Start-ups need a strategic roadmap to achieve scale-up success
If it takes a village to raise a child, what does it take to raise a company from start-up to scale-up?
The issue preoccupies both entrepreneurs and politicians as success in scaling up businesses delivers many benefits including: creating wealth; boosting innovation; increasing research and development; providing skilled jobs; generating export earnings; and contributing to GDP.
Entrepreneurs and the companies they create are important for the wider economy. Research by Deloitte and Nesta estimated that if the number of ‘scale-ups’ in the UK grew by just one percent, it could add 150,000 new jobs and £225 billion to UK GDP by 2034.
‘Village of gurus’
But where do you start? According to Verne Harnish, principal of the Growth Institute and author of “Scaling Up: How a Few Companies Make It…And Why The Rest Don’t”, scaling up requires “a village of gurus”.
That is true but entrepreneurs need help to identify and connect with ‘gurus’ who possess the relevant experience, wisdom and contacts that can help scale their particular business. A well-connected, knowledgeable and experienced investment partner can play a pivotal role in helping companies scale up by bringing on board not just financial firepower, but a network of valuable contacts and business acumen.
Management & finance
The business schools of Oxford University and Cambridge University conducted a new research project recently “Scale-up UK: Growing Businesses, Growing our Economy”whichconcluded that management and finance are the two most important issues for companies seeking to scale up.
The issues are connected as it takes financial resources to build and retain a first-class team equipped with the blend of skill sets needed to take a business to the next level. Tackled well, these factors are enablers of growth - handled badly, they can create obstacles that may either hamper growth or result in unsustainable, uncontrolled growth, potentially leaving a company over-extended, under-financed and unable to capitalise on new opportunities.
Planning for growth is vital which is why obtaining ‘smart money’ from a backer with whom you can build a constructive working relationship is important. It takes time, careful planning and skillful execution to establish infrastructure, systems, processes and partnerships needed to capitalise on opportunities to scale up and to expand into new markets or territories.
You need to be strategic about which growth markets to target first - the approach will vary depending on the type of business and the stage it has reached. Growth strategy may depend as much on market maturity, regulatory regimes and the presence or absence of competitors as on geographic proximity, common language or cultures.
What does success look like?
It is important to be specific about what scaling up success looks like for your business and set realistic strategic objectives and timeframes. The best approach for one company may be to establish wholly-owned overseas subsidiaries, while for another it may be better to achieve scale via strategic sales partnerships, cloud-based service models or online sales via local language websites rather than an international bricks and mortar presence or ‘boots on the ground.’
Scaling up may not require crossing international borders. For companies focused on increasing market share within large and lucrative domestic markets, skillful execution of a growth strategy that propels them into the ranks of the top three players in their home market could be a valid benchmark of success, underlining value created.
Strategic input from an investor that has helped other entrepreneurs to devise and execute successful scaling strategies is invaluable. As Thomas Hellmann, Professor of Entrepreneurship, Said Business School, Oxford University puts it: “Funding isn't just money, it is money combined with capabilities, expertise and patience.”
Entrepreneurs should question prospective investors as well as potential board and management recruits about their track record in helping companies to achieve scale and find out what they can bring to the table.
It is important to drill down to specific issues such as skills, governance, cashflow management, IT and management information systems, intellectual property, marketing and brand-building when you draw up a roadmap for scaling a business. An experienced investor will know how best to incorporate these in a ‘100 Day Plan’ of priority tasks to be tackled by the management team post investment.
Skyscanner demonstrates scaling success
Scottish Equity Partners (SEP) has developed a tried and tested methodology to assist technology-led businesses achieve their global ambitions. We have applied this for more than a decade of investing through different economic climates, helping portfolio companies overcome diverse challenges and scale up successfully.
Skyscanner is a great example of a company whose growth we have supported since we first invested in the online travel search business in 2007. We have worked closely with Skyscanner’s highly capable management team to grow it from a company of fewer than 30 people with revenue of less than £1 million to a company employing almost 800 people worldwide and revenue in excess of £120 million.
Entrepreneurs looking to emulate trailblazers such as Skyscanner must take care to forge the right partnerships as they navigate the transition from start-up to scale-up.
Paul Neeson is an Associate with Scottish Equity Partners focusing on new deal generation in Scotland, portfolio monitoring and deal support.
We just sent you an email. Please click the link in the email to confirm your subscription!