You’re a Scaleup What? I’m a Scaleup Partner - Mark Harrison
I recently took up the position of Scaleup Partner and have spent much of the last 6 weeks explaining and simultaneously figuring out what it is that I do as the cries of “what the hell is one of those?” comes from the smart-arse at the back of the room (historically this would have been me).
Now that I’ve figured out how best to explain this, here it is, “Funded Bespoke Management Consultancy”, we aren’t allowed to call it consultancy, so we use Advisory. I’ll spell it out, so this gets published, “Funded Bespoke Advisory”.
If you apply to come onto the programme and are successful, the right mix of skills from the Scaleup Partners are assembled to give you the support you need. We are all generalists and specialists in one person a status you can only achieve with many years in business, we’ve all started our own businesses and had successes and setbacks along the way.
As Craig Huntington one of my colleagues succinctly put it, we love getting involved with and helping interesting businesses but are of an age where we really don’t need the stress of trying to make payroll anymore. Amen to that!
Why am I here?
The key questions I’ve always asked myself whenever I’ve gone into any organisation are “can I make a difference, will I learn anything?” Being a part of the Scaleup programme affords me the scope for achieving these personal professional goals on an almost daily basis.
Enough about me, step into my office, pull up the virtual couch. Comfortable?
Let us discuss what makes a business ready to scaleup.
Does your business have the potential to Scale?
Is there a formula that makes the next big thing jump out at you?
The answer is, it’s not that simple. There are a few key indicators that will lead you to believe that a business is capable of scaling. It’s the unknown that will decide whether it does or not. There are so many outside influences beyond your control that make up the final ingredient in the secret scale up sauce and its always luck, being in the right place at the right time.
Here are some of the indicators we look for when assessing whether a business has the potential to scale. There is no right or wrong here it’s just us using our experience to improve outcomes of the program we support.
Does the management team have a diverse enough talent set and are they flexible enough and talented enough to recognise or fill each other’s deficiencies? Can they create an environment that inspires a level of commitment in their staff that turns them from 9 to 5er into a member of your tribe?
There are many talented individuals out there who have started businesses but struggle to let go and bring in talent at peer level or above to help them grow. However talented they are they will be the reason the business doesn’t scale or ultimately fails as they quickly become the choke point for everything.
A Scalable Model
To scale, you need to have a product or service that you can easily and consistently replicate, which means your increase in costs is disproportionally low compared with the increase in revenue generated by a step-change in sales.
For this reason, an example, professional services companies tend not to be scale-up candidates as they always have a time and materials element to every sale and their only economies of scale are potentially some of their central overheads, companies like this traditionally grow through acquisition not by scaling their core operations. Their costs are directly proportional to their revenue.
A Great Market
Is the market you are in at the right point where it’s about to take off or is what you are doing going to fundamentally disrupt the way things are done in an existing mature market?
This can be ease of deployment, service level, or just a good old-fashioned price point. If a market is well established and the vendors in there have been operating for years at a very high price point and cost base. You can come in and sell at an order of magnitude less than them, they have no way of following that, their cost base just won’t allow it.
Customers who Love what you Do
Being able to demonstrate customer case studies who love what you do and how what you have done for those customers can easily be replicated and they aren’t just projects.
Access to Capital
The biggest problem for many businesses ready to scale is access to capital and the right instrument to choose.
Do you bring in equity? This will always take somewhere between 9 to 12 months from first considering it to closing finance and there are no guarantees you will be successful. There is always a disconnect between management's valuation and that of the incoming money, meaning that there is an inevitable resentment barrier to be broken down once the deal closes. It’s important to bring in Patient Money, investors that are prepared to stick with you when it takes longer than you thought to get there, which it always does.
The other factor to consider an equity partner is, are they Smart Money do they have existing relationships and experience that will open doors for you?
If your investor checks both the Patient Money and Smart Money boxes, they will be well worth the equity you are selling them.
The alternative is debt, and the debt service that goes with that, and more importantly are you literally prepared to bet your house on your business being successful as personal guarantees are the norm here.
A Strategy a Vision
Can you demonstrate you have a strategy to scale and a vision of where you want to take the business? What will that look like and how long will it take?
A Coaching Board
Too many boards are filled with lawyers and accountants who will just advise you not to take any risk, there is no business that ever scaled without taking a risk. You need people on your board who can help you take calculated risks and execute them.
The input of the lawyer is to be noted but the risk assessment is yours to make, you need people around you who have played and won before to help you decide whether the risk you are taking is calculated or reckless?
There are many more factors that we can consider and each one of the ones I’ve described could be an article on its own. That’s for another day, thanks for taking the time.
RTC North is delivering Scaleup North East in conjunction with the North East Local Enterprise Partnership (LEP). The programme is part-funded by the European Regional Development Fund (ERDF). It is aimed at supporting North East-based businesses that can demonstrate both the hunger and the potential to achieve high levels of growth. www.scaleupnortheast.co.uk