3.1 Medium-sized businesses
Scaling up to a medium-sized business arguably results in one of the biggest challenges for entrepreneurs who have been successful in creating their small business. Being totally focused on keeping on top of everything, making it work, knowing who’s doing what, and following up on every opportunity in a small business is very different to deploying a staff of 50 or 200 employees.
As you grow your business, you simply cannot wrap your arms around it all. With growth comes a little less direct control and an ability to find and trust other people to perform their role.
If your idea has high growth potential and you don’t have the means to finance it yourself, you will have to seek external investment. To achieve growth it is highly likely you will need employees, a means of production (which may mean premises, equipment or people), and a structure. You may also need to finance research and development. These all entail increasing costs. Medium-sized businesses have to find and manage access to finance to grow and this can be more difficult for them than larger companies.
Some regulations apply to all businesses, irrespective of size. Small businesses may be exempt from some, for example, the need for financial audits for a turnover below £10.2m and fewer employees than 50, but medium-sized firms need to fulfil all the requirements of a larger business without having the structure and specialist staff to deal with them.
As a medium-sized business you will have to compete in the job market for trained or skilled staff, or find the budgets and time to train and develop these amongst your own employees. And of course there will be the need to pay them competitive wages, and provide pensions and benefits, if you want to retain those staff. Involving investors will require you to take a longer term view to satisfy them of your plans to show how you can increase costs while generating future revenues.
Banerjee (2011) suggests that entrepreneurs who want to run medium-sized businesses have to think differently by setting aside the instinct to do everything themselves because they know they’re best at it. Entrepreneurs have to be able and prepared to bring on board a team to spread the load and provide diversity of thinking and new ideas.
You will return to financing your business in more detail in Session 7.