Barriers to £1 million turnover for SMEs
Achieving a £1 million turnover is a pivotal milestone for UK SMEs, yet many businesses that have this target in mind face significant barriers in reaching this goal.
For the purposes of simplicity, I am not ignoring that turnover is vanity and profit is sanity. Assume that reaching the turnover goal delivers the expected profit levels.
Only 4-5% of the 5.9 million SMEs in the UK will ever reach this milestone, with many trying and failing.
Over the last few years, I have helped a number of ambitious SMEs to reach and scale beyond this figure. From lawyers to accountants, digital agencies to contractors.
It is hard work but with the right ingredients, achieving £1 million turnover is entirely possible. Having a robust business plan and the guidance of an experienced Business Mentor helps. Here’s how these components can drive success and what steps SMEs should take to stabilise and grow after hitting this milestone.
Main barriers to reaching £1 million turnover
Lack of strategic direction: without clear goals and strategies, SMEs often struggle to maintain focus and direction. They drift without focus and clarity.
Financial constraints: insufficient funding and poor cash flow management can hinder growth. There is not enough working capital to invest or often a reluctance to play it safe and not invest.
Operational inefficiencies: scaling up operations without the right systems and processes in place can lead to inefficiencies and customer dissatisfaction. Systems run the business, people run the systems.
Limited market penetration: competing against larger companies and breaking into new markets can be challenging. Many small businesses often don’t have clarity on their unique offering, target market and don’t build a strong brand and reputation in their space.
Talent acquisition and retention: attracting and retaining skilled and value aligned employees is crucial but often difficult for SMEs. If you are not attracting the cream of the talent in your sector, it is likely you will always be recruiting.
The need for a Business Plan
Less than one in four SMEs have a business plan (satnav) to guide them on their journey.
A comprehensive business plan provides the following:
Strategic roadmap: clearly defined goals, strategies, and milestones to guide the business towards its targets.
Financial planning: detailed financial projections and budgets help manage cash flow, attract investors and make wise investments.
Market analysis: understanding the market, competition, and customer needs allows SMEs to tailor their offerings effectively and exploit a niche or window of opportunity.
Risk management: identifying potential risks and developing contingency plans (SWOT) prepares the business for unforeseen challenges and reduces bumps in the road.
The role of a Business Mentor
A Business Mentor can provide:
Expert insights: drawing from their own experiences, Business Mentors offer valuable advice to navigate common pitfalls and seize opportunities.
Networking opportunities: Business Mentors can connect SMEs with potential partners, clients, and investors to assist.
Motivation and support: ongoing encouragement and strategic guidance help entrepreneurs stay focused on their long-term vision.
Accountability: challenging the owner to take action and hit target every month and keeping them focussed.
Wise counsel: it’s lonely running a business. Having an experienced sounding board and somebody that can empathise helps when the going gets tough.
Once the £1 million turnover milestone is achieved, different strategies to the ones previously adopted are needed to continue to scale.
Post-milestone strategies for stabilising and growth
Refine Business Plan: continuously update the business plan (I’d recommend at least quarterly) to reflect new goals, capitalise on new opportunities and overcome new barriers.
Invest in technology: implement scalable technologies to further streamline operations and improve customer experience. Customer experience is the number one differentiator for most SMEs.
Strengthen marketing efforts: expand marketing strategies to maximise retention, reach a broader audience and enhance brand presence.
Focus on talent management: foster a positive company culture, offer competitive benefits, and invest in employee development to attract and retain top talent. Whilst having loyalty to those that have helped you hit this milestone, often some are not the ones to help you on the nest stage of your journey. This includes your external team – accountant, digital agency, legal team et al.
Monitor financial health: regularly review financial performance, manage cash flow, and ensure efficient resource utilisation. Working capital is key to providing stability and the funds to invest.
By prioritising a well-crafted Business Plan and seeking skilled mentorship, SMEs can not only reach the £1 million turnover milestone but also build a solid foundation for continued growth and long-term success.
Over to you to plan accordingly.
