If you’re scaling-up your business or aspire to, make sure you consider these 3 characteristics and 3 challenges.
The OECD definition of scale-up (or high growth) is growing turnover by more than 20% a year over a period of three years, with at least 10 employees at the start of the period.
In 2020, there were 27,285 scale-ups in the UK. These are visible scale-ups who disclose their turnover in their filed accounts - the number is actually much higher, as many SMEs have abbreviated accounts.
If you are looking to scale-up your business, it is worth considering the 3 characteristics and top 3 challenges of Scale-Ups, from the extensive research carried out by the Scale-Up Institute in 2020.
3 Characteristics of Scale-ups
- They plan to grow
9 out of 10 scale-ups expect to scale again in the coming year. 1 in 3 expect to achieve 50%+ turnover growth.
- They are innovative
3 in 4 scale-ups have introduced or improved a product/ service/process in the last 3 years.
- They are productive
Scale-ups are more productive than their peers, generating an average of £328,000 turnover per employee.
Top 3 Challenges of Scale-ups
1. Growth and Access to Market Challenges
When CEOs were asked to force-rank the greatest barriers to growth and their priorities to address, access to markets was top of their lists.
Scale-ups want to sell to and collaborate with large corporates, and public sector organisations yet insufficient traction and/or options occur at present.
Access to international markets continues to grow as an issue for scale-up leaders, with nearly half of them rating this as a vital or very important factor in their future growth.
2. People and Management Challenges
Building the leadership and management capacity within their senior teams has always been a focus of scale-up CEOs.
Developing the senior team through training (70%) remains the top factor that scale-up leaders feel will aid their growth, alongside individual development. They are also seeking to augment their teams by strategic recruitment of top-level talent (54%), plus increasingly, they are looking for support from non-executive directors (56%) - with access to effective mentoring is also recognised as valuable (36%).
Key future skills for scale-up employees are critical thinking (79%) and service orientation (61%).
Six out of ten scale-ups say that access to talent is vital to the continued scaling of their business and they continue to demand a wide range of skills. They employ a mix of graduates (79%), post-graduates/PhDs (47%), and school leavers (36%). 60% offer either apprenticeships or work experience, while one-third offer internships.
3. Finance Challenges
Access to appropriate finance and growth capital is increasing as a challenge for scale-ups into 2021.
Three quarters of scale-ups are using external finance (75%). Of those, six out of ten feel they do not have the right finance in place for their business.
Maintaining access to innovation and R&D funding schemes is seen as very important to six in ten scale-up leaders.
We will be looking at these top challenges and others and how to address them in a series of articles over the next few months.
We will share case studies of clients who we are supporting as they are scaling-up.