In this feature interview Kevin Brent, founder of BizSmart discusses the most common challenges for business when trying to scale.
What prompted BizSmart to conduct the ScaleUp Challenge research?
“According to the latest government statistics, there are 6 million private sector SMEs with the UK, of which 5.7 million fall into the micro-business category.
“Although the vast majority fall under this category [96%], the data shows ‘micro-businesses only account for 33% of the UK employment and just 21% of the entire turnover.
“In contrast there are only 7,474 ‘scaleups’ in the UK but they contribute 50% of the UK’s SME economy. Scaleups are defined by the OECD as having at least 10 employees and showing at least 20% growth annually for the last 3 years.
“We wanted to find out why it is that just 4% of UK businesses can scale beyond 10 employees and what is preventing the average business owner from continuing their scaleup journey reaching 20-25 employees or 50 plus. We also wanted to gain some insight into the key challenges at different stages of the scaleup journey.”
Are you surprised by any of the findings in the report?
“I am surprised at the very high proportion of business owners who experience challenges in regards to placing the right emphasis on the importance of team engagement and culture, as well as team metrics in key performance indicators.
“However, I am less surprised, but fascinated, by the clear correlation between business success and personality types. Those who identified as ‘dominance’ [falcons] under the DiSC profile were more likely to scale their business beyond 10 employees when compared to ‘steadiness’ [doves], ‘conscientiousness’ [owls] and ‘influence’ [cockatoos].
“Our findings also indicated that a business owner’s personality type can also impact the types of issues they experience when scaling.”
What are the main challenges that are preventing the majority of businesses from scaling?
“Based on the comments and the analysis of the data, we would suggest that the main challenges fall into 5 main areas:
- Desire and confidence – business owners become more risk adverse as they grow, to the point that it prevents scalability as they have more to risk and more to lose. Business owners also struggle in recognising when to scale and having the confidence to invest time and money in business growth.
- Personality and leadership – understanding and recognising that we need to balance the strengths and challenges of our personality profile by building a balanced team around us. Creating a high performing team culture is another challenge, as the focus needs to be given to maintaining the ‘common purpose’ that is clear during the start-up phase but is easy to lose as the team grows.
- Understanding what it takes to scale – recognising that scaling up is a journey consisting of a series of steppingstones and that each transition has its own set of challenges. Also understanding the importance of ‘true’ profitability in order to scale.
- Team engagement – placing the right emphasis on the importance of team engagement and culture.
- Overcoming the ‘chicken and egg’ –too many business owners fall into the trap of working in the business, not on it, creating an ‘owners trap’ that can be difficult to break out of without cash and the right resource.”
Do you think these challenges are easily overcome?
“To quote the military, the important things are simple, but the simple things are very hard. This is definitely the case in trying to overcome these challenges.
“Overcoming these challenges is about instilling good habits within the business that enable us to set good short and medium term priorities, solve specific challenges and deliver a good business ‘rhythm’ that keeps our ‘finger on the pulse’
On an ongoing basis, the business needs to highlight the priority areas. What are your main struggles when scaling that we can impact in the next 90 days? Once this has been determined, consistency in fixing these issues is key. Get into a good habit, implement KPIs, ensure all employees know what is expected of them and address any scaleup issues head on.”
56% of respondents said that getting dragged back into day-to-day operations was preventing their business growth. Do you have any simple solutions to help business owners avoid this?
“In the early stages of scaling a business, it is important that we delegate effectively. Business owners can often fall into a trap of doing too much, meaning they are unable to focus on the things that will make a difference to their business.
“There are practical steps business owners can take to help avoid this. The first is a strategic value vs. low teachability/high skill matrix and is a simple way of thinking about where you should be spending your time.
“Think about all the things you do in your business and plot them out in regards to the level of skill needed or how difficult it is to teach someone else to complete it, and if it is something that is delivering real value to the business over the long-term.
“By completing this exercise you can prioritise what tasks you should not be spending your time doing, and work out a plan in how to do so. This could include teaching or delegating the task to someone else in the team, outsourcing, automating or hiring.
“You should adopt the mindset that it is fine to not to do everything yourself and you should get into the habit of identifying something each quarter that you are going to stop doing and delegate it elsewhere. Over time you should be actively removing yourself from day to day tasks to give yourself time to focus on scaling.
“To progress beyond the 8-12 employee level, you need to be able to remove yourself, and break free from the ‘owners trap’ where you are at the centre of everything. This requires developing leaders ‘behind’ us. In order to do this, we have to find ways to delegate even the things we believe we are the only ones in the business who can complete it.”
How important is getting staff to think and act for themselves when scaling a business?
“To progress beyond the 8-12 employee level, you need to be able to remove yourself, and break free from the ‘owners trap’ where you are at the centre of everything. This requires developing leaders ‘behind’ us who are comfortable in making decisions and acting for themselves.
“Being the business owner, you are the ‘one who knows how to do everything’, so it’s easy to see why employees come to you with questions before trying to address things on their own. This can be an even tougher problem when staff have been in the business from its infancy and are used to coming to you directly. It is vital that you address the issue before you lose valuable time that could be spent on growing the business.
“The ‘three before me’ rule is a good place to start. It requires employees to prove they have sought out at least three avenues to obtain answers or information to solve their query before bringing it to you. This means only the problems or decisions that truly need your input reach you, and encourages employees to be creative in finding solutions.”
Do you believe that, despite these challenges, business owners remain optimistic about their future growth?
“I do believe that business owners remain optimistic about their future growth, perhaps overoptimistic, which could be detrimental to the business’ growth.
“Through our research we found that business owners are in fact much more optimistic about their future growth rates in comparison to their historic financial performance. 61% of business owners expect to nearly or more than double over the next 3 years, whereas only 19% report that they have actually doubled or greater over the last 3 years.
“This overoptimistic approach may be overshadowing their ability to view the challenges that are holding them back.”
How much of an influence does personality type play in when scaling a business?
“We uncovered that personality type definitely has an impact on a business owner’s success when scaling a business. Leaders with a ‘dominance’ [falcon] DiSC profile are more likely to surpass micro-business status and reach a 7-figure plus turnover when compared to the other 3 groups.
“Those who fall into the falcon category are the rarest type of DiSC profile, making up just 9% of the global population. As competitive, decisive and results-orientated individuals, this could explain why just 4% of UK businesses surpass micro status.”
To conclude, what one piece of advice would you give to any business trying to scale?
“Scaling a business is not easy – and there is not one simple tip that is suddenly going to deliver success. In my experience of working with hundreds of business owners, there are two things that separate out those that successfully scale, and those that do not.
“The first is working to a proven system to scale and build value by properly planning and executing a scale up, rather than drifting into growth. The second key thing is harnessing the power of peers through peer to peer working. By working with a group of likeminded business owners, you can identify barriers within your business, and bounce ideas off one another to learn from each other’s journeys.”