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Super size me
Is bigger really better when it comes to your business? Paul Stephenson looks at the problems associated with expansion
Published:  04 September, 2008

‘Hey, Hamster Pants, blast her into next week with your new trouser rocket - you'll be knocking in nails and bringing down planes with your new improved equipment!'

A quick look in my inbox would suggest that size is important to us all (either that or the Mrs has been spreading malicious rumours about me in chat rooms again) - bigger is better isn't it, and the same applies to business.

Well, I don't know, remember the old days? No wages to pay, no national insurance to calculate, no wondering whether to remain under certain thresholds to avoid a roistering by the tax man.

It was all so much easier to be a bit smaller wasn't it - you were lightweight, nimble, a guerrilla operation smash and grab outfit. Print the Ts, load up the van and off to the drag strip, knocking them out for a tenner all sunny day long. The air was thick with essence of hot dog and burning fuel, deep fried doughnuts, billowing tyre smoke and the relentless chug of a hundred generators.

Fingers in your ears everyone, the jet car is about to run a quarter mile. It will be so fast that the driver will black out, his nose and ears will bleed, and some numb nut will stand too close and have his gall stones removed.

As night falls forget the tent, it's back to Madge's B&B. She was a large woman, wore too many man made fibres, and in a low cut blouse looked like a tourist brochure for Cheddar Gorge......but what a breakfast. And then off on the road again, with so much Jack Dash in your back bin you'd be banging your head on the van roof all the way home - small, can be quite lovely.

Even so, overcome with a desire for M&S food and a swanky key fob to throw down on the coffee table, we will all at some stage feel a touch Bransonesque and attempt world domination.

The methods for expansion are extremely difficult but annoyingly obvious, so I won't anaesthetise you with them here - improving your web site, employing a rep, brochures, telesales, buying businesses, becoming a money laundering operation for the Peruvian mob - you've heard it all before. Five year planning is the key we're told, to assess budgets, understand what funds are available and then maximise their effectiveness - basically, don't attempt to employ a blow dried rep (who will need climate control to stay comfortable while having a kip at Leicester Forest East) unless the long term budgets are in place.

In addition we're advised that an honest assessment of strengths and weaknesses is required. Once these skills are identified we can set about entering events we've got half a chance in; to avoid this is presumably like putting Geoff Capes' name down for the pole vault - and then naturally we put the correct structures in place to get us over the bar, a nice tight pair of shorts, some running pumps and good long jumping rod, that sort of thing.

Easy! Well obviously not, as anyone working a heat press in a back bedroom in Droitwich will tell you, but let's just assume you're expanding like a kid at the Wonka factory, what dangers lay ahead?

Because the general view is that growing a company isn't just a case of dealing with the same problems on a different scale, it can often mean running an entirely different business.

Problem number one: growing too fast. Now I know something about this; anyone remember a 13-year-old 6'4" soprano at the Albert Hall Nottingham? 1979, Joseph and his Amazingly Embarrassing Experience, still talked about.

The problems here are usually most noticeable at the operational end it seems - demand for product overtaking production capacity for example. It's rather tiresome when you've signed a five-year lease for a unit with a front door like a cat flap, when suddenly you need to install a 30-foot dryer.We hear of companies that need to move several times in a few years with all the costs involved - they may try and self fund this, suddenly hit a cash flow pot hole and whoops, the wheels are off. A good time to talk to the bank manager presumably, and make sure the funds are in place prior to moving, just in case we need a little extra.

Problem two, and in our game I suspect this is a biggy; entering the more volume based end of the market. I'll hold my hands up and admit to this - those automatic printing machines are so shiny, they've got knobs and switches all over them, digital read outs, safety loops, they hiss and they whirr and they've got a Geneva Wheel - what the bloody hell one of those is I don't know and I don't care, but what small boy could say no?

Bang a few of those in and then you can talk to customers that your friends have heard of. You're no longer printing for Doncaster Tackle and Bait; you're on the blower to New Look, Selfridges and Harvey Nicks. ‘This whopping order is reversing' you hear, as another lorry backs up to the loading bay with 10,000 sleep suits in need of a Snoopy print. Big time here we come..... ‘Hedges, buff one's helmet to a high sheen and spark me up another Havana'.

