Illustration by Gary Waters
Are you happy with the size of your business? With your profits? Your position in your marketplace?
If you want more, here are seven ways you can successfully and sustainably scale your business.
Let's start with a definition of scaling.
The ScaleUp Institute defines it as a business that is growing by at least 20% per annum for three consecutive years, measured in revenues or headcount. ScaleUp Nation says 'scaling is the achievement of outsized results through small smart moves, aided by good fortune'.
The definition I'm choosing to use is a combination of:
Stage of the business: Past the startup stage, profitable, cash positive (or at least adequate funds to sustain losses), typically two to four years old, and between 50 - 100 people.
Mindset of the founder(s): Highly ambitious (evidenced by the scale of their vision), comfortable with a relatively high level of risk, hungry to learn, happy to seek outside funding, whether equity, loan or both. If equity, happy to dilute their shareholding, within reason.
Business type / sector: The business model and the sector within which it operates, allow it to scale.
Rate of growth: at least 20% year-on-year, probably higher.
So, given this definition, here are seven areas I recommend you concentrate on to scale successfully and sustainably:
1. Capability: The range of skills and capabilities within the business that got it successfully through the startup phase is not the same as is needed to get it to the next stage. It's crucial to run a capability gap exercise that ignores personalities. The analogy I use is that you need different skills and resources to climb a 5,000 feet high mountain than if you're climbing a 1,000 feet high hill. There's an excellent book called 'What Got You Here Won't Get You There'; by Marshall Goldsmith that expands on this.
2. Culture: Up to around 50 - 75 people, the business can still feel like a family. The founder(s) probably know everyone by name. To scale, that's going to change fundamentally. The business needs to articulate, codify and work hard to maintain the culture of the business during fast growth. My formula for the culture, or ‘DNA’ of a business, is DNA = Purpose + Values.
3. Structure: It's crucial that business processes are codified and systemised. This does mean more formality but, without a solid foundation in place, scaling will be chaotic. Organisation charts, policies and procedures, clear processes, workflows and induction procedures are some examples. These may be anathema to some founders, but they ignore them at their peril. Moving from decision-making based mainly on gut instinct to more data-based analytical decision making, in other words having processes in place, is a crucial part of sustainable growth.
4. Founder or CEO?: There's a huge difference between founding a company, and leading and managing it once it's past a certain size. During the startup and early stages the business may have grown well using a 'beneficial dictatorship' approach; however in order to scale, a different approach is needed: Team-based decision- making, for which CEO-type skills such as leading and motivating a team in order to serve the best interests of the company as a whole are needed. This may not suit the skills of the founder(s), in which case it may be sensible to hire a CEO, allowing the founder(s) to focus on new ideas, 'semi-detached' from the day-to-day running of the business. Sometimes the founder(s) has to get out of their own way!
5. Focus: This one is counter-intuitive. At startup and early stage, businesses need to say yes to almost anything. After that stage, a much sharper, more focused approach is needed to scale. Which products or services and which markets or types of customers have the highest growth potential? It's crucial to focus on those, and cut out the rest. This links with running a project to sharpen the business's Positioning, i.e. what perception of the brand do the founder(s) want to create in the minds of the customers, to give as much competitive advantage as possible?
6. Succession: Depending on the choice around whether a founder will be the CEO of the business for it to scale successfully, or whether a new CEO is hired (see above), it's important to start succession planning early, particularly if an exit is planned. Businesses that are over-reliant on the founder(s) are typically valued lower than if they can show strength in depth. Attracting and retaining the best people is a crucial part of increasing a business's capabilities (see above) in order to scale. The best candidates are going to want to know at the interview stage that there's a clear career path to the top of the tree.
7. Strategy: By this I mean planning for the long term. For example, should the business focus on new products / services, or new channels to market? The Ansoff Matrix, which I write about here, is a very useful framework for assisting decision- making in this area. No matter how ambitious the plans, or how well-funded the business is, once the business is past early stage, which may well have been haphazard and unplanned in terms of the order of play, from now on decision- making, particularly for the long term, will need to be much more formalised and systemised; team-based decisions based as much or more on data and analysis as gut instinct.
And, finally…
In point 2 above, I mentioned Purpose, as part of the formula for a business’s Culture.
Purpose is the ‘fourth P’ that builds on the original Triple Bottom Line of Profit, People, Planet to create the Quadruple Bottom Line (QBL). One of the best-known exemplars of this approach is Patagonia.
Click here for a deeper dive on this uplifting topic.
I have helped many entrepreneurs successfully scale their business; if you’d like to have a chat about how I can support your growth, do get in touch.
I’d love to hear from you.
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