James Pinchbeck, partner at Streets Chartered Accountants, considers the barriers to, and avenues for, business growth.
The mini-Budget or fiscal event on Friday 23 September not only sought to address, in part, the cost-of-living crisis with its energy support bill but also to unleash the country’s economic potential with the lowering of taxes. The focus being on putting an end to what has been described as economic stagnation.
Having a tax regime that incentivises or motivates entrepreneurs and business leaders to start and grow enterprises needless to say is key, however it is perhaps only one element of what empowers, drives or facilitates growth.
Against a backdrop of a pandemic most businesses will have probably been more in survival mode as opposed to growth. Whilst innate resilience, along with financial support from the government, has no doubt helped organisations weather the storm, many in business are still recovering. Growth therefore may not yet be back on the agenda, or part of a short term or even longer-term strategy. Few business owners therefore probably have a growth mindset.
For those striving for growth there appears to be a number of key barriers, not just the current tax regime. Certainly, one of the biggest barriers, not just for growth but for just maintaining business, is the lack of available labour and skills to fulfill key vacancies. New approaches to recruitment and ways of working have in part helped to ease the situation, however much more needs to be done as part of a longer-term approach.
For those fortunate to be operating in a growing market, increasing revenue is somewhat easier than for those operating in a mature sector. For the latter, growth is more dependent on looking at innovation in terms of service and product and gaining a competitive advantage to take market share. For some growth may come about through increasing their geographical coverage.
When it comes to growing a business, it invariably requires investment, whether it’s in new products, business processes and systems, people or sales and marketing. Access to either own funds and external finance make such investment therefore key. Having the wherewithal is one thing, having the confidence to make such an investment is another. In uncertain times, and with the rising cost of finance, many will perhaps defer such a commitment.
Business growth fundamentally requires business leaders to have confidence in the market they operate and economic certainty, along with their organisations’ capabilities, competence and capacity to deliver growth.
Whilst growth may be close to the heart of many an entrepreneur or business owner, unless the conditions are right for it perhaps greater focus in the current climate should be around consolidation and improving profitability. A drive for growth can often be at the cost of increasing the value of what you already have. Perhaps a more balanced approach is what should be strived for.
See this article in the November edition of East Midlands Business Link Magazine here.
