Research and analysis

Executive summary: Understanding growth journeys of the 'upper end' of small and mid-size businesses

Published 24 April 2025

The findings in this report reflect the policy and attitudes of participants at the time it was conducted, in 2017.

1. Background

HM Revenue and Customs (HMRC) commissioned Ipsos to undertake qualitative research to gain greater insight into the growth journeys of mid-size and small businesses who have grown quickly, to support HMRC in developing strategies for these businesses to transition and grow. HMRC is committed to supporting growing businesses and breaking down barriers to growth that currently exist. There are approximately 170,000 mid-size businesses in the United Kingdom (UK) and 5.5 million small businesses, and both contribute significantly to the UK economy.

A total of 50 qualitative in-depth interviews were undertaken with businesses, including 30 with mid-size businesses and 20 with small businesses. The sample also included a mix of business characteristics (sector, number of employees, trading area and use of HMRC reliefs or incentives). Interviews were conducted face to face (12) and over the telephone (38) between 7 March and 18 April 2017. Findings presented in this report reflect the attitudes and experiences of businesses and the policy context at this time.

2. Business growth model

Both small and mid-size businesses developed a formal plan when setting up their business, to establish themselves and attract investment. The business model clarified direction but was used flexibly to allow businesses to respond to opportunities that arose; as such, initial plans were more likely to focus on shorter term activity. As businesses became more established, developed, and grew (and transitioned from small to mid-size), they were more likely to hone and tighten plans and to follow a more structured approach. Growth was therefore a combination of planned, organic and opportunistic, with businesses having a broad plan, but responding and reacting to opportunities as they presented. Fast and accelerated growth was often created through opportunity.

Businesses almost universally defined growth as an increase in turnover, although client numbers and contract sizes were also considered. They did not generally identify staff numbers as an indicator of growth. As businesses developed and transitioned from small to mid-size, they placed greater emphasis on profit and introduced planned strategies to increase margins. Business undertook monitoring through a mix of informal meetings and more formal strategy sessions and data monitoring.

3. What drives business growth

While some businesses discussed their growth journey in terms of turnover, others noted touchpoints such as taking on their first employee, launching a new product or service, through to recruiting specialist staff or expanding premises. The sample includes a range of growth patterns: consistent growth, where businesses grew year-on-year, and intermittent growth, where growth declined or stood still for periods. Consistent growth varied and could be fast, slow, or accelerated (where businesses grew sharply). Growth was also planned and unplanned: for example, with businesses choosing to stand still to manage their growth and reduce risk; or having to respond to external or industry factors, such as market volatility, increased competition, and personal circumstances, which curtailed their growth.

While all the businesses interviewed wanted to grow, they did not all want to grow quickly as this was seen as risky by some. Concerns were raised in relation to a decrease in the quality of their service, volatile market conditions and industry competition and financial issues (such as cash flow, over-trading and squeezed margins).

Drivers of business growth were explored as part of this study and 4 main categories were identified: personal and skill-set issues, the business approach, market conditions and financial issues.

Personal and skill-set issues include the drive, passion and vision of the owner and leadership team, previous business experience and the use of skilled staff. The Business approach includes the use of sales, marketing, and networking to build reputation and their client base, the use of external support to help drive the business and relieve administrative burden, mergers and acquisitions and developing export markets.

Market conditions include being the first entrant into a local market or having a unique service or product to sell.

Financial issues include the injection of capital, use of capital allowances and tax reliefs and the protection of cash flow. There were no sector-specific drivers of growth, growing the business was getting the right mix of growth drivers for their specific business.

4. Challenges to growth

All the businesses participating in the research experienced some challenges to their growth. Several of these challenges were common across businesses, whilst others were very business specific. Common challenges included difficulties recruiting skilled and high calibre staff (for example, those who had the 바카라 사이트˜right바카라 사이트™ attitude), managing cash flow (including bad debts and late payments), seeking capital investment, lack of external support and market uncertainty or competition. Most of these challenges had a solution, but the costs involved reduced investment in the business and restricted growth.

The UK tax system was not seen as a significant barrier to business growth. However, the complexity of certain tax processes, together with a perceived lack of support for businesses in the tax system, did present some challenges.

5. Support

Businesses viewed HMRC as a collector of tax, rather than a channel of business support and this aligned with their expectations. The relationship was mainly seen as transactional, although more conversational and 2-way by some mid-size businesses. There was clear evidence businesses contacted and received support from HMRC in relation to payments (such as payment plans or simplification measures). This support was instrumental in helping businesses manage financial issues, enabling them to survive and grow their business and was seen as invaluable.

Businesses were looking for functional support from HMRC to get their taxes right; the tax system was felt to be highly complex and changed regularly. Businesses thought receiving support on how to use the system would enable them to spend less time on tax administration and more time on their business. Ideally, businesses were looking for good customer service, tailored advice, and clear communications in relation to tax and reliefs and incentives.

Awareness of support and incentives was variable, although it was higher among mid-size business (primarily because of their experience, but in some cases also a result of having specialist financial advice in-house). Businesses found out about support in 2 ways: via their agent (who they were often reliant on for information, especially small business), or by being proactive and connected, by linking into networks, keeping abreast of what is available and drawing on the range of initiatives and support available to them. Lack of time was seen as the main barrier to finding out about support and when weighed against perceptions of stringent eligibility criteria and complex application processes, businesses often did not pursue. Businesses often questioned how useful (government and external) support would be, based on the view that only those with specialist knowledge of their business or the sector could provide relevant support. 바카라 사이트ƒ