Businesses of any size will encounter growing pains. But arguably the most challenging period of growth is the transition from a startup to a fast-growth SME and beyond, with four in ten businesses failing within the first five years. Far from being a case of simply growing bigger and hiring more staff, leadership is perhaps the biggest contributor to a business’ success, and there are fundamental differences in the types of leaders that organisations require to make them a success at each stage.
Most startups tend to be led by an incredibly driven and passionate leader, who sets out a grand vision for a small team of highly talented and equally minded individuals to pursue, and this often works. But in order to continue a growth trajectory, leaders have to adapt their leadership style and learn different ways of working than those that made them successful in the first place.
Ambition: The passion that drove the creation of the business can easily dim if business challenges seem insurmountable or the opportunity for a quick acquisition presents itself. Leaders of the startups that have gone on to become the most successful companies on earth all demonstrate ambition that shows no bounds and overcomes set backs. If a leader has ambition, everything else will follow, as they have the drive to learn and adapt.
Hiring and delegation: With rapid growth, scale-ups have to hire more staff and implement new organisational processes while producing more output. This means both hiring the right talent and mastering the art of delegation to get the most out of them. Hiring decisions are incredibly important – the staff that scale-up businesses require are different to startups. They also require a different style of leadership to handle members of staff that don’t necessarily have the same emotional bond to the company as the CEO does. Leaders have to become masters of delegation, management and oversight, rather than jack-of-all-trades with a role in everything, in order to lead their businesses from the front.
Funding: Many startup founders, particularly in the engineering and technology sectors, started out in a technical role – developing a product with commercial potential. But as the business grows, their focus must shift to the lifeblood of every company: funding, in terms of both investment and organic growth. Investors expect to see the founder or leader of a business front and centre of investment discussion, which means that they sometimes have to take a step back from the technical side of the business and prioritise the development of their investor relations skills. Leaders need to take a step back to manage and ensure investment conditions and targets are met. This step back is also crucial to think strategically about organic growth opportunities such as focusing on where the best revenue streams will be and how best to increase the business’ customer base.
Last year alone, 650,000 startups formed in the UK. Yet there are only seven UK companies on Fortune’s 2016 Top 150 Unicorn list (private companies valued over 1 billion dollars), and CB Insights reveals only 12 out of 217 unicorns worldwide are from the UK. The rest of the list is dominated by US and Chinese companies. UK small businesses are lagging behind their international counterparts, and this is in part due to the need for better leaders that can take their companies from the startup to the scale-out stage.
Training and mentoring are crucial to ensuring that leaders develop those skills. The Royal Academy of Engineering Enterprise Hub established the SME Leaders Programme for scale up leaders, providing training and mentorship to help entrepreneurs continue to scale their businesses and innovate. By helping UK entrepreneurs realise their potential and gain the skills to make the jump from startup founder to successful CEO, we can help to ensure that in the years to come, UK unicorns will become a more common breed. The more we can support leaders to grow their businesses, the quicker their innovations will reach the people that need them the most.