Once you’ve established your business and secured some loyal customers, growing to a scale where you can feel more secure requires a different mindset
The Central Statistics Office reports that, pre-2020, about 17,500 businesses were started each year in Ireland and 16,200 ceased trading. Around one-third of the enterprises started in 2015 had stopped operating by 2019. Most of the start-ups are micro businesses with less than 10 employees and the vast majority remain that size. (Data from 2020 onwards is distorted by the pandemic, the energy crisis and the various government supports introduced to deal with both.)
Many early-stage entrepreneurs aim to nurture their businesses through the start-up phase and scale to a size which helps them achieve their business and personal goals.
What got you here, won’t get you there
The skills needed to start a business and establish a foothold with an offering which secures those first few valuable customers, are not always the skills you need to develop a sustainable, scalable business.
For example, start-ups need to be obsessive but agile. They will spend long hours developing a product or service and convincing their early customers to use it, but they’re also able to re-develop their offering quickly in response to demands from those early adopters. They’ll often have three or four versions of the one product/service serving different customers.
Scale-ups, on the other hand, need to simplify their offerings so that they can reach a wider customer base without incurring the costs needed for endless adaptation.
Tips for scaling businesses
1. Focus on what you want to be – not what you are
Don’t base decisions on where you are – base them on what you want to become. What type of business do you want to become – €1m a year turnover? €2m? €10m? You must have definite objectives. The decisions you make as a €200k-a-year business are different to one that turns over €10m. If you want to become a €10m business – you have to start thinking like one.
2. Simplify to Scale
Most entrepreneurs have a hard time scaling businesses because they don’t make things easy enough on themselves. To scale, you need to simplify.
Typically, businesses start with one person doing everything. As the company generates more success, it’s difficult to jump out of the place of doing everything yourself to outsourcing work either to staff or externally.
Once you get to the level of success where you are no longer able to do everything alone, evaluate your business. Look at where you are struggling and how you can make things easier.
3. Make sure you’re ready and prepared for growth
When your business starts to scale up, things can begin to creak. Weaknesses can be exposed, and you can’t always fix them once the journey’s started. You could be held back by your IT system, processes, cash flow, team, weaknesses in your supply chain or all of the above. Think very carefully about how scaling up and growing your business will affect your company – you must be ready and your processes must be robust.
4. Learn from successful competitors
Think about how they’ve done it. How have they succeeded? For example, finding out how many staff they now have could give you a rough idea how many you’ll need. Where are they selling and how? Understand their business model and learn lessons.
5. Identify your barriers to growth
Once you have objectives, part of developing a strategy for growth involves thinking about possible barriers to scaling up. Be honest and pragmatic. There are several factors which could thwart your ambitions to grow, such as lack of leadership skills, lack of funding, weak cash flow and even being in the wrong premises. Identifying the potential barriers can help you address your weaknesses and the threats they could pose.
6. Protect your business values
Things can change massively when your business is growing and scaling up and many things will compete for your time and attention. Be prepared for that. Also realise the importance of safeguarding your business values – which must not be allowed to suffer. They’ve helped you to be successful up to that point.
Next time we’ll outline some tips about leading and growing your team through this process and what you need to do to secure that all important financing.
DHKN’s Corporate Finance and Advisory teams work with business at all stages of development and we have helped many through those difficult scaling years to be come successful sustainable enterprise fulfilling the visions of their founders.
For an informal discussion with our experts about how we can help your business match your ambition, contact me at email@example.com.