Small businesses thinking big

SMEs remain the backbone of Lancashire’s economy as highlighted each year by our Hot 100 list of the most profitable.

Our latest toolkit offers advice and guidance to companies looking to grow.

Charlie Stephenson has just come out of a meeting with potential investors as he looks to steer his business to the next stage of its
growth journey.

YUDU is a Clitheroe-based software company specialising in digital publishing and crisis communications and is looking for backing.

Charlie is director of the SME’s Sentinel division. It has developed software that allows organisations to communicate and coordinate during a crisis, such as a cyberattack, using tools including secure live chat and video crisis rooms.

There are 12 people in the business, which has a turnover of around £1.2m. Charlie says heading an SME in the tech space is like
“juggling plates”.

Those plates will be familiar to SME bosses across the county. They include serving and growing the company’s customer base, working on future plans and keeping up with new technology and regulations, while at the same time putting energy and effort into raising funds for growth.

Looking at the fundraising element he says: “You have to be careful how much time and energy you spend. It’s time and energy you are not putting into other elements of the business.

“You are constantly trying to prioritise; there are so many things pulling on your time.

“Should you be spending time improving your marketing or building up your relationship with existing customers? How much time should you spend networking? You are always looking to split the work into chunks of time. Time management is the hardest thing.”

Charlie adds: “In an ideal world you don’t need to raise funds, you grow organically. But that’s not the reality. You need capital to get to the next stage of your growth journey.

“A lot of tech business are competing with massive companies coming out of America, where there is a very different funding environment. We are competing on a global scale.”

He adds: “What I have learned through fundraising is that it is very much done on a relationship basis. Trust can only be built in person.”

He believes building a support network is vital for SME owners and managers. Charlie took part in the University of Lancashire’s ‘Help to Grow’ programme, which delivers mentoring and peer support.

He says: “Having that person you can talk to about the stage you are at as a business is invaluable. Building up that network of people you can use as a resource reduces some of the isolation you can feel.”

Mark Gibbons is funding and partnership manager at Rosebud, which is part of Lancashire County Council’s Business Growth Service.

Rosebud provides growth support and loans for companies based in the county.

He says: “For businesses that have successfully moved beyond the start-up phase – those that are up, running and growing – seeking debt
finance can be a powerful way to unlock the next stage of growth.

“When used strategically, debt funding enables businesses to invest in expansion, boost working capital or seize new market opportunities without selling equity through private investment.

“However, preparation is key. Lenders want to see that you have a clear plan for growth and a robust understanding of your financial position.

“Before applying for funding, businesses should ensure they have strong financial systems in place, up-to-date accounts and clear cashflow forecasts.

“Demonstrating consistent revenue growth, profitability – or a clear pathway to profitability – can significantly strengthen your application.”

The timing also has to be right. Mark says: “Debt finance works best when it is used for momentum, not to solve fundamental business problems, cash flow issues or to get your business off the ground. Can you clearly show that funding will generate increased revenues
to service new debt?”

Leading business lender Allica Bank has called for more finance to be made available to North West businesses after its research revealed a
worrying SME ‘lending gap’.

It says its research highlights a ‘concerning drop’ in business loan applications and increase in bank rejections, leaving the UK with the lowest business investment rate in the G7.

And it warns a lack of SME lending is sucking £6.33bn of productive credit out of the North West’s economy – equivalent to around 2.3 per
cent of the region’s GDP.

Pete Norris, Allica Bank’s relationship manager for the region, says: “The North West is home to some fantastic businesses and a business community that wants to invest, grow and innovate. All too often, however, business owners struggle to find the finance they need to do so.

“Recent decades have seen many banks focus lending only on businesses with significant assets and property, or shy away from supporting some sectors altogether.

“Our data reveals that three decades ago only five to 10 per cent of SME loans were rejected – a figure that stands at 40 per cent today.

This shows a banking sector failing to keep pace with a changing economy and this is having real knock-on effects for the North West economy, and the country as a whole.”

Things may be about to change. As part of its overall plan to support small business the government has announced plans to launch a new £4bn wave of financial support.

It will be aimed at boosting growth and supporting more small businesses to start up and grow. Accelerating SME growth by just one percentage point per year, could deliver £320bn to the UK economy by 2030.

Finding the funds to push forward is just one of the potential barriers to growth Lancashire’s SMEs have to overcome.

The Blackpool Growth Business Academy is working to help SMEs identify the hidden challenges. According to its team, some of the most common, and often overlooked, obstacles include limited operational capacity, informal or unclear strategies, leadership pressure points
and what it describes as ‘digital hesitation’.

A spokesperson says: “These issues are simply natural hurdles many growing businesses encounter, even after years of solid performance.”

David Thorp enlisted the academy’s support last year as he looked to grow Blackpool based SME Stanton and Novelty Confectioners.

Since 1969 it has been known for its iconic candy and rock novelties. Managing director David is the third generation at the helm of the business that has a 14-strong team.

Recognising the challenges of managing a seasonal business he worked to establish a year-round trade.

Stanton’s products are sold in Fortnum and Mason, Alton Towers and Blackpool’s own Pleasure Beach Resort, while its Logo Lollies have been created for brands ranging from Staples and Samsung to Chelsea and
Everton football clubs.

David’s next task was to look for growth. He says: “I really wanted an external pair of eyes to check our plans and reassure us that we were heading in the right direction.

“I’d been working full-time on production and running things in the office, and it’s easy to find yourself just reacting to what’s going on around you and never thinking ahead.”

He adds: “We did a three-year orbit plan that helped me focus on the future and how to get there. And a resource matrix helped identify the parts of the business where we’re a little resource light. So that was all fantastic, because you can’t figure out where you’re going next without understanding where you are now.

“I’m definitely able to take more of a data-driven, more strategic approach to what we’re doing,” he says.

“I’ve now got systems in place that make it easier for me to understand what’s happening within the business.

“The wild card remains the external factors.

By definition, they’re hard to control, but I am now able to better prepare the business to withstand the unexpected.”