1.6 Business Growth Practice Questions

This question is about business growth. You do not need to refer to a particular business in your answers.

Text 1 — Hedgerow Garden Centres Ltd

Priya Dhillon opened her first garden centre 12 years ago in the town of Ashfold. The business has grown organically ever since. Hedgerow Garden Centres Ltd now runs six garden centres across the region and employs 140 people. Every new centre has been paid for out of the profit the business has kept. In 2024 Hedgerow added a houseplant range and a café to each of its centres, which attracted many new customers.

Priya now wants the business to grow more quickly. Sedgecombe Plants Ltd, a rival chain of four garden centres in nearby towns, is for sale at £2.4 million. Sedgecombe's managers have 20 years' experience of online plant delivery, a service Hedgerow does not offer. However, two of Sedgecombe's four centres have made a loss for the last two years, and Sedgecombe's staff are used to a very different way of working.

Year	Revenue (£)	Number of garden centres
2022	2 750 000	4
2023	3 010 000	5
2024	3 290 000	5
2025	3 575 000	6

Text 1 — Pedal Loop Ltd

Pedal Loop Ltd sells and repairs bicycles from six stores in the north of England. It was set up nine years ago by Marguerite Hallam. Every bicycle the business sells is built using frames bought from an outside supplier, Rendle Frames Ltd.

So far Pedal Loop Ltd has grown organically, opening two extra stores in the last three years. Demand for electric bicycles in the region is growing quickly and more people are cycling to work.

Marguerite now wants the business to grow more quickly. She is considering two options:

• a takeover of Rendle Frames Ltd, the business that supplies Pedal Loop Ltd's frames
• a merger with Spokeworth Ltd, a rival chain of five bicycle stores in the same region. Spokeworth Ltd is owned by two brothers and is currently making a loss on two of its five stores.

Pedal Loop Ltd: revenue and number of stores

Year	Revenue (£)	Number of stores
2021	840 000	4
2022	912 000	5
2023	1 020 000	5
2024	1 155 000	6

Hartwell Pet Foods plc

Hartwell Pet Foods plc makes dry dog food and standard cat food at two factories in Staffordshire. It sells its own Hartwell brand and also makes own-label dog food for supermarkets in the UK, France and the Netherlands. Last year sales revenue was £146 million and net profit was £11 million. The business has £18 million of retained profit.

The pet food market is growing, especially for premium grain-free food. Hartwell makes no premium cat food, and one in four of the supermarkets it supplies has asked it for a premium range.

Hartwell is considering two options.

Option 1: develop its own range. Hartwell's product development team would create its own premium cat food range. This would take two years and need a new production line costing £12 million.

Option 2: take over Pawsley Ltd, a family-owned business that already makes premium cat food, holds 6% of the UK cat food market and has one factory in Shropshire. Pawsley's owners would sell for £20 million. Pawsley made a loss last year because its factory runs at only 55% of capacity.

Rowan & Reed Ltd

Rowan & Reed Ltd makes natural haircare products. Megan Rowan started the business in 2016, making shampoo bars in a rented unit in Derby. The business now makes 40 different products, which are sold through UK supermarkets and its own website. Last year sales revenue was £14 million, 15% higher than the year before.

When Megan started the business her main objective was survival. Her objective now is to double the size of the business within five years and to begin selling in Europe. So far, Rowan & Reed has grown only organically.

Rowan & Reed holds £2.1 million of retained profit and has been offered a £3 million loan by its bank.

Rowan & Reed is considering two options:

• Option 1: take over Tullaghmore Haircare, a smaller haircare brand based in Ireland, which sells £4 million of products a year to European customers
• Option 2: use retained profit to launch a new range of men's haircare products, made at its own factory in Derby.

Harbour Greens Ltd

Harbour Greens Ltd runs 34 healthy-eating cafés across the UK. Lena Okafor opened the first café in Bristol in 2015, selling salad bowls at £7.50 and soups at £4.20. The business now employs 410 people and made a profit of £1.9 million last year, most of which was kept as retained profit.

Harbour Greens has grown by opening its own new cafés in city centres, close to office blocks and universities. Every café is fitted out by the same design team and all dishes are made from recipes written by Lena.

Lena has turned down two offers to buy smaller café chains. She says that opening its own sites keeps the brand consistent, although it has meant growth of only four or five cafés a year.

The board now wants to open 20 more cafés over the next three years, including the first five in Scotland. The expansion will be paid for using retained profit and a £3 million bank loan. City-centre rents have risen and two national sandwich chains have recently opened outlets close to Harbour Greens sites.