According to the Telegraph, the UK alone is home to 33,860 scale-ups, contributing £1 trillion to the UK economy annually and making up half of the SME economy (which accounts for over 99% of all businesses and numbering 5.6 million in 2021).
However, there are a dozen stories of failure for every great success - tech start-ups that were thought to be the 'next Facebook' or businesses that captured the zeitgeist for a brief moment only to collapse, having failed to understand the changing market.
For example, Sinclair C5 was supposed to revolutionise transport in the '80s, the energy drink Hype had high hopes of rivalling Red Bull and Boo.com - the short-lived British e-commerce business that was arguably the first major UK dotcom to collapse.
The reasons for failure range from a lack of proper business controls to dismissing the fundamentals of and underinvesting in marketing.
So how do you make sure your business is amongst the unicorns of the scale-up world and not just another flash in the pan?
The start-up mindset v. the scale-up mindset
The start-up mindset
In general, start-up founders and CEOs think about selling their product or service, raising money and hiring the right people as key factors to sustain growth. However, they often don't think about how the business will run when those milestones have been reached. They tend to have been focused on demonstrating a minimum viable proposition and haven't had a chance to think about how to go to the next level.
The scale-up mindset
The scale-up mindset is about a focus on long-term growth. That means having a plan and not just an idea. For example, it involves having a razor-sharp focus on the business's real-time status so as not to run out of cash and blow up. It also means focusing on sustainable growth and being acutely aware of the market and its fluctuations. You might ask yourself:
- Can you meet the requirements of massive, sudden growth without compromising your embryonic brand reputation through poor customer experience?
- Are you in control of that growth, or is it running away with you?
- What happens if that suddenly slows down temporarily for some reason? Can you absorb that impact as well?
- How will you make a case for further investment down the line?
- How are you going to establish sustainable growth and revenue?
Challenges faced by scale-ups
The prevalence of scale-ups is in no doubt; when Interbrand released its 2020 list of 100 Best Global Brands, just 41 of the companies included had been on that list in 2000. Many of the brands on the list didn't even exist back then.
However, as exciting as companies can be in their growth phase, it's also a time when they are highly vulnerable. For example, growing at pace requires a laser-focused strategy and access to funding that can match the speed of that growth. In 2020 reports estimated that fast-growing SMEs in the UK faced a cash shortage of up to £15bn after investor funding fell away in the pandemic.
Practical needs of scale-ups
The path from scale-up to unicorn is in finding a playbook that works for you, allowing you to react to the market whilst honouring your business objectives and responsibilities to key stakeholders.
Where a start-up has just been fighting to survive, a scale-up moves towards establishing product-market fit, understanding the customer, and not only establishing how to reach them, but how to keep them as well.
With that in mind, some of the key requirements and considerations for scale-ups include:
On a practical note, scale-ups need to carefully look at their capabilities, from staffing to back-end solutions and review their capacity for supporting sustainable growth. Do your systems and staffing levels allow you to scale without compromising the service, product or customer experience that has got you to today?
Scale-ups are defined by the fact that they have received funding and are in a position to scale up. While this can seem like a moment of victory for many companies, and in many ways it is, it's a far cry from being established and having the kind of resilience that makes you a solid and sustainable business.
Although funding might already be in place by way of an investor, you need to keep it in place, use it wisely and be mindful of your accountability to existing investors and your proposition for additional investors as you continue (hopefully) to grow.
Scale-ups can't afford to get things wrong because resources are limited, and your brand reputation is not strong enough to absorb errors. That means knowing your market, understanding them and meeting their needs, as well as directing resources in an informed and focused way. Data and customer insights are essential to minimising wasted resources and maximizing opportunities. For example, you can segment the market to help establish a formula for growth.
Many scale-ups consist of enthusiastic teams of young people, and this is no doubt where the energy, ideas, and enthusiasm comes from. However, scaling up also requires experience in marketing and business development to provide strategic leadership and the best return on investment. Otherwise, you tend to be in a position of trying and testing in the dark or doing the same thing over and over again, expecting a different result, which, as Einstein pointed out, is the definition of madness.
Historically, you would probably end up having to hire someone full-time - a Director who could provide advice based on tangible experience. However, for most scale-ups, having that role filled by a full-time member of the team is unnecessary and disproportionately expensive. If your team comprises many young people, that experienced person doesn't fit culturally into that demographic. The net result is that you end up with junior people leading in critical roles, ultimately not bringing the leadership and insights that are so essential simply because of a lack of experience.
This is where gigCMO's approach can benefit businesses in the scale-up phase. Our Fractional CMOs provide a high-level experience from markets worldwide but on a fractional basis. That means we can provide a strategy that the management team can implement and input at critical junctures to stay on track or react to the evolving market. Businesses can also scale the service up or down as required. As a result, scale-ups get the brainpower they need to drive existing resources to a higher level whilst maximising the talent of people within the company who are hungry to learn.
To have taken a company from start-up to scale-up is a considerable achievement and an exciting moment in the development of a business. Still, in many ways, it's where the actual test begins.
So the question is, are you a unicorn or just another flash in the pan?