Q&A Piers Linney – ‘Staying where you are is dangerous’

Piers Linney, 47, is best known for being one of the dragons on TV’s Dragon’s Den. An entrepreneur and investor, he is a non-executive director of British Business Bank, the UK government-owned development bank with £6.2bn of funding to improve small and medium-sized business access to debt and equity finance.

However, increasingly he has become a passionate advocate for scaleups, which, he says, are the growth drivers in the British economy.

Linney points that if the number of scaleups in Britain was increased by just one per cent, that would create 238,000 new jobs and add £38 billion to GVA within three years.

GB: Why are you so passionate about scaleups?

Scaleups do not get the support they often need. The issue is growth. If you look at the economy and the potential to grow it, there are 5.7 million UK businesses out there, of which 75 per cent are owner managers. But scaleups are ones that move the dial in terms of innovation, growth and wealth creation. If scaleups are supported, they move the economy.

Some scaleups can be a legacy business. It could be a family business where the children have taken over the business and want to do something with it. It’s not always about startups.

Sometimes the oxygen can be sucked out of the room by startups. But if you want to be successful economically, we need to put more resources into companies which want to grow. And they’re not all young companies; I met one recently which started in the 1700s, but it’s taken this long to find the opportunity and now they want to grow.

The companies with growth ambitions are the ones that are going to drive economic wealth and personal wealth. What the research shows that if you add one per cent to the number of scaleups in the UK, that would add nearly a quarter of a million jobs. That makes a big difference.

GB: Why is it important to keep growing businesses?

My view is that staying where you are is dangerous because markets are dynamic and you’re seeing disruptors being disrupted. Having a no-growth strategy in a medium-sized business is potentially very bad because you’re losing market share. If you’re not careful, you end up being a small fish in a shrinking pond.

‘Having a no-growth strategy in a medium-sized business is potentially very bad because you’re losing market share’

GB: What are the barriers facing entrepreneurs who want to grow their business?

I get approached all the time by companies that employ 150-200 people and they want to grow quickly but they don’t know how to go about it. They haven’t got the advisory network around them, so they can’t reach out to the right people.

I would highlight three problem areas: skills – there’s going to be a skills shortage across Europe; leadership – the ability to lead and to want to lead; and finance.

It’ about ambition and then connecting that ambition with the ability to finance where you want to go. Unless you can finance that growth out of profits, you’re going to have to raise money.

GB: What can be done to change entrepreneurs’ fears about involving external finance?

Half of companies want to grow but they don’t know how to. If you raise equity, you might have new stakeholders or new directors on board. If you borrow money, you might have new stakeholders too, and they have rights and you have obligations to them as well. There’s a misunderstanding about how this all works.

Also, the access to information is not there. Culture takes a long time to change but you what you can do is improve the information flow. Then people would be more willing to raise external finance and bring in stakeholders.

A company that wants to raise finance goes to its accountant, doesn’t get the finance they want and gives up on the first try. There’s a lot of forms of finance out there but companies don’t know about them. It might be crowdfunding or peer-to-peer lending or using credit cards to finance income streams. The number of ways you can finance your business is growing … what’s fundamental is making people aware of the options available.

GB: Does scaling up mean I have to move offices?

The world of work is completely changing. Work is something you do, not somewhere you go. Going back to that reaching out to talent, increasingly you don’t even need offices. Coworking spaces can have 200 people, all of whom work for different companies!

GB: So, what’s your advice for anybody who wants to scale up?

First, have a plan. There’s no point in deciding that you just want to grow your business. You have to have a plan about how you want to grow your business, which could be through M&A, new product development or just doing what you’ve always done A lot of companies fail to do this. It could involve lengthy research and taking a deep, uncomfortable look at your business.

Second, operations and execution. As your business grows, it needs to grow up. That could be anything from processes, regulation, compliance – all these things that you need in a business to grow at scale. You need to put them in place before you need them. If you try to replace systems as you’re growing, the wheels will fall off and it’s going to cost you more while you do it.

Third, people. People are absolutely fundamental for success. Your team is everything. Take a long, hard look at your team. You can’t rely on ‘jack of all trades, master of none’. As you begin to grow, you need specialist skillsets, people who have experience. You might have to change your senior management team. You might even have to change yourself. If you want to create wealth and value, are you the right person to run it?

Also, there’s a growing skills shortage, so you have to compete more effectively for talent. However, the talent pool is bigger than you think. Use technology to cast your net wider. Look for diversity of talent and, most importantly, don’t just hire in your own image. Don’t hire yourself again. That’s just unconscious bias and you have got to get past that. Don’t just employ people locally or because they have the same skin colour, ethnicity or even religion as you. Diversity equals success.

We’ve already talked about finance, and you’ve got to understand that involves risk.

Fifth, technology, which cuts across the other four. We are moving to a software-driven future and technology gives you a competitive advantage. Some companies are afraid of keeping up to date. Yet artificial intelligence and robotics will enable you to operate more efficiently at a lower cost. You can buy that software off the shelf. If you’re not doing it now, you’re potentially already too late.