To realise the growth potential and exit that you want, it is vital that you invest in developing your employees
Small businesses are the backbone of the UK economy, accounting for 99.9% of the business population and over half of private sector employment. Yet despite their vital role, many small firms are struggling to scale. While access to finance, regulation, and infrastructure are frequently cited barriers, one of the most under-recognised factors limiting small business growth is the underinvestment in people - particularly in leadership and management capability.
If we are to unlock the growth potential of the UK’s small businesses, it is essential that more firms prioritise employee development - not just at the front line, but across the organisation, starting with those at the top.
The Case for Investing in Leadership and Management
Many small businesses are led by founders or technical experts who have grown their firms organically. But as a business evolves, the skills needed to manage teams, inspire performance, and drive strategic growth become increasingly important. According to research from the Chartered Management Institute (CMI), poor management is costing the UK economy over £84 billion a year in lost productivity. This is not just a corporate issue - it affects small firms, too.
When leadership and management training is embedded early, it strengthens the foundation for growth. Business owners who invest in developing their own leadership skills - and those of emerging managers within their business - create a multiplier effect. They become better decision-makers, communicate more effectively, manage change with confidence, and are more likely to empower their teams to take ownership and solve problems.
Yet leadership training is often deprioritised in small businesses, seen as a luxury rather than a necessity, when it should be viewed as an investment in long-term resilience, culture, and performance.
Fostering Good Management Practices
Good management isn’t about micromanaging or enforcing rigid rules - it’s about consistency, clarity, and alignment. Businesses that thrive tend to have clear goals, defined roles, and systems for feedback and accountability. Managers are not just taskmasters; they shape how people experience work, how problems are resolved, and how innovation is encouraged.
Simple improvements in management practice - such as setting clear expectations, conducting regular one-to-ones, recognising effort, and involving teams in problem-solving - can have a transformative effect on morale and productivity. These behaviours can be taught and reinforced, but without support and training, even the most well-meaning managers can fall into patterns that frustrate rather than motivate.
For small businesses with tight margins and busy calendars, carving out time for management training may seem difficult. But even light-touch approaches - mentoring, peer networks, short workshops - can yield strong returns. And with growing availability of digital and hybrid learning options, there’s never been more flexibility to build skills at a sustainable pace.
Building a Healthy Organisational Culture
A healthy organisational culture is not just a “nice-to-have” - it is a key differentiator for high-performing businesses. A strong culture attracts talent, reduces staff turnover, boosts engagement, and fosters innovation. It also improves a business’s reputation among customers, partners, and potential acquirers.
Culture starts with leadership, but it’s reinforced every day by management behaviours and team dynamics. When businesses actively shape their culture - defining values, rewarding positive behaviours that embed those values, creating open lines of communication - they build workplaces where people want to stay and grow.
For owners considering long-term strategic goals, including succession or exit, this becomes even more important.
People Investment as Part of Exit Planning
An often-overlooked benefit of investing in people is the role it plays in preparing a business for exit. Whether you plan to sell, bring in external investment, or transition to employee ownership, potential buyers and investors will look closely at your team. They’re not just acquiring your products or client base - they’re investing in your people and the systems that support them.
A capable and motivated workforce, with strong middle management and a clear organisational culture, signals stability. It reduces key person risk and enhances the chances of a smooth transition. Businesses that have embedded leadership development, documented knowledge, and empowered their teams are significantly more attractive - and typically command higher valuations.
Conclusion: A Strategic Imperative, Not a Side Project
Investing in employee development is a strategic imperative for owner/managed businesses. It builds the leadership capacity required for scaling, embeds good management that fuels productivity, and shapes a culture that attracts and retains top talent. Most importantly, it ensures that the business can thrive beyond the founder.
The UK’s small businesses have extraordinary potential to drive innovation, employment, and regional growth. But to do so, they must be equipped with more than just ambition - they need the skills, systems, and people to grow sustainably. And that starts with investing in the development of the very people who power them.
Photo by Dylan Gillis on Unsplash
