It’s hard to keep track of, and if you take your eye off the ball, it can have a disastrous impact on cash flow.

This then has knock-on effects on inventory/stock, supply chain management and customer service.

Technology and digital infrastructure

While tech is the cure for many of the growing pains we’ve discussed in this article, it also presents some new challenges of its own. Keeping up with rapidly evolving tech and the need to digitise operations can be a costly and daunting process. As you grow, a digital infrastructure to deal with data is key, as is a strong online presence.

This was something that took Leslie Gilmour of Refound by surprise. “The sheer volume of data, user interactions, and the need for scalability,” was an unexpected challenge that meant growing her marketing agency was a time “filled with a lot of doubt, anxiety and confusion.” 

She found herself “inundated with data from various channels: social media, email campaigns, website traffic,” describing the situation as “overwhelming”.

Difficulty meeting a challenge in just one area of your business, perhaps because it has caught you unawares, can derail operations across the whole company, where being consumed by one issue takes your focus away from other things.

This was certainly the case for Gilmour when she was faced with sudden and unexpected growth. “It not only impacted my decision-making process but also threatened the efficiency of all my campaigns.”

Gilmour solved this particular challenge through a mix of people and tech, upskilling key staff and initiating a complete “tech overhaul” to ensure she could extract meaningful insights from the data being thrown at her.

“It was a steep learning curve, but a crucial step in aligning my digital capabilities with the pace of growth.”

The future is bright

Clearly, there are many challenges ahead for SMEs pursuing growth, but as this article has shown, there are solutions for all of them. If you’re proactive, anticipate and plan for these challenges, you will rise to them. There are already lots of tech solutions for every business problem, if you know what’s coming and get ahead of the game.

And for every challenge, there is an opportunity. 

There is so much to be excited about and so many compelling reasons to pursue growth once the time is right. With the right strategy and tools in place, SMEs can shoot for the stars (or global expansion), using digital tools and e-commerce to tap into international markets.

The UK government also offers a variety of initiatives, grants and tax incentives to support SME growth and innovation.

What’s more, there’s a seemingly endless supply of clever and intuitive tech solutions designed to streamline operations and processes to make businesses more efficient, and AI is about to take these into the next dimension. There could be no more exciting time to turn your small business into a big one.

Ultimately, you cannot have growth without change. Growing pains are par for the course – you can and will get through them, with the right tools and the right attitude, which Niall Lynchehaun summed up perfectly: 

“Just embrace change. It’s better to proactively address the challenges of growth than react to them.” 

To do this, businesses must plan carefully, keep a close eye on finances, take advantage of technology and be ready to adapt to changing economic and market conditions to capitalise on growth opportunities.