From start-up to scale-up

Navigating the complexities of growth and maintaining previous success is a challenge for all mid-size businesses.

In partnership with the Australian Information Industry Association (AIIA), Grant Thornton recently brought together leaders of Australian scale-ups who candidly shared their growing pains while participating in solution-seeking discussions. 

Scale-up companies have survived the start-up phase and have grown into established, mid-sized businesses. But this next phase has new challenges –defining the core business, creating a clear strategy and communicating it, retaining culture, attracting the right talent, and building loyalty, just to name a few.  All whilst maintaining a focus on the customer.

Creating a foundation for sustainable growth

Clear planning is difficult but extremely important. In start-up mode, you’re agile and solving challenges as they arise.  As you grow, clear planning is necessary to stay on target. Too often CEOs develop a strategy but get caught up in day-to-day business operations. You need to be clear on what you’re doing to achieve your goals.          

1. Define your core business. What is it you help your customers achieve? What are you doing well? This is your foundation and everything you’re doing should support it.
2. Put yourself in your customers’ shoes to thoroughly understand their motivation and experience. Ask for their opinion and look at problems like an outsider, with common sense and without emotion.
3. Know what your competitors are doing and be careful of expanding into areas where you’ll become competition to your clients.
4. Set clear goals for the next 12-18 months and communicate them to your people, customers, and external partners.
5. Bring your people along on the growth journey. They need to believe in the vision and feel they are part of the planning process to embrace the change.

“Whilst much of the discussion focused on strategic ambitions and operations, it is the human element of all businesses that is core to the growth of a scale-up, whether it be customers, employees, leadership or  external stakeholders” Rob Samuel, Partner, Grant Thornton.

Growth through M&A

Mergers and acquisitions are one way to grow quickly but it’s vital to determine the alignment between your core business and that of the organisation you are looking to acquire. Will your customers benefit from this added service? What is the culture of the organisation you’ll acquire? Too often people make the mistake of focusing on the price of the deal instead of alignment to their existing business.

External assistance and expertise on a merger and integration is critical.  Paul Billingham, Head of Growth Advisory at Grant Thornton advised, “Both your existing business and that of the acquired business will suffer if your core team is lured to the excitement of merger and integration projects and tasks. Both businesses need to be kept up and running to generate value from the merger.”

Often there’s a honeymoon period after a merger where people are optimistic the changes will be positive. You only have one chance to get it right. React quickly and integrate properly. A failed merger will break your culture and your business.

Culture is key

Culture is key to attracting and retaining the best people who will embrace your cause. A great culture starts with a vision statement, and that purpose will guide your growth and decisions.

Leaders have a significant impact on culture and bring it to life. Whether they are company founders or new to the business, working together to create an environment that aligns values and supports people to do their best work is essential.

When people are dedicated to your culture you access their discretionary effort and they’ll go above and beyond for you. It’s important to clearly identify the values and behaviours you want to encourage. For example, in an innovative culture, you want people to speak up if they have an idea, be willing to test and learn, and give recognition for their contributions.  As one CEO mentioned,

“We focus on gaining employee loyalty. Upskill investment is very expensive when young employees view working at a company as a one to two-year gig. The backbone of our company is our permanent staff. They stick things out because we nurture them through ups and downs. Don’t sacrifice a good employee to retain a bad client. It will hurt your culture immensely.”

Culture is sometimes created unintentionally and it is important to understand the levers that impact your culture.  For example, your office space and fit out is a physical representation of your culture.  A start-up crammed in a small space will experience a culture change when the time comes to expand over a larger space, or new location.  This change can be positive, and minimised when such a change is managed correctly.  Your financial position can also impact culture in many ways, and one may be the floor space and location that is financially feasible, and not necessarily the preferred decision for cultural alignment.

The constant balancing act

Scale-ups face a constant balancing act between investing in growth and retaining profits. Investing early in scalable technology, people, and the working environment can improve productivity and customer experience, and reduce the need for future large-scale investment. A COO at our roundtable commented ‘Our money is spent on customer-facing services, not on the back-office systems which are slowing us down. As a start-up we didn’t invest in IT systems that would scale. All of a sudden we’ve grown and need everything digitised which requires a huge investment.”

As scale-ups grow they will continue to encounter this balancing act.  However, with an understanding of the key levers of growth, a strategic growth plan, and a sound vision the entire team is behind, decisions can be made with confidence on where to invest for future growth.