Middle-market enterprises – planning for sustainable growth

Planning for sustainable growth

Growth is vital to continued business success, but amid unique pressures, how can middle-market enterprises build a strategy, identify the best opportunities and – most importantly – ensure it lasts?

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It is one thing to achieve short-term growth, but for a middle-market business to thrive into the future amid increasing competition, a sustainable growth strategy is essential.

Each mid-market enterprise is different, with its own goals and path. But whether it’s a not-for-profit or company turning over millions of dollars a year, it’s vital to put in place the infrastructure that allows it to streamline operations, develop and retain a skilled workforce, and keep up with the ever-changing technological expectations of its customers.

Meeting the demands of the constantly shifting modern business environment has never been tougher, with the mid-market facing unique changes compared to other types of enterprise, explains Toni Jones, Partner at KPMG Enterprise.

“Changes in the mid-market are happening so quickly,” she says. “The mid-market is being disrupted as new competitors are coming in, technology is advancing and customers are changing the way that they want to interact with a business. This is providing both opportunities and challenges.”

On the positive, their medium size and structure provides the ability to respond and adapt more nimbly to these changes than large enterprises. The challenge is that they may not have the same level of resources available to them as the big players. They can also lack specialised understanding or knowledge of areas of change.

“They often haven't got the ability to acquire the combination of market-leading resources and skills to continue to grow in a challenging environment,” she says.

Despite the complexities, a well-planned strategy designed to take advantage of these new opportunities can lead to sustainable growth.

What is sustainable growth?

Sustainable growth, Jones says, is all about efficiency and long-term stability. Quite simply, it’s the ability to continually earn more than you spend at a good margin, and to do so while continuing to invest, as well as mitigating unprecedented risks that medium enterprises are set to face.

“For a medium business, that means you've got a really strong top line, but you've got a ‘managed’ below the line. In a not-for-profit organisation, even though they don't declare profit, it is important that they still declare a surplus which enables them to reinvest and to efficiently support their mission.”

Achieving this requires a very honest assessment of how the company is operating. A sustainable growth strategy is about maximising resources.

“It's about taking that level of maturity and professionalism [in how you run your business] to the next level,” Jones says.

Agility for sustainability

For medium-sized enterprises entering an increasing technology focused world, where expectations of service from customers will intensify, sustainability will also require immense agility and flexibility.

“Leaders must ask, how do I harness technology, adapt to changes in the market, respond to fluctuating demand for services, get to market quicker, lower my working capital, or help my team change to agile ways of working?”

One step could be removing time intensive manual processes in favour of technology automation.

“It’s about acknowledging that you’re getting bigger, that you need to consider investing in these things to scale up, or that you need to get ready to scale.”

However, agility needs strategy and a constant eye on what better practice looks like, and to optimise spending on resources where they are adding value.

“It is essential to know what everyone is doing in the business, to be more efficient, drive down costs, and get better information and support from the resources you invest in,” Jones says.

Being agile also helps to mitigate risk, with the ability to shift, change and pivot ahead of, or in response to, market forces.

“Things are moving so quickly and businesses need to be open to, and aware of, the changes and disruption that are effecting them, and how they can utilise it for their advantage. The risk of not doing this is that they will be left behind and become less relevant to their customers in the market, and hence challenge their sustainability,” Jones says.

 

Identifying growth opportunities

For mid-market businesses looking to achieve sustainable growth, businesses must identify where growth opportunities exist in the market, and put a plan in place to reach them. Key questions to ask include, what products do you offer? What are the points of difference that you have in the market? How do you take advantage of the weaknesses of your competitors or the gaps that present?

“Once you understand how you're going to go to market and what channels you are going to go to market in, it's then about how you structure your business to support that. Ask, what support structures do you need? What technology do you need and to what level?”

The main opportunities for the mid-market will depend on where the business is placed in its growth cycle.

“There are certain stages of growth that every organisation goes through and there are characteristics within each of those stages. Medium-sized business have to focus on ensuring they have the right combination and size of support functions for each stage. It’s about ensuring the foundations for their operations are sound.”

As businesses seek to grow, there are also common periods of upheaval and symptoms that may indicate the business is not coping or responding to the changes well. This is critical to address.

“We know that businesses don't address the symptoms go through crises and can remain stagnant or go backwards in terms of growth,” Jones says.

Enacting the plan

Knowing what needs to be done is one thing, but following through and making sure the growth strategy is implemented is another. Jones says it all comes down to accountability.

“Many businesses come up with a strategy for where they want to end up, but then they never break it down into what it actually means. How are we going to measure it? How are we going to get action on it and track the action?”

One of the main points to a successful growth plan is approaching it holistically, rather than trying to implement piecemeal projects.

“Middle-sized businesses will often say, ‘I need a HR system’, then they think ‘I need a payroll system’; ‘I need a finance system’. They keep adding incrementally rather than developing an overall roadmap to ensure it all works well together and the investment is efficient,” Jones says.

Implementing the plan is about knowing what needs to be addressed, what timeframe things can be done in and what dependencies will impact the business. It’s a prioritisation exercise.

“You need to think: Have we got the right clarity around processes and efficiency of the processes that we’re doing? Is our operating model set up to cater for our services? Do we have the right people and the right technology?”

These structures and processes can help ensure that everyone knows what needs to be done and people are being held accountable for enacting it.

“It comes down to being very structured – accountability is really important,” Jones says.

Setting the foundations for sustainable growth

Watch KPMG Enterprise Advisory partner Toni Jones, discuss common challenges companies face in achieving sustainable growth.

 
Read more

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