5 tips for transitioning your small business into a medium business

For this topic I’ll start by clarifying some key points, that will be useful later. This is because at times when MDs and business owners say a small business, they actually mean a micro-entity. As such I'll include tips for both.

What is a micro-entity?

A micro-entity (in the UK) A micro-entity must meet at least 2 of the following conditions:

• turnover must be not more than £632,000
• the balance sheet total must be not more than £316,000
• the average number of employees must be not more than 10

Source: https://www.gov.uk/government/publications/life-of-a-company-annual-requirements/life-of-a-company-part-1-accounts#micro-entity

What is a small business?

Defining a small business (in the UK) For accounting periods beginning on or after 1 January 2016, a small company must meet at least 2 of the following conditions:

• annual turnover must be not more than £10.2 million
• the balance sheet total must be not more than £5.1 million
• the average number of employees must be not more than 50

Source: https://www.gov.uk/government/publications/life-of-a-company-annual-requirements/life-of-a-company-part-1-accounts#small-company

What is a medium business?

Defining a medium business (in the UK) To be a medium-sized company, you must meet at least 2 of the following conditions:

• the annual turnover must be no more than £36 million
• the balance sheet total must be no more than £18 million
• the average number of employees must be no more than 250

Source: https://www.gov.uk/government/publications/life-of-a-company-annual-requirements/life-of-a-company-part-1-accounts#medium-sized-company-accounts

Tip 1: Transitioning from a small to medium-sized company 

So you’ve got a lot of options with how you can approach this. Increasing revenue is one way to do it, but the way you go about it depends on what is appropriate for your specific situation. For instance, some of the below will work extremely well for business A but also work terribly for business B.

• Introducing 1–2 more products
• Buying out a competitor
• Transitioning your business into a completely different industry

Other non-revenue areas can be seen below:

• Increasing the value of the total cash and other assets on your balance sheet
• Launching 10 new branch locations
• Entering a new country

Naturally, the above list is not exhaustive, because I’m just trying to give you a broad idea. Also, each of the above and other more tailor-made solutions will need to be assessed based on the findings of your strategy process. I cannot emphasise enough, how useful learning and applying the 4th pilot's framework would be to this end. 

P.S. As great as it can be to grow your business you still need to make time for yourself when doing this. Click the button below if you want tips on how to do this?

Tip 2: Transitioning from a micro company to a medium-sized company 

Because some people mean a micro company when they say a small-sized company I also included this as a definition. Similar approaches can be used here but they will typically need to be more transformational if time is a factor, rather than an option for incremental changes.

Tip 3: Cultural considerations 

Please note that while growth is a word that is promoted as the thing that everyone should aim for, it’s important that there are fundamental cultural changes to consider in going from say a team of 25 or 50, to 200 for instance. As such leadership and management skills will be invaluable during the transition.

The beautiful thing is that the 4th pilot's one-page framework is built to help you account for and manage the critical nuances of this aspect of your business. Even if you are navigating such cultural considerations for the first or 100th time, and if you are doing this as the sole leader in your business or as part of a management team.

P.S. For another perspective on how culture (which is often closely related to geography) can affect your business strategy, clcik the button below and pay close attention to the 3rd point in the following article.

Tip 4: Motivations for growth 

Once again growth can sound great, and is ‘seen’ as success in many cases, but that’s not always true. For instance, if you as a founder never desired a company with 200 employees to manage then growing your company may bring undesired stress. This is especially true if you are still managing the company overall as a CEO.

P.S. Although I can't remember who said it, there's a great saying that states, "Success will take you to where your principles can't follow". This 'high' of success can blind you to the core motivations that started you down that path, so it is always good to reflect on and sense-check the strength of your values. Click below for tips on how to test the strength of your company values.

Tip 5: Hard truths about your leadership team 

Not everyone who founded or previously joined the business, might be a good team member for the company’s future. Put another way, although you and your team may have been pivotal in the companies past, that will not always mean you are the best team to take your company forward to the next level. Although key things can be done to offset this effect such as upskilling and bringing in professional help consider the following.

• Do prefer starting and selling companies to growing them?
• Do you have the skills to manage a medium-scale company and is it possible for you to acquire the skillset in the next 6 to 12 months?
• Do you prefer being the CEO to being a silent shareholder?
• Is your leadership team the right leadership team for the new culture the company will need to take on?
• Is your leadership team able to make the mental jump from operating as a small company to being a medium one?

The above are just starting points.