A report published just over a year ago by Sherry Coutu CBE, non-executive director of the London Stock Exchange, titled “The Scale-up Report on UK Economic Growth” highlighted some of the challenges of ensuring that small medium enterprises are supported sufficiently to provide the desired impact on our economy.
Startups have received a lot of attention in recent years with the promotion of an entrepreneurial culture to encourage would-be entrepreneurs to take a measured risk and start their own business. Initiatives like Startup Britain have been tracking the record number of yearly company incorporations in the UK, highlighting how this pipeline of new companies is boosting economic growth for the nation.
The issue, of course, is that many new companies fail to grow or simply fail outright. The real economic benefit comes not from the sole-trader or micro-enterprise but from the rapidly growing SME.
Sherry defined a Scale-up as “an enterprise with average annualised growth in employees or turnover greater than 20 per cent per annum over a three year period, and with more than 10 employees at the beginning of the observation period.”
This may sound manageable, but in reality if you are the founder on the ground orchestrating this rapid growth, you have numerous balls in the air and a whole host of issues to worry about. As Sherry stated, “In growing from 10 to 100 employees, to 500, 1,000 and so on, companies have specific requirements for capital, management, skills and organisational processes.”
Communication within a rapidly expanding team can be fraught, cashflow can be excruciating, and seeking new customers exhausting. Using an engineering analogy, it is during this period that the company’s foundations, processes and ethos are stress-tested way beyond specification. In short, Scale-ups need all the help they can get if they are to succeed in this fiercely competitive world.
I also believe another key factor in the success of a Scale-up is having the simple, streamlined organisational processes in place from the outset. If the company starts poised for growth, it will find the journey much smoother. Don’t build your enterprise foundations on sand; underpinning is expensive in both civil engineering terms and enterprise organisation terms.
So this means thinking at the earliest opportunity about how your company might grow. What job functions are you likely to have in the business down the line? Who will need to know what information? How will new staff be quickly inducted into the ethos of the company so they can hit the ground running? How will you ensure the right templates, correct price lists, most up-to-date presentations, and so on, are used by all throughout the organisation? This is some of the nitty gritty of the internal challenges faced in the rapidly growing SME.
So although more Scale-ups are indeed needed, one of the key things that will help them emerge is a pipeline of well organised and spring-loaded startups.
Start to Exit is due to be published in 2017.