With a little success, every small business will grow. It’s tempting to let this happen naturally, to ‘go with the flow’ without intervening too much in the process. It’s also unwise. When you start bringing in bigger clients or earning larger revenues, having a scaling-up plan is essential. It’s not just about knowing how large you need to grow to meet increased demand; small business leaders need to be aware of the practicalities of upscaling, and the pros and cons of taking different routes.
You don’t need to draw up a thorough step-by-step program, but some kind of roadmap is necessary to stop your small company from being overwhelmed. Whatever you come up with, here are three important factors to keep in mind.
1. Calculate your business rates
If you rent a commercial space for your business, you will have dealt with business rates before. But since nearly half of the UK’s small enterprises are home-based, this first growth spurt will cause many to move out for the first time.
Many businesses look into rental spaces with larger companies, such as serviced offices, when they first start out. There is one way to avoid business rates altogether. London-based company Dephna points out that many startups make use of their kitchens for rent as this allows them to circumvent business rates whilst benefitting from the use of a customisable kitchen space of their own.
Moving out of your home office will cost more than the lease alone. Business rates are taxes companies pay to the government dependant on the size and value of their premises. For standard businesses, rates have a multiplier of 47.9p. Businesses with a rateable value of below £18,000 (or £25,000 in London) however are subject to the small business multiplier, which is a more forgiving 46.6p. Use the government’s business rates calculator for a more precise figure, as smaller enterprises are also able to apply for small business rates relief in some special circumstances, which can sometimes cover all costs.
2. Prepare to hire new employees
Aside from moving to a larger space, the biggest physical manifestation of growing a business is expanding your workforce. Hiring new employees is a huge undertaking, especially if you do it all at once. It’s best to break it down into manageable sections by asking a few simple questions.
- Who? Look at the areas of your business that’ll need more people power and put together job descriptions based on what you’ll need them to do. Then you can advertise for the roles with a clear idea of who you are looking for.
- How (much)? Hiring more staff means paying more people. Not just salaries but pension contributions, and even the cost of buying new equipment. Figure out how much you can afford to pay new staff before you make any hires.
- When? If you can’t afford to hire everyone you need in one go, decide which new positions you need to fill first, and which you can wait to fill later.
3. Ensure you have insurance
All of this business growth will have a big impact on your required insurance. There are a few different kinds of insurance all small businesses need. Here is a rundown of a few of them.
– Employers’ liability insurance
If your company hires even a single employee it will need to take out employers’ liability insurance. As Confused.com explains, “This insurance covers the business in the event that an employee who is injured at work or who become[s] ill as a result of their work for the company makes a claim from compensation.” It applies to both current and former employees because some conditions can develop over time.
Employers’ liability insurance is a legal requirement. Any business which does not comply can be fined up to £2,500 a day. The minimum level of cover a business must have is £5 million, but even the smallest businesses take out up to £10 million.
– Professional indemnity insurance
Professional indemnity insurance covers your business if someone claims you have caused them loss or damage, infringed their copyright or trademark, or acted negligently.
It is only compulsory for certain kinds of businesses. Accountants, architects, financial advisors, IT consultants, and professionals in the media industry all fall under this bracket, but Startups.co.uk has more information on whether it applies to you.
Some businesses take out professional indemnity insurance even if they are not legally obliged to do so as it can still be useful to be protected from compensation claims of all kinds.