6 Key Factors for Healthy Growth
Small firms that adopt six key factors will make more profit than those do not, according to new research from the Warwick Business School, which says it has come up with a ‘blueprint for success’ for small businesses.
The survey compared the growth rates of 500 small businesses. Six key strategies were identified that set successful businesses apart, including HR planning, research and development, and growth ambition.
Those that took the six rules on board had a ‘strong link’ to an above-average trading performance, Warwick University academics said, with research showing that nearly half (43%) of small firms adopting the blueprint criteria had benefited from sales growth of 17% within the past three years.
In addition, the findings indicated that implementing just three of the rules would enable firms to outperform competitors and their industry average in terms of growth and profitability.
Stephen Roper, professor for enterprise at Warwick, said the research highlighted the ‘potential for real growth’ among small and medium-sized enterprises.
“As the economy moves out of the recession, new opportunities will emerge for many firms. Adopting the blueprint will help these firms maximise their growth and profit potential,” he said.
According to the study, business services firms were among the most likely to be following the blueprint already, while construction companies were least likely.
Out of the six benchmarks, the biggest contributor to success was having a flexible management style and team-based working, rather than standardised or routine work practices.
Marketing was also significant, the study found, with businesses that used a variety of methods seeing ‘above average growth’.
Phil McCabe, spokesman for the Forum of Private Business, said it was ‘unsurprising’ that implementing certain processes would improve business results.
“Most successful firms are the result of careful planning and procedures,” McCabe said.
“However, for start-ups and those who are newly self-employed, it’s worth remembering that it’s not just about focusing on your specialism, but selling your skills. Lots of businesses are expert at what they do, but must not overlook the commercial side either. Without marketing and sales, the business is unlikely to grow,” he added.
The six key factors are:
- Flexibility – adopting flexible and responsive managerial approaches will enable firms to meet and surpass customer expectations
- Business process efficiency – making active attempts to evaluate and optimise internal processes enables businesses to reduce costs and improve efficiency
- Marketing – using a variety of marketing methods, such as mailshots and the internet, enables firms to more effectively make potential customers aware of products and services.
- Human resources planning – developing a plan for staff development and future employment increases a business’s flexibility and responsiveness and aids its growth aspirations
- Growth ambition – having a growth objective or ambition shapes a business’s strategy and its willingness to invest in development
- Research & development – a thorough understanding of the markets in which it works, and the best ways of delivering services, enables a business to compete more effectively