Are you ready to scale up your business?

Now, how do you scale up?

During this next phase, your focus should be on developing and establishing your product or service to meet market demands. If your product or service is either not repeatable at scale or nor yet perfected, scalability and future reliable growth may be hampered.

Adam Root, CEO and founder of Matter has a different experience. “Scalability is not just about product rollout, it’s about team and process. Often start-ups and new businesses are looking at other companies, products, and gaps they see in the market, and saying “I can do that better”. You normally succeed through working more hours at lower rates at the beginning. The challenge happens when you take this beyond the founding team. Culture is incredibly important when your growing team does not have the same skin in the game with equity as the founding team.”

This is before you consider wider market conditions, and 2022 has really brought this to the fore.

Meera Shah, Director at Buzzacott, has a key insight on this. ‘Given rising interest rates, recent political and economic uncertainty in countries like the UK, as well as strong inflationary pressures and a cost-of-living crisis, this can all impact fixed and variable costs in businesses, which for certain entrepreneurs who are on the cusp of scaling, this may knock them back.’

However, the question remains, is there an opportunity to scale in a potentially recessionary environment?

Different sectors react to economic conditions differently. Some sectors even thrive in a recession. However, as borrowing becomes more expensive and consumers are tightening their belts, it is worth considering if your model remains viable. Only by understanding the potential impact of a recession on your overheads, demand for your product or service, and the impact on your route to market, can you make an informed decision about your ambitions.

Advanced Funding

When scaling a business, to grow and maintain growth, additional funding is an avenue to explore. This differs considerably from seed capital where you are proving concept and value in the problem you are trying to solve. This requires greater thought and preparation to secure the right funding at the right time.

Why do you need funding

Scaling a business requires investment. Whether that is to fund new key hires as you build your team, to increase your sales and marketing spend, to broaden the reach of your business, or further develop your product. Knowing how you to plan to direct new money will help to make your case more compelling.

When should I raise capital?

The timing for when this funding should take place is key. According to Meera, many businesses take on too much or too little at critical points in their scaling journey, often giving away precious equity or going through multiple funding rounds in a short space of time, which can impact on the day-to-day running of the business, limiting the returns investors are expecting.

It is critical to step back and challenge the purpose and timing of external funding, and the difference it will genuinely make on the growth of your business, and therefore returns to all stakeholders. Once that is established, you can better consider which type of funding is most suitable for your company (debt or equity, institutional or alternative) – both in its current and future stages.

Always remember funding is a sales process, says Adam. You still need a sales funnel and there is an expectation of how to present a business in a standard ten slide deck. You, as a founder, are selling part of your business to someone who shares your vision of what the world would look like with their money as part of your business.

He goes on to say ‘equity is the most expensive type of funding. Although this can be true, if you look for “smart money” you will get a lot more than cash. The right investors can catapult you into a universe that you might not know about. Investors profit from growing their investment in you, and you can act in a symbiotic way together benefiting from a mutual arrangement.’

Professionalising the business

From an early stage, employees may wear many different hats, performing many different functions. This is typical in the start-up phase, but not sustainable as you grow.

As you look to scale up, a real challenge can be implementing distinct roles and accountability to a set group of individuals. Bringing in a set of rules and guidance to a company that most likely excelled on the ability to be free without said rules in place needs careful management.

Naturally, you may find that the people who began this journey with you are not a perfect match in terms of skills to take this business to the next level. This could result in bruised egos, or people not being used to asking for help from more experienced colleagues in the world of growing a business.

Or worse still, it could be that certain people may need to be exited, which is a true challenge for founders who have worked with people from the start. Recognising this is critical, particularly when it comes to considering incentivising staff. It has been known for young companies to put in place share options without sufficient clauses to make amendments in the event of people leaving.

Adam says, “Be mindful about giving C-suite roles early in your company. If you are scaling quickly, the title can be difficult to shift to someone not ready or wanting a role that large. A company with six people has 15 lines of communication whereas 14 people need 91 touch points to share the same information. It’s frequent to grow a company 3x per funding round. That’s a lot of growth and strain on some teams."

Lines of connections

Building a strong ecosystem

From an early stage, it is recommended to build and maintain an ecosystem of strategic partners, advisors, and investors.

Being part of business network groups provide a great way to meet new contacts and continually learn through osmosis, but also gain insight from stakeholders from every part of an industry. This provides a contact book of people that might assist later, whether they are future strategic partners, or even a competitor who may one day offer you an exit opportunity. In addition, this is a network of people who can offer feedback about your business and help you identify potential pitfalls and opportunities.

Adam concludes “Network is everything. It’s where your customers will come from, your investors, and hopefully your employees. Do not underestimate the potential of word of mouth.”

If you would like to find out further information on how we work with our clients, whether they are looking to scale up or diversify their business model, please get in touch with our entrepreneurs team.

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