Maintaining company culture has emerged as the biggest internal challenge for small businesses scaling up, according to new research, with many owners struggling to protect values and communication as they expand their teams.
The data, published by accounting software provider FreeAgent, shows that almost a third of small business owners (32 percent) see maintaining company culture as the hardest part of transitioning from a micro business to a small or medium-sized enterprise. That’s despite a large majority (81 percent) saying it had been a priority throughout their growth journey.
Only 10 percent said they had not prioritised culture, revealing a gap between intention and outcome. The findings suggest that while most leaders understand the importance of culture, many underestimate the difficulty of preserving it during periods of rapid change.
As businesses grow, new hires, team structures and leadership demands inevitably introduce complexity, say workplace experts. Without deliberate action to reinforce shared values and ways of working, company culture can quickly become fragmented or diluted.
People Management the Biggest Pain Point
Alongside culture, recruitment and people management are significant obstacles for growing firms. Forty-two percent of respondents identified people-related challenges as one of their top three concerns, while 24 percent specifically mentioned hiring as an issue.
Communication within growing teams was another pressure point. Over a quarter (26 percent) flagged communication as a concern, and nearly one in five (18 percent) said that employees had been the most difficult group to manage during the scaling process.
The results show how growth, while often seen as a commercial success, can place considerable strain on internal relationships and team dynamics. Hiring quickly to meet demand may create short-term capacity but can lead to long-term misalignment if onboarding and leadership support are weak.
These issues point to the need for stronger systems to support employee experience, not just in recruitment but in day-to-day management. As roles diversify and expectations rise, the challenge of maintaining alignment and shared purpose becomes greater.
Leadership Pressures and Employee Expectations
Donald Lindsay, chief people officer at FreeAgent, said the findings showed the importance of prioritising people as much as profits.
“As businesses scale, the pressure to grow quickly can stretch culture and people management to breaking point. Our research shows that leaders understand these aren’t just operational concerns. They’re critical to long-term success. In today’s competitive market, prioritising culture and talent retention is no longer optional; it’s what separates thriving businesses from those that merely survive,” he said.
He added that “[w]ith shifting employee expectations and a saturated hiring market, it’s clear why culture and communication top the list of priorities for growing businesses. Navigating this landscape requires more than just new recruitment strategies. It demands a deeper investment in the systems, values and leadership that support and sustain a strong internal culture.”
Protecting Wellbeing During Growth
Although the survey did not directly measure wellbeing, the findings suggest that risks to psychological safety, trust and employee engagement increase when communication is weak or leadership is overstretched.
Small businesses, especially those with fewer than 20 employees, often depend on informal culture and direct communication. As they grow, that closeness can be lost unless it is intentionally maintained through strong onboarding, clear values, and regular leadership visibility.
The study findings are based on a survey conducted by research firm Censuswide on behalf of FreeAgent. It involved 500 UK decision-makers aged 18 and over, all from businesses with between 5 and 20 employees. The data was collected between 24 December 2024 and 3 January 2025.