Friday, 14 March 2014

Success and Failure in Small Firms: Take a SMaRRT Approach

Small firms are the backbone of the UK economy; they account for around 99% of all
registered firms and employ 50% of all workers. Professor Lawrence Bellamy provides
expert advice on how small companies can ensure strategic success.

Despite decades of research on small firms, there is still a lot to learn about when it comes to success and failure. Whilst there are no easy answers, there are some indicators - common mistakes made and examples of good practice. Most of these can be linked back to strategic awareness and the ability to operationalise ideas. One way to consider these is to use the SMaRRT acronym:


The ‘market’ is constantly changing. What worked one month may not work the next. Small firms don’t suffer from the ‘oil tanker’ problems that large firms do and, therefore, one of their key strengths is
adaptability (but they need to be alert to new possibilities). Trade magazines and journals often provide information on key industry changes and new technical developments; this information is useful but tends to be historical. The most up to date information tends to come from key customers and suppliers - by maintaining contact, you can gather data on a daily basis, enabling you to respond to market changes (but
you need to review what you are finding and check it with other information too).

Do your research!

Whilst it is important to deal with the day to day, it’s also important not to lose sight of the ultimate goal. Having a long-term vision allows you to view key decisions as steps towards an ultimate objective. Are
the things you are doing moving you in the right direction? As the business develops, your knowledge grows and the market evolves it may be reasonable to adjust your long-term direction. Whatever you decide, try to
make your offering distinctive. Why should customers choose you?


Lack of management skills are often cited as the root of many problems when it comes to success and failure in small firms. It is an easy assumption to make, as you can always criticise a business after something goes wrong and blame the management. However, this area can be broken down into specifics - delegation
is a big problem for many owner-managers. They have started the business, built-up the customer base and probably done most of the roles within the firm. They hate to let go!

If it is a specialist task, then employ a specialist. Release your time to work on something else of
importance and which you are good at. Planning, innovation, budgeting, people skills and
managing risk are also important.


Manage the downside: in approaching any situation think about the risk involved and
how it can be minimised. Making a significant purchase? Could you dispose of it easily and what would it be
worth? Would it be better to lease? Taking on new staff? If the projects they are working on don’t go forward then can they be reallocated? Would you be better outsourcing that operation?

Get your planning right and reduce the chances of failure. Run through scenarios when making key decisions; if ‘A’ happens, how could we respond? Could we prevent this from occurring? Use specialist insurance if you need to. If you are lacking experience, then use a mentor to assist you. Build up your personal ‘knowledge bank’ and prevent yourself being ‘blindsided’ by an event; critical thinking skills are crucial.


Finance, for small firms, is probably the largest single problem cited as a cause for failure. This can occur in a number of ways - liquidity problems occur simply because the time it takes customers to pay the firm is greater than the time you take to pay your suppliers (i.e. cash flow). In bridging the gap, firms fail to manage their debtors-creditor balance well and banks are often less helpful than they might wish for.

Small firms also tend to be underinvested; ‘make do and mend’ rather than invest in equipment which will make you twice as productive. Assess your investments carefully and look at the payback. Firms
really need to get a handle on what their fixed and variable costs are, especially in set up or growth phases when these can change dramatically. Monitoring and budgeting is crucial. When it comes to equipment (whether it’s for IT, your fleet or anything else), you need to have a renewal plan. Old kit is potentially unreliable and less productive than new. However, new kit depreciates quickly and financing costs can be high.

If you are running large premises plan your maintenance and if times are hard, you can leave replacement and renewal a little longer without too much detriment. People make your company perform well… invest in them. It’s not always about the money either; try to engage your employees by letting them try new tasks, recognising them with encouragement and personally engaging with them. Get to know your staff
and what motivates them - can you use the information within their job design?


Organise your firm through targets and measure them: new business gained, margin achieved, output levels, cost reduction, response time. Measure the things which matter, though. Break your business down into periods of operation and assign projects for completion within them, e.g. development of new products,
website update, IT upgrade, new area promotion, customer account review. Whilst running the day to day, projects will take the organisation forward. Cascade targets down to your employees and get them involved in the challenge, with appropriate support.

Ultimately, all owner-managers get to a point where they feel that it’s time for something new. So you also need to have an exit strategy. After all if you can be successful in one business, why not three
or four? There is always a right time to move on if you’re working SMaRRT.

Professor Lawrence Bellamy is Associate Dean at the Warrington School of Management, University of Chester Warrington (Padgate) Campus.

Do you feel like your business needs a boost?

Warrington School of Management is launching Ignite Business Club on Wednesday 26th March  - an initiative designed to help businesses increase sales through: a business diagnostic, ongoing webinars and master classes, access to grants and a mentoring network. 

This launch event is free to attend and provides local business people with the opportunity to network and find out more about the Business Club. You will also get the opportunity to hear the inspirational story of local entrepreneur, Adrian Lomas who set up his business from a spare room in his house to grow it into one of the most successful digital agencies in the UK, with a multi-million pound turnover.

Book your ticket now


  1. Thanks for this very useful information. I looked over and they are a bit technical in areas, but overall very useful.

  2. thanks a lot!!! it really helps me. i am so happy to read this blog.
    Manage Business Leads

    1. Thank you. We are pleased you enjoyed reading and you found the post useful.