Around half of start-ups fail within the first four years of being in business. And even those that succeed will have to work hard to achieve the annual growth in employees or turnover required to be called a ‘scale-up’.
While there is no fail-safe formula for securing 20 per cent growth per year, following these 6 steps will help you to put your best foot forward and ensure you’re well positioned for growth.
1. Consider your funding options
The 2008 recession saw banks dramatically scale down SME lending due to increased capital requirements and perceptions of risk. While the verdict is still out on whether the current economic climate will create a similar situation, it’s clear there’s some uncertainty ahead. On the one hand, the likes of Virgin Money are delaying entry into the market, but equally some feel that the Bank of England’s raft of policies will keep bank’s lending to smaller businesses.
During this period of doubt, growing businesses may find it more difficult to access traditional funding. But this doesn’t necessarily need to be a bad thing. They should take the opportunity to explore new avenues, such as alternative finance, that may actually provide a better fit for their business. UK Bond Network for example is able to provide between £500,000 and £4m business funding by matching SMEs with sophisticated investors.
In addition, it’s best to consider what form of investment suits your business. If your business is high-growth, do you really want to give away a stake in it? Carefully consider whether debt or equity funding would be most suitable and do some research into the propositions of a number of different providers.
2. Learn from your mistakes and adapt to change
All businesses will make mistakes. It’s how you deal with these that will determine your future success.
When approaching investors, be transparent. Acknowledging errors made and learnings from these demonstrates maturity. Evidence your adaptability and trustworthiness by making clear the remedial actions that you have taken, and you will go some way towards turning a negative into a big positive.
Beyond this, be aware of the market and wider economy. Successful business plans take external factors into account and will adapt in response to these. Adopting a pragmatic approach early on will set you up to deal with turbulent market conditions in the future.
3. Network, but for more than just business leads
The larger your network, the greater your pool of potential investors, clients, customers and partners. Getting the organisation’s name out there is critical for building customer demand – especially if launching a completely new product or service.
However, there is more to achieve from networking than just building a customer base. Aim to meet seasoned entrepreneurs and business leaders who can mentor and offer advice. Investors look at the calibre of non-executive directors as an indication of the quality of guidance the business is receiving, so your mentors can go a long way to helping secure investment.
4. Have the heart of a start-up, and the head of a seasoned multinational
There is a reason that your business survived past it’s infancy: it resonated with your market in some way. This might be because it was original; you took a risk and it paid off. Whatever it is, make sure it continues to be a fundamental element in your business.
Going forward, balance this element with carefully considered plans. As a start-up you have the benefit of agility, but the larger you grow, the further you have to fall from grace, so consider your development carefully.
5. Hire the right people and let them flourish
For early-stage businesses, attracting and holding on to talented individuals is no mean feat. While your aim will be to hire exceptional people with the specialist skills required to push your organisation forward, nurturing a positive workplace culture is equally (if not more) important.
When building a team, balance enthusiastic young talent with experienced heads and encourage discussion and innovation. Don’t be afraid to delegate responsibility, share in successes and reward valued input. Your business has its own unique set of short- and long-term goals, and achieving them will be heavily dependent on not just the skills at your disposal, but your ability to effectively manage the people with those skills.
6. Allow for flexibility in the structure of your business
All businesses work within frameworks. These govern physical aspects of the work environment, for example office space, or less tangible aspects of the business, such as its operating style. These frames need to be constantly assessed to ensure they still fit the business. Location, for example, should be regularly evaluated. Are your current headquarters fit for purpose and economically viable? Or would moving to another location reduce financial burden without damaging your business? Equally, when looking at business functions, does your business need to hire in talent or can it be outsourced to specialists?
These factors need to be considered on more than just a financial level – think to the future and plan around your growth.
Many of these factors interlace in some way. What ties them all together is investment. Top talent will want to work for you if your business has investor backing, and you’ll have the flexibility to change locations and processes if you have the capital to do so.
Firm funding foundations will put you in a good position to build a strong, sustainable business; one that has the potential to scale-up.
Ben Cohen is the marketing manager at UK Bond Network.