Common “breakpoints” as SMEs grow.

There are certain breakpoints, where businesses need to make significant changes to sustain growth and avoid stagnation or decline.

These breakpoints are typically marked by shifts in revenue, employee count, operational complexity, or market conditions.

✅ Reaching the first million in revenueis a significant milestone for many SMEs. At this point, businesses may need to formalise processes and implement better financial management systems. 

✅ Growing the workforce to between 30 and 50 employees often raises communication and coordination challenges.  Companies at this size need to introduce middle management layers, create cross-functional teams, and invest in collaboration tools and processes. 

✅ Reaching 100 employees.  At this point, businesses face the need for more robust human resources practices, including employee development, performance management, and benefits administration.

✅ When reaching £10m to £20m of revenue, companies may encounter issues related to scaling their infrastructure, expanding into new markets, and managing cash flow effectively. This may necessitate changes in leadership, strategic planning, and the adoption of more sophisticated operational and financial systems.

✅ As companies approach the upper limits of the SME category, they may encounter challenges related to scalability, cultural alignment, and maintaining agility. At this stage, businesses may need to consider more sophisticated enterprise systems, leadership development programs, and formal strategic planning processes.

Reasons for SMEs to fail

According to the US Bureau of Labor Statistics, only about half of businesses survive for 5 years and only a quarter of them reach 15 years. 

The underlying reasons for SMEs to fail remain the same throughout their life. 

They include: -

❌ Not having a team with the skills, experience, or capacity to support the growth of the business. 

❌ Not having effective systems to generate and share reliable data to manage sales, production, engineering, projects, finance, or HR. 

❌ Not having clarity about the company’s values and “why” to guide the growth of the business.

❌ Not having realistic sales projections and cost forecast. 

Although the reasons for failure remain the same throughout the life of the business, the consequences of failing to address them become more critical when the business grows as the number of employees and the running costs increase. 

Way forward

Sustainable growth requires doing things differently, allowing vulnerability, ceding control of certain decisions, and asking for help.

Transitioning from a small business run by its founder to a company positioned to grow to another level is a huge challenge. 

But it has been done many times before when the leader has committed to change. 

Help from an experienced and independent third party focused on supporting you is invaluable. 

I work with overstretched leaders of SMEs in the engineering sector to help them prepare their business for sustainable growth. 

My role is to act as an objective sounding board to talk through changes, brainstorm creative solutions, anticipate setbacks, and maintain accountability until progress takes root.

Please use the link below to book a time in my diary for a free exploratory conversation.

http://tinyurl.com/HerveJardonCalendar