If you are thinking about ways to scale up your business, you might well have been looking at high growth companies and wondering how you can continuously innovate and create high growth in your businesses. We all know the superstars (eBay, Alibaba, Netflix, Google, Starbucks, Apple, Cisco and Dell) and their path from start-up to scale-up status, employing thousands of jobs. Scaling up and staying dynamic and entrepreneurial looks like living the dream.
How can I scale up successfully?
As with everything in life, you need to start from where you are! The good news is that in as little as four minutes, you can get your Scale Up health check when you take our free Scale Up and Exit Business Assessment. This report will give you insights into your business worth thousands of pounds!
Learn from the Experts
In his book, Scale Up!, the FD Centre’s Chairman Colin Mills defines scale-ups as companies that have grown by 20% a year for a minimum of three years and which started the three year period with a minimum of 10 employees.
Scale-ups disrupt and revolutionise entire industries, according to a Deloitte & THNK report. “They embody ingenuity, innovation, and foresight,” its authors concluded after studying 400,000 enterprises worldwide.
You Don’t Have to be a Start Up
There’s a common misconception that only startups can be innovative, dynamic and entrepreneurial. Yet as scale-ups like Google and Alibaba illustrate, that’s far from the case.
Perhaps startups attract more attention because there’s so many of them: it’s estimated that there are 300 million startups globally. By comparison, only a tiny fraction of startups ever survive long enough to make the transition to scale up, according to the authors of the Deloitte report.
“Our research shows that the chances of a new enterprise to ascend as a scale-up are around 0.5%, which means that only 1 out of 200 surviving new enterprises will become a scale-up. ‘Unicorns’ make up the even smaller subset of scale-ups; only 104 startups are valued over $1 billion.”
Scaling Up Boosts Economies
Those companies that do become scale-ups help to boost local, national and international economies. They provide direct, ongoing employment and that, in turn, creates more consumer spending which in turn stimulates the economy and expands the tax base.
Or as business guru and venture capitalist, Daniel Isenberg says in Scale-Up!, “One venture that grows to 100 people in five years is probably more beneficial to entrepreneurs, shareholders, employees and governments alike, than 50 which stagnate at two years.”
Contrary to what many policymakers believe, startups don’t help economies to flourish or cause per capita income to rise.
“The relationship between per capita income and entrepreneurial activity is generally negative, rather than positive as is often believed,” wrote Scott Shane, Professor at Case Western Reserve University, in Entrepreneur magazine. He referenced a Gallup Organisation survey which compared per capita Gross Domestic Product (GDP) with the fraction of the population that reported being self-employed in 135 countries. It showed that the self-employed fraction had a negative linear relationship with the log of GDP.
“That is, self-employment rates are lower in rich countries than in poor ones.”
Does Your Business Model Move You to Growth?
But growing a company past the start-up phase is not without its share of challenges, whether they are related to employees, sales and marketing, operations, administration, or finance. Most importantly, if growing companies don’t have the right infrastructure to support their expanded operations, those challenges can become increasingly severe.
“While on paper, they may have the revenue, the manufacturing base or customer reach of a substantial business, the culture, the controls, the processes, the personnel and the leadership remain those of a much smaller business than they were a short time before,” says Mills in Scale-Up!.
“Worse, they haven’t yet accumulated the resources to build and maintain that infrastructure.”
If the situation is not resolved, the business will outrun itself (cash reserves will dwindle as it tries to meet the expanded demands) or get stuck (as the owner and employees find themselves unable to cope with the problems).
But if you revise your business model, you can overcome these challenges or even avoid them altogether.
“You need to consider your whole business model, because if you have a terrible business model, then the last thing you want to do is to start scaling it,” says Mills.
How our CFOs Support Scale Up Businesses
The CFO Centre’s part-time FDs or CFOs help clients revise their business model using a framework known as the ’12 Box’ approach.
It has three levels:
- Business Support
This refers to finance operations and focuses on two key aspects: cash and profitability. There are four boxes: Cash Flow Management and Profit Improvement (which generate money), and Internal Systems and Reporting (which generate time for management).
This involves your finance strategy: how are you going to finance the business to achieve future cash and profits? The four boxes in this section cover: Risk Assessment, Strategic Funding, Strategic Activities and Exit Planning, and an Implementation Timetable.
This involves crucial tasks such as compliance, tax planning and legal issues, banking relationships and outsourcing. In the case of The CFO Centre’s FDs they don’t carry out the tasks but instead, manage the work on a client’s behalf. They’ve built relationships with the right people in each country where they operate so that they can connect clients with the right supplier at the right cost when they need it, and then manage the work on their behalf.
Find Your Future Challenge Areas
If you haven’t taken the quiz already, you can identify strengths and weaknesses in your business in just four minutes with our Scale Up and Exit Business Assessment. Just answer a brief series of questions, and you’ll receive a customised page report that will reveal potential current or future pain points for your business. It will also help you to rate the performance of your finance function and uncover untapped opportunities for growth. Take your Scale Up and Exit Business Assessment now. Uncover how your company is performing in terms of your finance function and also uncover untapped opportunities for non-linear growth.
To discover how The CFO Centre will help your company to scale up, please call us now on 0800 169 1499 or contact us here.
Updated from a post originally published in December 2018