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How Should Medium Size Businesses Approach Growth

Driving growth in businesses is not always the only focus for shareholders and management teams of MSBs. It is often the case of management teams being focused on the immediate day-to-day needs of their business without considering a longer-term view to understand the strategic direction of the business. In this respect, setting a strategic plan over several years will help a business define the steps needed to help achieve its longer-term goals and objectives. Often, this will involve thinking about key growth objectives and how shareholder value can be maximised.

Growth can be achieved organically by continuing to increase market share in existing markets or revenue streams, or by the acquisition of other businesses or assets. For obvious reasons, growth by acquisition is often viewed as a more difficult option but it can also be the most efficient way for a business to scale up. Making strategic acquisitions that increase market penetration, geographical spread or product and service offerings in a complementary way, have an immediate impact. There can be more risk making acquisitions, compared to organic growth, but by approaching this in the right way and taking relevant advice, a lot of risks can be mitigated and result in accelerated growth.

To help support an acquisition, a company will often raise finance. The options available to MSBs are wide and varied and include debt finance (of which there has been an increase in the diversity of sources over recent years) and equity finance that can come from sources such as private equity funds or from the public markets. Often a combination of both debt and equity finance is the most appropriate funding structure.

It should also be noted that raising finance can also help deliver an organic growth plan. Financing can be used to increase productivity, through investing in assets and talent, or to support geographic or product expansion.

In summary businesses that are unable to define a strategic plan to grow can often see slower growth and missed opportunities as in all industries the competitive landscape will be dynamic.

To help execute a strategic plan and support growth, many businesses could utilise the professional community of advisers who are willing to engage with MSBs in initial discussions to help explore the opportunities available to them. This needn’t mean incurring costs as most advisers are willing to have exploratory discussions to ascertain the likelihood of executing a strategy.

— This article was written by Neil Mitchell and published as part of ‘Hiding in the Light’, a study of UK Mid-Size Business Leadership

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09.04.19