Andrew Clough, founder and managing director at The Brew explains the key issues that scale-up company’s need to examine before they take their business to the next level.

UK is world-renowned as a great home for new businesses, placed third globally for start-up creation by the OECD. But the picture doesn’t look quite so positive when it comes to nurturing those businesses into established brands and household names, with the UK falling to just 13th worldwide for scale-ups. That means thousands of businesses could be falling short of their growth ambitions and potential.  

Scaling a business involves big thinking and big rewards, but the road to success is full of new and unpredictable obstacles for start-up founders. It’s important to know when your business is ready to make the leap, as trying to scale too quickly can leave you out of your depth, losing control and haemorrhaging money. But wait too long, and you may find you’ve missed your moment – and the market opportunity.  

So, before you start on your growth journey, here are five of the most important foundations to put in place first:

1.Define your five-year goal: Scaling means different things to different businesses, so defining your ultimate objective is the first step.Your goal might be to achieve a certain amount in revenues, be present in a certain number of locations, employ a certain number of people – or a combination of all three. Once you have a definite target in mind, this is your starting point for developing a plan of how to get there.

2. Outline your resourcing strategy: Taking your business to the next level, means bringing in new people and teams to run individual departments such as marketing, product development and operations. So, you need to look at how your projected growth will affect the number of people you need in your sales team, marketing and accounts, and the skills that are most important. Bear in mind that in some areas, your money may be better spent on an external agency or outsourced provider rather than committing to a full-time expert in-house.   

3. Systems and technology: How well is your current infrastructure designed for a big increase in customers and revenue? For example, if you’re currently using a simple accounting system, you’re likely to need a platform that integrates your billing with your CRM system, giving you a global view of how your marketing aligns to your revenues. And while as a start-up you’ve probably got by with off-the-shelf tools, you should consider investing in building your own bespoke systems as you look to grow.

4. Map your cash flow: Many a business has buckled due to insufficient cash, so it’s not an area to overlook in a hurry. Your five-year plan should include a detailed map of your cash flow, to highlight where the pinch points are and ensure you have sufficient funds to work with at each stage of your development. Of course, things can change, but this provides a valuable benchmark to track against and reevaluate on a regular basis, to mitigate any problems before they arise. There is nothing worse than having to go back to investors cap in hand to ask for more money, and if you do have to, it’s better to do it six weeks, rather than six days, before you need it.

5. Funding strategy: It’s impossible to scale your business without a healthy chunk of cash behind you, and that means deciding which funding option is right for you. There are a number of routes you can go down, including applying for a bank loan, courting investors or launching a crowdfunding campaign – each with its pros and cons. The big advantage of bank loans is that you can source the funds you need while keeping 100 per cent of the equity in your business. However, on the flipside, bank finance is arguably the bigger personal risk than working with third-party investors, where you aren’t required to pay the money back until you’re in a position to do so. Meanwhile, crowdfunding can be a great way of building an engaged community of advocates and champions for what you’re doing, but on the other hand leaves you with a lot more investors to answer to. So, do your research and consider your options carefully before moving forward. And lastly, you should prepare to be flexible. If you are being offered more investment than you expected to accelerate your expansion, look at your plans and work out how you can achieve it!

Scaling a business is hugely exciting, giving the chance to see your start-up graduate into fully-grown enterprise. But once you set out on the scale-up journey, it’s very difficult to turn back. Spending the time building solid foundations will ensure your business has the strength and integrity to overcome the many obstacles that lie ahead.

Further reading on scaling up

Do UK scale-ups face an ambition gap?