Title: Maximising investment funds as an SME

Whether you're a startup looking to scale or an established business aiming to solidify your market position, how you allocate investment funds can significantly impact your trajectory. In this post, we’ll explore a few ideas of how SMEs could use investment money intelligently to maximise returns and foster growth.?

There are multiple funding avenues open to SMEs including loans, grants, SEIS schemes and angel/private equity investments; and although the rate of growth slowed in 2023 the private equity market in the UK is still on the up, averaging an increase of over 11% per annum between 2018 and 2023.?

Whichever options you are considering for funding the next stage of your business, you’ve probably already got some key initiatives identified – or certainly general areas that you want to use the funding for.? No matter the level of investment, it’s important that once you’ve got it to be smart about how you deploy it. A million-pound ‘war chest’ might sound great and potentially be game-changing for your business, but often comes with provisions. For instance, if it’s PE or grant-based then it might be delivered in instalments or have certain obligations relating to release of funds such as growth or profitability targets.?

So, what might you want to consider to maximise bang for your buck? Areas of typical focus include:?

People

The team around you is your most important asset – investing in experienced people to help you overcome growth challenges or set strategy pays dividends short- and long-term.?

The problem with experienced, senior people is that they’re not cheap. Aside from bringing on your own permanent hires you could consider:?

• Finding non-execs or people who will work on a future equity/LTIP basis.?
• Building a relationship with outsourced providers – be it sales, technology, legal or financial resources you can often get a broader and more experienced team for less if you select the right partner.?
• Fractional resources can also be a great way to maximise return on spend – for example, you might have a great internal tech team already but want to augment it with a bit more experience. Do you need a full-time CTO at this stage, or can your needs be fulfilled more efficiently by paying for someone one or two days per week instead???

Core operations

Before expanding into new areas, it's essential to strengthen your core operations to provide a solid foundation on which to grow – do this, and it sets you up to scale efficiently. This might include:?

• Technology Upgrades: Modernise your business with the latest software and hardware. This could include adopting cloud computing, implementing or upgrading a Customer Relationship Management (CRM) system, or automating repetitive tasks. These investments can enhance efficiency, reduce operational costs, and free up time for strategic activities.?
• Employee Training: Allocate funds for training and development programs to enhance skills, improve productivity, and boost morale. A well-trained workforce can lead to better customer service and innovative solutions.?
• Inventory Management: For product-based businesses, efficient inventory management is crucial. Invest in advanced inventory systems to reduce waste, optimise stock levels, and improve cash flow.?

Customer acquisition & marketing

You’ll already know your primary route to market, but using investment to introduce new routes or optimise your existing ones is often worthwhile.??

• Look at optimising existing sales channels before introducing new ones: Are your conversion rates as good as they ought to be? Are there bottlenecks in the sales processes or technology platforms? Can you improve your website to increase average order value? By assessing this area first, you can often identify improvements that are simpler (i.e., better ROI) to implement than forging new, less well tested routes to market.?
• Know your fulfilment capabilities: whether you’re manufacturing, retail, service, or anything in between you need to ensure that you can deliver for your customers (and deliver well!) before investing too much in marketing or advertising. For instance, there’s no point in spending an abundance of cash on generating a 200% increase on your website orders if you can’t deal with it, and your reputation (and therefore likelihood of future sales) takes a battering.?
• Once you’ve addressed the above, invest in SEO, social media marketing, content creation, and paid advertising to increase your visibility and reach your target audience – again, getting specialist advice and delivery is often the most effective way to magnify your spend.?
• For new channels or sales strategies, adopt a ‘test and learn’ approach. This means not committing too much (either cash or time) to a particular route until you’ve analysed the results from the latest pilot, worked out where you can optimise it, and measured the impact of such. You can use the principles of this approach across any channel – whilst examples abound in digital marketing (e.g. A/B testing), it’s equally applicable to more ‘traditional’ methods such as discounting or new product launches. Say for example you wanted to introduce a partner referral scheme; testing it in a limited capacity to ascertain average customer value from that channel before you finalise terms with the partner or commit to a level of spend on marketing it will take some of the guesswork out of the investment. Of course, this strategy is highly dependent on good data! Speaking of which…?

Good data

How do you know if you’re getting ‘bang for your buck’? The answer is good measurement. An ROI-first approach, where you can reliably assess not only where to spend in the first place but also what is working – and importantly, what’s not – is imperative. Some funding avenues (like PE investment) will require accurate and regular reporting, and some funding options will be closed to you if you don’t have a handle on the key metrics appropriate for your business or change programme. Aside from that though, making the shift to data-driven decision making can significantly enhance business outcomes – and it only becomes more important as you grow.?

Contemplate if you need to appropriate funds to enhance your current ‘view of the world’ – it might be manageable via spreadsheets at ￡5m turnover, but if that doubles or trebles how are you going to manage that effectively? How do you know if the information is reliable? Do you have actual insights to hand, or just data??

There are myriad options for achieving this, and technology that can help to provide insight and intelligent analysis has come a long way in the last few years, but you may want to consider the following:?

• When enhancing ‘core operations’, ensure that sufficient provision is given to data availability and synchronisation – for example, making sure that a customer can be identified from initial contact through to revenue and beyond?
• Developing a robust data strategy for all aspects of your business.?
• Know what measurements are important to enable effective management; day-to-day and month-to-month.?
• Be clear about your intended outcomes and how you assess progress against them.?
• Work towards achieving ‘one version of the truth’ across all your processes and platforms to enable the right decisions, at the right time.?

In conclusion – smart decisions can enhance the impact of the funds at your disposal. Be clear about your goals, focus on ROI, assess multiple options, and get good advice from the right specialists in the right areas.?

John Welsh - Consulting Lead

At True Worth, we specialise in connecting businesses with top-tier data professionals. When direct resourcing lets you down, our expertise in recruitment ensures you find the right talent to meet your needs. Our unique selling proposition lies in our deep industry knowledge, personalized approach, and extensive network of qualified candidates. Visit us at True Worth Consulting to learn more about how we can help you build a data-driven future.

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