In a recent survey, a quarter of small business owners said growing a business was more difficult than starting one. It’s a phase that does raise some difficult questions: how fast should growth be and under what circumstances? Are entrepreneurs chasing growth before their businesses are ready? Is it better to play the long game?
Initially, The Apprentice 2015 winner Joseph Valente, did not think so. When he started his plumbing and heating business Impra-Gas in 2012, he was so impatient to get it off the ground he took out a personal loan of £15,000 because applying for a business loan would take too long. Things continued at much the same pace until Valente featured on the programme last year, convinced that he was destined to be Lord Sugar’s business partner – a single-mindedness that got him exactly where he wanted to be.
Valente is the first to admit that the full-tilt approach took its toll. At one point he had to stop promoting the business because he was struggling to keep up with demand. “The hardest thing [about growing so quickly] was trying to control everything – the workload, scheduling, managing bookings, advertising,” he says. “I was spreading myself very thinly, and the number of man hours involved was untenable.”
Within four weeks Valente had taken on his first apprentice; by the end of the first year he had three vans on the road. When he started filming The Apprentice, the company was up to five vans and seven staff, with an office in the centre of Peterborough, servicing homes within a 50-mile radius.
Get the basics right first
Winning Lord Sugar’s backing has given Impra-Gas a grounding the business needed. Previously, Valente had turned to his uncle for informal business mentoring, along with other business people; and he also found advice online. Now he has access to Lord Sugar at least once a month when they sit down to go over the figures. “His advice was not to run before you can walk; to get the foundation right,” Valente says.
As well as approaching growth less frenetically, Impra-Gas has been repositioned to target private home owners rather than property management companies. “The plan for the next three years is to be the best at one thing – selling and installing boilers directly,” Valente says. “Although property management companies offer volume, there isn’t much profit on smaller repairs. As we grew the margins became tight because our overheads are bigger, so the model wasn’t sustainable.”
Cash flow hasn’t been an issue though. “Because of the amount of work we’ve had since the start, we’ve had good profit which meant we could sustain our growth. After our core assets (people, vans, tools and uniform) – the resources we needed to make revenue - there weren’t many other expenses,” Valente notes.
The £250,000 investment from Lord Sugar has paid for a paperless job management and scheduling system, which engineers can connect into via tablet devices. The company now has nine vans and 16 employees and an expanded reach - to 90 minutes’ drive of Peterborough centre.
“My advice to others would be not to try to take over the world in a day,” he says. “Be patient and have a good solid business plan – I didn’t. And make sure you understand the numbers; they’re the key to everything.”
Pushed by high demand
Mattress specialist Simba Sleep had an entire supply chain to consider when negotiating a recent sharp growth phase. The startup business, based in central London, is just a year old but is already supplying its rollable, one-size-fits-all mattress to 27 John Lewis stores. Early popularity meant the company had to gear up quickly – it expected to sell 400 beds when it launched to the market in February, but sold 4,000 in its first three months and racked up £2m sales.
When consumer demand exceeded expectation, staff worked “all hours” with manufacturing and supply chain partners to minimise any delays, co-founder and CEO James Cox says. “High demand was particularly stressful for our manufacturers, which had to increase the number of mattresses they were producing – something they hadn’t planned for. We pushed them to facilitate this demand, and while it strained our relationship to a point they did everything to meet our needs. We now have a renewed respect for each other.”
Simba Sleep also sought additional funding, to drive sales while allowing the company to compete on the same level as larger mattress manufacturers. “We’ll also be using the investment to expand overseas,” Cox says. “We’re planning to launch in Europe over the next three months and Asia by the end of the year.
The company is projecting £10 million revenue in its first year, increasing to over £50million by the end of year three. Says Cox, “We’ve ensured the company is well funded and cash flow is positive, so we are confident we can continue this growth and achieve our targets.”
Don’t rush to build the right team
For Bolton-based utilities comparison website Love Energy Savings, which is also expecting to turn over £10m this year, the issues in managing growth have been more to do with finding the right staff.
“In the last six months we have doubled our workforce to 121 employees,” says MD Phil Foster. “One risk of growing too quickly can be not taking the time to recruit the employees that fit in with your culture and ethos.”
The company devised a recruitment plan to keep up with demand, but this has been tougher than anticipated, Foster says. “To create a sustainable business growth model, we have to recruit for longevity, and this requires putting a lot of time and effort into finding the ‘right’ talent. We have learned that it is worth searching for the right people, and ensuring structures are in place before growth occurs.”
Love Energy Savings also works hard to keep people so, in addition to taking on a recruitment officer recently, it has appointed a ‘head of people’ and a training and development officer. “There will always be room for the ‘right’ people here, even if there is no official vacancy,” Foster says. “It’s not always about skills. If they embody the spirit of the business we can easily train them up, but a culture match is more difficult to teach. We see it as a future investment.”
Over the last two years, the company has ploughed profits back into the business to aid growth. These plans were recently bolstered by a £4.5m investment from NVM Private Equity, which now sits on Love Energy Savings’ board of directors.
Says Foster, “We have sought the guidance of strategists over the years but this was rather unfruitful, due to a lack of long-term experience within the business. The best advice has come from our investors, who are well versed in business growth and cash-flow management. But, in terms of day-to-day management, there is no one better to advise than our own staff who know our processes inside out.”
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