Well no, not quite, because as we all know this then sweeps all your margins into the gutter, and you're in a price war with businesses who are happy to watch machines running whether they are profitable or not, hypnotised perhaps by the carousel's circular motion? Bruised by their experiences with the bigger fish, many a printer and embroiderer has returned to their old hunting grounds.... ‘Is that Barry? Let's talk tackle'.

Problem three: and this one can be more pronounced if, in moving away from volume, we then attempt a large increase of orders, in the smaller but higher margin end user sector - if you haven't got 10 huge accounts but 500 small ones, imagine the increased record keeping, admin, and all that dreary drivvle.

Now I hate this stuff, and I've been regularly losing documents since I was fired from a paper round. But someone clever told me once that doubling the size of your business means the number of bills you have goes up six times. I don't know who worked that out and it must have been a very wet weekend, but generally the need to track deliveries, manage finances, chase overdue accounts and order more bog roll just keeps increasing. And it comes at time when by the very nature of expansion you are most over stretched.

So many obvious problems occur here, forgotten invoices, spot cured delivery notes, small printers falling into boxes and waking up on a lorry, but the problem rarely mentioned by all the business types is how utterly spannered you feel when you attempt to do everything yourself, which we all do as we wait for the confidence to employ more staff. You will all have cruised home in a haze of tedious information, trying to remember it all, to put on your wife's best nightie and pass out on the lavvy.

Problemo Quattro: finding the capital - this is so obvious I'm not even going into it, but it goes without saying that your bank manager would be more likely to lend you money to develop a new plastic frying pan for salads, than spot you a fiver for a tin of spray tack. I often wonder what would happen if anyone from our sector attempted to raise any capital in Dragons Den; they'd probably just form a circle and relieve themselves on you.

And five: personnel issues. Tell me if I'm wrong, but it feels to me that this is the sharpest growing pain of all, certainly for me, but then I do cry at the end of the Railway Children. It's not a difficulty with new staff, they of course have known no different; but for the hard core, the ones who were there at the beginning knocking it out of the back of the van, side by side, the changes they go through around a time of growth can be uncomfortable to watch. Often companies get all the above right - they do all the long term financial planning, put the budgets in place, access the funding, identify the right markets and build the right infrastructure... and they have a road map for growth with identifiable milestones to check and monitor progress (did I just actually say that....what a tit).

Anyway, meanwhile Wayne, who used to be the world's best printer, specialising in four colour process with high build, gloss, suede effect and a rhinestone, is now head of production. He's got a clipboard with a weekly planner on it, he's got deadlines and talks to customers, he's been shoe horned into a tucked in polo and chinos with a pleated front. Frankly, he looks about as comfortable as a dog in lingerie. Next thing you know you're employing people you don't even know, at least one of whom you suspect has eaten your fruit and nut, and done a tribute to Jackson Pollock in the executive washroom.

We're still a small business but I often hear my lads talking about the old days and how it used to be much more fun - I've started playing loading bay football again and nothing cheers them up more than blasting the ball into the gaffers danglers, but if I don't keep the atmosphere family enough, I could lose some of the best men that ever picked up a squeegee - one to watch.

This brings us onto the subject of limited and controllable growth. What? Surely we want to have 15 pints of overnight success and then come around in a Jacuzzi with silicone head rests - but if some of the above difficulties apply, perhaps a flatter upward curve makes sense.

Now business growth can of course be controlled by shouting ‘Clear off Big Nose' every time a customer walks in, but the standard method is a timely price rise for any customers who aren't on your Christmas card list, and for any new enquiries you don't like the sound of.

This is a dangerous game of course, flirted with when we're busy and regretted when it seems like the phone is broken, but analysts do suggest that as a by-product of this business control method profits will increase, especially in niche businesses.

One last thing - if we do find ourselves at the volume end, limiting growth can be unwise if you're arguing in the Gents with anyone who gets suddenly enormous. In which case you're no longer dealing with the mild mannered Bill Bixby but head high with the Hulks lunch box - this can be bad. Up against a massive competitor who can then buy way cheaper than you, whose manufacturing costs are coming down, and in an environment where 2p is all the world, you're not going to like it when they get angry.

I guess it all comes down to who you want to be; but while the big kids in the playground are grabbing your conkers and attempting a onehanded wedgie, there's often a youth in the corner, almost invisible, sporting a cycling proficiency badge, and doing rather nicely.

Cheers,

Paul







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