Growth Constraints - What are the biggest challenges for a growing firm?
Growth Constraints - What are the biggest challenges for a growing firm?
Rhea Gordon, Director of Sanne's Private Equity division, explores what are the biggest challenges for a growing firm?
One of the main challenges facing a growing business has to be maintaining a satisfied and engaged client base. How best to achieve this is an important question, after all, client satisfaction in a service industry is paramount and one of the most important indicators of success. At Sanne, client service is a primary focus and throughout the growth of our own business it has been a key measurement of our success.
A key consideration for any company through a period of growth, whether organic or through acquisition, is managing the cultural environment and ensuring that the DNA of the company is maintained. Throughout growth, management will need to focus on communication with all stakeholders, especially staff and clients, to make sure that the company’s ethos and goals are preserved.
At Sanne, we have enjoyed a significant period of growth leading up to our listing on the Main Market of the London Stock Exchange in April 2015. A major consideration in the process was ensuring that we did not lose sight of what had driven our success to that point. We are a director-led business with specific asset class and market specialisms which enables us to service our clients’ needs effectively and comprehensively. Our director-led teams result in true ownership of client relationships at all levels of the team, further allowing transparency with clients.
Growth cannot be managed without a robust procedural environment. Having one in place is essential for effective and efficient take-on of new clients along with the on-going servicing of them. Making sure that the onboarding and on-going services to these clients are proceduralised ensures that senior staff have capacity to add value at each stage. It’s also important to have the capacity to be able to review each client’s unique requirements as the regulatory landscape constantly changes.
From experience it’s one thing having a robust procedure drafted and implemented but another to ensure compliance with these procedures.
In today’s climate, fund administration and depositary companies are increasingly expected to have ISAE 3402 or similar accreditations. An independent review of key processes not only gives the management team the confidence in the firm’s ability to grow, but also gives potential clients and fund investors the comfort that these internal controls have been reviewed and tested, making this element of a selection process/due diligence review straight forward.
Changing regulatory framework
In the past eight years we’ve seen an ever-expanding regulatory environment, with AIFMD, FATCA and Dodd Frank (to name a few) coming into force. For service providers, this provides challenges as well as opportunities. It’s meant that providers have had to effectively adapt their service and in turn interpret what these regulations mean for each client. Depending on this interpretation, this has often led to the solutions being extremely responsive in terms of assisting clients with regulatory reporting and ensuring as a service provider you remain up to date with these developments.
The services we provide clients with today, in comparison to the pre-crisis days of 2007/08, are much more comprehensive and typically more bespoke to an individual client’s needs.
At Sanne, we are cognisant of our ability to service the mandates we are appointed to and not only do we recruit inline with our projected business growth, but we invest in the group infrastructure required to address regulatory changes as they are realised. We have specialists who focus on ensuring that we remain at the forefront of regulatory changes. These teams equip the client service teams with the skills and training required to effectively service clients’ needs.
Infrastructure and resources
A service provider must have appropriate systems and reporting in place, be in the right jurisdictions and be able to attract high quality and experienced staff, who understand the working culture and the demands of their roles. Furthermore, service providers must then be able to retain and nurture them in order to ensure service continuity.
It is assumed that in today’s environment, every effective fund administrator will have appropriate systems and be present in the right jurisdictions for clients. A key challenge for most is having a consistent and engaged team. At Sanne we achieve this through our dedicated graduate training scheme and professional development programmes. Teams are mentored throughout the business and we are committed to ensuring that there is always the opportunity for individuals to grow. Retaining the best staff has always been an integral part of our business, ensuring they feel valued and challenged in their roles.
When involved in a tender process, a service provider must give far more consideration to capacity and their ability to service a new mandate. It is all very well winning a substantial new mandate but if you can’t service the client effectively and can’t anticipate their ongoing requirements, then you spend more relationship management time fire-fighting rather than offering value added services.
Sanne’s directors ensure that they take personal responsibility for each and every client mandate which in itself means engaging with the wider team and the clients’ team to ensure that the process is effectively managed and the right skill sets are drawn upon at the appropriate times. This is often one of the biggest challenges in any growing business, both service providers and our clients’ businesses themselves.
No one organisation can necessarily be all things to everyone. Managed growth is about being realistic about what you can achieve, whether this is the challenge of capacity for a newly won mandate or whether this is the effective growth of the company through capital and strategic growth projects. It is important as a business to know what you’re focused on, but more importantly to understand what you can achieve with the resources available to you. Your client service to existing and established relationships should never falter as a result of business growth. Clients should therefore always consider their engagement with their service provider as business as usual.
At Sanne, the Group Executive team focus of the strategic development of the business engaging with business leaders where appropriate to contribute and support projects on a day-to-day basis. This enables business leaders to focus their time on servicing their clients.
Globalisation and international co-ordination of regulation and tax arrangements are expected to create an environment of continued change, which will affect funds and managers in the coming years. At Sanne, we provide support to funds and the fund boards to ensure that future development plans which might affect the structure are communicated and planned for at an early stage.
We take a pro-active approach to understanding the issues and engage with the managers and the fund boards to communicate challenges as they become known and to agree on a plan to mitigate or deal with those challenges. Where appropriate, we make introductions to professional advisors with specific relevant expertise to perform impact assessments and to develop a detailed work programme.
Each of these factors contribute to the on-going challenge of growing a business in a competitive service sector. What sets a service provider apart from the competition is their ability to navigate through all of these changes, keep clients happy and ensure client service is at the top of their daily agenda.