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'. Les McKeown, CEO of Predictable Success, defines it as 'the ability over time to sustainably grow your organisation to whatever size your industry or sector will allow, in whichever market segment(s) you choose to engage.'
The definition I'm choosing to use is a combination of:
Stage of the business: past startup, 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.
Given this definition, if you're serious about scaling your business, here are seven areas you must concentrate on to scale successfully:
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.
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. Here's an excellent Harvard Business Review article on the subject.
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. This stuff may well be anathema to ambitious entrepreneurs, 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 an important part of becoming more structured generally.
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 well have benefited from a 'beneficial dictatorship' approach, but 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 in 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!
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?
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. Candidates are going to want to know at the interview stage that there's a clear career path to the top of the tree.
Strategy: by this I mean planning on the long-term. For example, should the business focus on new products / services, or new channels to market? The Ansoff Matrix, which I wrote 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 of the long-term type, will need to be much more formalised and systemised; team-based decisions based as much or more on data and analysis as gut instinct.
These are what I consider to be seven areas you must concentrate on to scale successfully. There's a particularly good book I recommend on this subject: It's called Do / Scale by Les McKeown.
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