Deciding to scale up your business is a big step to take. You’re committing yourself to significant changes to your business and achieving rapid growth.
There’ll always be risks when becoming a scale-up business. The best way to mitigate them and get the best chances of succeeding is to plan what you’re going to do before you begin.
Are You Scale-Up Business Ready?
A key difference between a start-up and a scale-up, is in how you’d convince an investor. When scaling up, you should be able to show them proof that your business is succeeding already. You’ll have customers, products and, most importantly, a clear roadmap for expansion.
The kinds of businesses that choose to scale-up will be making money, but have outgrown their current structure. This could be an older business that’s found its growth has plateaued or a new one ready to take the next step.
The most common investment for a scale-up business is Series A. Typically, VCs (Venture Capital) will be looking to invest an amount in the millions. If you can’t see how your business could possibly spend that much, it might not be time for you yet.
1. Agree on a Strategic Direction
- Why do you want to scale up?
- What do you want to achieve?
- What does your team think?
How you answer these questions will shape how your business scales up. This is where you need to decide what your business’s growth will be.
It’s best to do this alongside your business’s key players. Who these are will depend on your business. It could be the other founders, your Board of Directors, or even your entire staff if small enough.
Everyone has different experiences they can bring to the table. Involving your team will help produce a well-rounded strategy for expansion and ensure that everyone understands your new direction.
What can You Change?
If scaling up means doing something big, what does that mean for your business?
Working with your team, look at what your business’s strengths and weaknesses are. Look at how you operate and where the bottlenecks are. Consider how you could diversify.
If there’s a major bottleneck in your structure, how could you remove it? Is there a new product that you could launch? Could you benefit from a new marketing campaign? Do you need to enlist the help of advisors to grow quickly?
There are a number of ways your business could change with a large sum of capital to fund it. From purchasing the machines to start manufacturing in-house, to creating entire new departments, you have to find what will work best for your business.
2. Planning for Funding
Before you look for an investment, you want to know what you’ll do with it. Not only will most investors want to know this before they give you any money, but it’s important to know how much you need before you start searching.
To use the manufacturing example, calculate the costs of moving. How much do the machines cost? What extra costs come with them like staffing, training, or storage?
This will give you an idea of the scale of investment you need, and make you look better when pitching. After that, it’s a case of researching the funding options and picking the best one for you.
Getting investor ready also takes time and preparation. The investors will want to see that you’ve done your homework, so get all of your financial documents together before you apply.
Most VCs will have a set of questions they will ask to satisfy the standards they have to meet. If you aren’t familiar with the process, use your network. Find out what kind of questions they might ask and prepare answers before they even ask them.
Not only will this make you appear organised and well managed, but it can give the impression that other investors are interested in you. If it looks like there’s competition for your business, it’ll make you much more desirable.
3. Scale Up Your Board of Directors
Take a critical look at your current Board of Directors and your role in it. If that’s currently just you, you’ll need to build one before you scale up. Even if you do have one, it may need to change.
A Board of Directors should have a diverse range of experiences that covers the important aspects of your business. Consider what gaps you may currently have such as financial, IT, or commercial expertise.
Has anyone on your Board scaled a business before? When preparing answers to a VC’s questions, they’ve answered them and will remember what they were asked. They’ll also be a source of hard earned wisdom to guide you through an inherently uncertain process.
You should also be honest about your skillset and role on the Board. Some entrepreneurs are better suited to being Director in their specialty and not the CEO.
If you’re an expert in marketing but don’t know much about corporate management, there’s no shame in taking the Director of Marketing role and hiring a new CEO. It takes strength of character to trust your creation to the hands of another, and investors will respect you for it.
4. Develop a Business Plan
Write it all down. Make sure that everything you have decided to do, everything you think is important, exists in a single document.
Taking the time to write it out helps you reflect on your decisions, and may lead to a spark of inspiration. It also makes it much easier to communicate your plan.
There are a number of reasons why having access to a physical – or digital – document is beneficial.
- Receiving feedback – if you want advice on your business plan from a mentor or more experienced associate, it’s a lot easier when you can hand them something to check over in their own time.
- Involve your employees – your whole business should understand why they’re doing what you’re asking of them. Being open will encourage a more loyal and understanding company culture through your changes.
- Onboard new directors – as previously discussed, it can be very useful to expand your Board of Directors as you become a scale-up business. Your business plan acts as a resource for bringing them up to speed.
- Impress your investors – as part of vetting a business, most big investors will want to know what you’re going to do to grow. Your business plan explains everything they need and gives you the chance to impress them with your preparations.
Quite possibly the greatest benefit of writing an actual plan is that it’s a reference to return to. When becoming a scale-up business, a lot is going to happen quickly, and it can be hard to keep track of how it all slots together.
Making a plan means that you’ll always have something to come back to keep your business’s development on track. It also helps you understand your past motivations. If you need to change your plan, you know how it’ll affect the rest of your strategy.
When you take the leap and scale up your business, don’t go in blind. Figuring out what you want, and getting the help to do it, could make all the difference between success and a lesson hard-won.
Make sure you have your strategy and Board sorted before you try for investment, and you’ll be in a better place to kickstart your business growth.