What actually is a scale-up? It’s a term that is often used, but it’s not always clear what sets it apart from a start-up. According to business coach and board adviser Paul Piccirillo, the term has a very specific definition. “A scale-up is any company that grows by 20% or more over three years off a solid base,” he says. “That base would typically comprise 10 employees, which roughly equates to £1m in turnover. Only around 5% of UK companies reach £1m in turnover – and less than half a percent make it to £10m. So navigating that path from £1m to £10m is really tricky.”

He notes that in its pre-£1m period – the startup phase – a company tends to focus on getting its product market fit. At that point, the business is run by an entrepreneur, through a combination of talent, perseverance and will. However, once the business has acquired 10 members of staff and has a clear need to hire even more, the entrepreneur must adapt how they do things – not just as a leader, but in terms of operations, systems and processes. This begins with some searching self-analysis.

“The owner manager must sit down and ask themselves a number of critical questions,” Piccirillo says. “For example: what do I want from this business? Is scaling up the right path for me? Will it help me achieve the vision I have in mind for the company? Will it give me the levels of risk and return that I’m looking for? And will it give me the type of role that I want in the organisation?”

Sharing strategy

To help owners prepare for the journey, Piccirillo recommends dividing it into four parallel sections: strategy, people, execution and cash.

If you are a founder, there will often be a strategy sitting somewhere in your head. Get it down on paper, share it widely and make sure everyone is culturally aligned with serving that vision. Document the company’s culture and values and use them to drive a focused hiring process, while committing yourself and fellow senior team members to ongoing self-education. 

Set clear priorities for execution and ask your finance professionals to set up a dashboard to track and monitor progress. Plus, understand your cash-generation cycle and devise appropriate scenario plans – another area where finance staff will be of instrumental help.

For fractional CFO and commercial adviser Anne Allibone, data is a vital tool for keeping strategy on track. “It’s not just about looking at core topics, or metrics that will shape your value further down the line,” she says. “It’s about making sure you have data that will help you quickly identify what’s not working, so you can change strategy and be agile and flexible. As such, it’s far better to collect a small set of targeted and focused data points than lots of points whereby none of the resulting information will have much integrity or be particularly accurate. When a metric has moved in a negative way, you need to understand why it’s falling off. But going after excessive data can weigh down your admin functions.”

Edward Partridge, Head of UK Affinity at Marsh Commercial, points out that scaling up can take one of two paths. One business may resolve to establish itself as a market leader in a certain sector or product area that it already knows well and use that specialism to inform growth via clients, talent and acquisitions. However, another may seek to grow by using the scale-up process to access market share in unfamiliar areas.

“With that comes risk,” Partridge warns. “You’ll need relevant expertise to support any diversification plans and ensure that the reputation you’ve built won’t be damaged as you enter areas you’re not as experienced in.”

Control or growth

With the quest for expertise in mind, Partridge says that when founders interview candidates for the roles that will flesh out their companies, recruiting on attitude and values is almost more important than ability. “Technical capability and qualifications must 100% be there,” he says. “But if you have two similarly qualified individuals, look at the attitude and values they each bring to the conversation and will potentially bring into your business.”

Another positive step, he adds, would be for the business to operate a recruitment incentive scheme, encouraging employees who are already part of the culture to recommend peers from other parts of the industry. Glenn Fletcher, CEO of industrial sensors manufacturer Tribosonics, agrees: “Hiring people with great networks, who know where to find talent for key roles – be they data scientists, software engineers or whatever – beats spending hundreds of thousands of pounds on recruitment consultants.”

Fletcher is clear that adding talent to a business goes hand in hand with something that founders routinely find challenging: delegation. “You can either retain total control, or grow and scale a business,” he says. “You can rarely do both.”

On this point, Allibone says: “One really productive step is to foster a culture of upward communication. If your reports are upfront and proactive about not just the tasks they’re tackling, but providing you with updates, you will have confidence that they can cover off the parts of the business you’ve assigned them to. And if you as a founder are struggling with delegation, lots of investors and VCs will typically identify the issue and put in place appropriate coaching, guidance and support.”

Finally, as Insights reported last autumn, intangible assets are becoming much more important to the UK economy. For that reason, Fletcher says, as the fruits of its work emerge, a scale-up must think very carefully about how to manage intellectual property. “It will cost you around £200,000 over 20 years to provide a decent footprint of jurisdictional patent protection for just one product or innovation,” he points out. “So don’t patent something just for the sake of it. Patenting must be aligned with strategy. Some intangibles or innovations in your business can be covered under trade secrets or knowhow.”