Businesses survive and thrive for all sorts of reasons. Many of which are outside of our control. But many of them aren’t. There are strikingly few barriers to starting a business and consequently all sorts of dumb ideas, poorly executed, are attempted. As a result, only 10% of startups actually get into the market.
So, let’s talk about good ideas reasonably well executed. 70% of these achieve product market fit. They have a real business that delivers value clients will pay for. They have achieved ‘product-market-fit’ and have market traction. They can forecast revenue and start to breathe a bit easier and think about scaling up.
But ....
The Scale Up Gap (TM) is one of the most dangerous phases for a business and the stakes are so much higher now; staff, customers, bank loans, investors, hubris. Only 60% of companies in the Scale-up phase will succeed.
Why?
Here are the three big reasons that companies fail in the Scale Up phase:
ONE – Shifting Position
During Scale Up, there is a tendency to expand your offering. A $30M company had a great business selling memory modules for office equipment. Lots of customers, great margins. Then they thought, lets sell exactly the same product to the PC aftermarket. We can double our sales… Unfortunately for them it was a different type of customer, different values, different competitors, the only commonality was the product. It almost killed the company. It is so important to remain true to your market position:
Change any one of these and the whole proposition falls apart.
TWO- Missing the ‘obvious’ stuff.
Every quarter – or at least every year - you have to get your head out of the trenches and look around. What new opportunities are there and what could shake up your world. I’ve seen so many firms get ‘blindsided’ by things like e-commerce, AI, globalisation, de-globalisation, income redistribution, and so on. So take time, regularly, to review your PESTLE - the Political, Economic, Social, Technology, Legal, and Environmental forces that support your business.
THREE - Not sweating the Small Stuff
You survived startup on raw energy… nights, weekends, credit cards, personal connections and so on. As you scale up, that’s not tenable. You need to sweat all the small stuff and perfect it; you can’t run a marathon with gravel in your shoes. Hampton Inns noted that their reception desks were on the side wall when guests came in to the lobby. This made it hard for the receptionists to make eye contact and greet them. So, they shifted all the desks to 45 degrees. Small stuff – but to scale – super important.
If you plan to scale up, remember these three success factors to jump the Gap
1. Are you true to your start up Position Statement and staying in your lane?
2. Are you doing a PESTLE analysis regularly and seeing the obvious?
3. Are you sweating the details and delivering a perfect client experience?
See you next time,
Andrew
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