Not a day goes by when I don’t hear about another business celebrating their ‘scale-up’ success, usually endorsed with an angled shot of the management team strategically placed outside of a building with a proud logo, slightly out of focus in the background. Reading on, I find the business is usually celebrating a contract win, the hiring of new staff, strategic acquisition or expansion nationally, occasionally internationally.
In most cases, this is growth and that’s great…but it’s rarely scaling.
By definition, a scaling business is growing at least 20% year on year for 3 years consistently. No, if’s, no but’s. It is this 1% of all UK businesses that are responsible for the 33% of all new jobs created and that positive impact on the wider, local economy via growth in GVA.
All growth is great and should be celebrated, however, businesses need to be honest about their scaling aspirations.
It was put to me some weeks ago that whilst the owners of growing businesses can often be found celebrating their successes in bars, restaurants and on company away days, many owners of scaling businesses can be found locked away in a darkened room, phone on silent with ‘out of office’ set indefinitely. The sentiment wasn’t lost on me. Hanging on to a scaling business is one of the toughest challenges of my life, professionally and personally. It was dynamic, relentless and needed lots of energy but it was also one of the most exhilarating experiences I’ve encountered to date and when given the opportunity to do it again, I didn’t think twice.
Understanding that the faster you grow can often mean the faster you fail is very counter-intuitive and a massive slap in the face having just found the perfect proposition your customers cannot get enough of. ‘Over-trading’ is the official terminology (‘be careful what you wish for’ is more prominent) but come on, what is a driven business owner meant to do, particularly when the success finally arrives after many difficult years? Is it that business owners now need to restrict market demand where possible so that growth is manageable or choose not to capitalise on the obvious opportunities available to them? No, of course not, but what most owners of scaling businesses do is say yes now and work out the ‘how’ later. And therein lies the problem.
Scaling a business is scary. Often, the faster you grow, the more money you need especially if solid foundations, resources, processes and infrastructure are not in place. Understanding that scaling is costly and fraught with danger is a surprise to many but a reality one must face and be prepared for. Increasing profits pro-rata with sales when growth is extreme is mostly a fallacy. Reacting to rapid growth often means under-resourcing whereas preparing for growth often means investing upfront and in anticipation of growth that might not materialise. Matching the exact investment in infrastructure and resources in line with actual growth, which then produces profits that covers that cost, at best, unrealistic.
Businesses either need to prepare to scale or react to scale. In both cases, the stakes are high, the risks palpable and nights sleepless. Continuing to just grow is attractive.
Behind every true scale-up is a business with huge potential and huge opportunity combined with huge risk and huge challenges. Scaling often represents a complete overhaul of business activities, new structures, new processes, new people and a step into the unknown. What was once only dreamt about is now a reality and in order to seize the opportunity, businesses need to adapt and evolve quickly and more dramatically than they will have ever done before.
This might be unsettling for the existing staff but change management is only one part of the process necessary to allow that business to become scaleup ready. I often argue that businesses cannot ever truly become scaleup ready as the rate of growth is so unpredictable that planning is futile. Understanding the pressure points and the key areas of change is useful but putting that planning into practice against rapid growth is a significant challenge…however, it’s one of the most invigorating, enabling, empowering and downright euphoric experiences you could ever encounter whilst running a business.
There is support and Scaleup North East can help businesses prepare for and continue to scale but this is only possible if the potential and ambition are aligned. Preparing to scale when the ambition is to grow or preparing to grow when the ambition is to scale isn’t healthy and can result in real tension.
Scaling and growing a business is equally impressive, just different. Be clear about the ambition and careful about the language.
RTC North is delivering Scaleup North East in conjunction with the North East Local Enterprise Partnership (LEP) and is part-funded by the European Regional Development Fund (ERDF). The programme is aimed at supporting North East-based businesses that can demonstrate both the hunger and the potential to achieve high levels of growth.
If you are interested in joining Scaleup North East, we'd love to hear from you and invite you to fill in our application form here.
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