INTERVIEW: Chris Hodges, Investment Director, Business Growth Fund

Chris Hodges, Investment Director, Business Growth Fund

Is 2014 the right time for ambitious small businesses to really go for growth, or does the economic outlook remain too uncertain?

There’s good reason to be positive: even the most cautious analysts are feeling optimistic. The consensus amongst independent analysts is that the UK economy will grow 2.8 per cent this year and both the CBI and the British Chambers of Commerce have raised their forecasts. Even the IMF is forecasting 2.4 per cent growth. That’s encouraging.

Still, there are some risks. The size of the UK’s debt could threaten the recovery, particularly as we move towards higher interest rates. More turmoil in the eurozone would be a problem; and we need to watch out for the results of the shift of policy in the US, where the Federal Reserve is starting to unwind its quantitative easing policy. But overall, it feels as if the mood has shifted and that confidence is building.

What should the first step be for a small company thinking about how to pursue a growth strategy?

You have to make a cultural shift – you need to move from thinking about defensive issues such as saving cash to thinking about exploring opportunities. Articulate the vision to your leadership team and colleagues and set out the opportunities for your business. Think about whether additional resources are necessary and whether you have sufficient working capital to implement your plans.

Are businesses good at putting together strategic plans for expansion?

Entrepreneurs are hardwired to go for growth and they’re skilled at seizing tactical opportunities to develop their businesses. The challenges can include thinking more strategically and timing can depend on a range of factors. Some are exogenous, such as market conditions, the actions of your competitors and so on, but some you can control – your relationships with customers, for example, and the quality of your team. Focus on setting a clear strategy and achieving maximum impact with what you can control.

Where is that growth to be found? Are small businesses best off targeting more sales from existing markets, or going after new markets? Are small businesses sufficiently diversified?

The important thing with growth strategy is to balance risk and reward – it is a question of discipline. Broadly speaking, it is better to concentrate on doing one or two things really well than to be over-ambitious and fail by taking on too much.

Will businesses need additional financial backing in order to capitalise on growth opportunities? If so, is that finance now available and what form should it take?

Absolutely. Growth consumes cash and additional financial backing is often the solution.

Consider different types of funding. Credit conditions are improving, but don’t rule out equity finance. A well-capitalised company is far better placed to seize new opportunities such as acquisitions, to be pro-active, and equally to secure the sort of credit facilities they need, compared to a business that is over reliant on short term funding and excessive levels of cheaper debt.

Is there a risk in not going for growth – of getting left behind by competitors, for example?

I have never met a successful entrepreneur that doesn’t want their business to be more successful; whether that means bigger, more profitable, able to employ more people or simply having their products in the hands of more customers.

For me that ambition is, and should be, the very essence of entrepreneurship.

I have heard plenty of reasons not to act. But be wary of confusing inertia with risk management; over the long term inertia can rapidly become a permanent way of life and put the business at risk. A disciplined view on risk and return will enable the business to seize growth opportunities and flourish.




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