In recent years the UK has seen a shift in focus to scale-ups. Several scholars have discussed the need to support the UK’s scaling companies and according to Deloitte and Nesta, if just 1% more scale-ups are created in the UK, it could add 150,000 new jobs and £225BN to British GDP by 2034 – good stuff. In Scotland the support and attitude for entrepreneurship and creating new business has been phenomenal, but if we are to reap the benefits of this thriving entrepreneurial spirit, we need to ensure these start-ups become strong, and growing businesses.
The 2014 Scale-up report by Sherry Coutu, pioneer of the scale-up revolution and member of the Informatics Ventures advisory board, identified the paramount task of creating an environment which allows start-ups to turn into scale-ups. The Scale-up Challenge’ is the supporting report by Deloitte, which evidences the consensus in academia, business and government that targeting High Growth is a worthy intervention.
However, providing support to growing businesses is not just about money, says Stelios Kavadis, one of the authors of the Barclays report; Start-ups need guidance on how to grow strategically, need a good network and a thorough understanding of their sector.
Scotland great ecosystem that supports scaling up, through the workshops and events we organise at Informatics Ventures, the Scotland Can Do Scale programmes and most recently Strathclyde’s Growth Accelerator Programme to name just a few.
For those in any doubt though we thought it would be useful to define what makes a scale-up a scale-up, and give some top tips! After all, from what these reports say, it’s in everyone’s best interests that the UK sees more successful scale-up businesses!
What is a SCALE-UP?
“Scale-ups are enterprises with average annualised growth in employees (or in turnover) greater than 20 per cent a year over a three-year period, and with 10 or more employees at the beginning of the observation period.”
– Sherry Coutu
However, often scale-ups still maintain the ‘start-up label’. Being called a ‘start-up’ carries excitement and positive connotations, where the general impression is that they’re innovative, disruptive and versatile businesses which can quickly respond to consumer needs.
“A start-up is on the quest to find product-market fit, developing and iterating its product or service, experimenting with customer segmentation and working toward a positive contribution margin.”
“A scale-up, on the other hand, has already validated its product in a market, and has proven that the unit economics are sustainable. A scale up’s quest is to continue on that upward climb.”
– David Glickman: entrepreneur.
Differentiating between what makes a start-up a scale-up is important in order to understand the processes required to transition. A scale-up is past the stage of searching for a viable business model and is now executing a credible business plan, thereby a start-up becomes a scale-up when it has solved all the start-up challenges and is ready for growth.
Specialization: As a start-up everyone is giving their best, often doing more than one thing at once, which is extremely valuable at first. But as you scale-up, you need to functionalise roles, for example restructuring your organisation so employees can perform their responsibilities in a more effective way. As roles become more defined, it’s important not to lose creativity within your employees so although your structure may become more formalized, there’s nothing to say you need to lose your established culture.
Leading on-Leadership: As you scale up the leadership required changes over time, you need to find great coaches to guide your team. Hire good, experienced managers, and you should definitely be teaming up with executive and non-executive directors to bring their skills, experience and guidance to the table as you navigate the challenges of a scaling business (check out #Teaming here).
Get your house in order: You need to make sure you can keep your house clean from the start, which means keeping track of the dirty work. As your business scales, good record keeping is paramount, put processes in early so they are adopted quickly and become part of the norm. It’s much harder to change a culture once it’s established! Scale-ups need resources and often are looking for A-round funding – the due diligence required for a large investment round means having your house in order from an early stage will make the due diligence gathering much easier.
Prepare your team for success: Allocate a fair amount of time to allow your team to get acquainted with all the different parts of your business, spend more time to get people on board, etc, to ensure that everyone you’re working with understands your aims, what the business is doing, what differentiates you from competitors. Basically, prep your players to be able to deliver an effective elevator pitch!
Take care of the team: Both at work and off, it is good managerial practice to keep morale high and encourage employee loyalty. A scaling company is growing its head count so having a happy workforce is one of the best adverts you can have for new recruits. At the end of the day your business is nothing without the people in it so look after them and they will look after you.
Make sure you seek support from other entrepreneurs and advisers to answer big questions.
Transitioning from a start-up to a scale-up can require big and sometimes uncomfortable changes, however, these are all part of taking your business to the next level!
Why not take a look at how Scotland is Scaling by region with this super handy infographic.
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