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Scaling up: what to consider when growing your business

January 30th, 2020
Scaling up: what to consider when growing your business

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Three high-growth firms talk about how they’ve boosted their turnover.

Over the past 12 months there has been a 23% rise in the number of private ‘scale-up’ firms in the UK, according to the ScaleUp Institute’s Scaleup Index, bringing the total to 5,456 businesses.

Scale-ups are defined as businesses that have increased their turnover or employee numbers annually by more than 20% over a three-year period – they collectively contribute £1.3trn to the UK economy.

“Scale-ups are vital for the UK economy,” says Paul Excell, director of business support advisory service ScaleUp Group. “But to cross the start-up-to-scale-up chasm, businesses need access to talent, markets and patient growth capital. Of those, access to talent is the biggest barrier to growth.”

So how do you overcome these barriers in order to scale your business? We spoke to three firms that have recorded high double-digit turnover growth in recent years to find out what measures contributed to their success.

Five-year plans and employee engagement

PP Control & Automation is a manufacturing solutions provider that works with many of the world’s leading machinery builders. The firm employs 230 people and has grown annual sales from £18m to £26m in the past three years.

“Our success stems from a combination of organic growth, increasing our value-add solutions for existing customers and being focused on new clients and markets,” says CEO Tony Hague. “But it’s been part of a deliberate strategy to grow the company and bolster our market share.

“We’re now 18 months into a five-year plan to grow turnover to £40m organically, but also through a new ‘buy and build’ strategy. We’re looking closely at potential acquisitions and a joint-venture to establish a manufacturing footprint in North America.” That ambition has been boosted by investment from Canada-based Ardenton Capital.

PP Control’s scale-up strategy was also influenced by Hague’s reading habits: “I had a book called Mastering The Rockefeller Habits, which discusses scale-up theory; reading it gave me the clarity that we needed to do things differently. I gave the book to my management team and brought in a scale-up coach to help us.”

Hague say he learned that there are four clear disciplines behind scaling up: people, strategy, execution and cash.

“It’s not about just developing strategy but how we communicate it – I, for example, began to write a weekly blog,” he explains. “We also created a culture of high engagement through weekly awards recognition schemes, frequent town hall-style Q&A meetings and bringing in employee net promoter scores as a key metric.”

The firm also focused on increasing financial awareness amongst managers, and brought in a new finance and sales director to further improve expertise.

Up-skilling and internal investment

Direct Online Services, a kitchen components e-retailer, has booked double-digit profitable sales growth every year since its inception in 2008.

“We set out a plan looking at where growth opportunities were going to emerge,” says MD Jon Shepherd. “We’ve retained an entrepreneurial spirit of growth, always keeping our eye on new sectors to grow into.”

“We set out a plan looking at where growth opportunities were going to emerge,” says MD Jon Shepherd. “We’ve retained an entrepreneurial spirit of growth, always keeping our eye on new sectors to grow into.”

Jon Shepherd, MD, Direct Online Services

Engaging an investor was also key: in 2016, it received a £3m minority investment from the Business Growth Fund to accelerate its expansion across the UK and Europe.

Another focus has been in re-investing profits back into the business. The group has just announced a new £5m internal investment plan including improving marketing, staff skills and expertise, investing in a new warehouse building and machinery, and a bespoke enterprise resource planning (ERP) system to be able to fulfil orders quicker and more efficiently.

“As a business grows, it begins to reach capacity in areas such as IT systems, buildings and teams,” Shepherd says. “You need to have foresight, take action and invest to be more effective.”

People and culture

Arthur Online was launched in 2015; the property management software provider supports the management of over 70,000 ‘units’ in over 30 countries and has recorded 100% growth in revenue year on year for the past three years. Its employee numbers have grown from around 10 to 50.

“It’s getting harder to reach 100% growth levels each year but fundamentally our rise has been about people and culture,” says co-founder and chief financial officer Rochelle Trup.

It follows the objective and key results (OKR) management strategy, which aims to connect company, team and personal goals to measurable results.

“It’s about having a long-term plan and working out how every member of our team will work towards achieving our goals – whether that relates to revenue growth or increasing users,” explains Trup. “It has to be broken down into what executives have to do year on year and what individual teams have to do on a quarterly basis to help us reach that annual target. Having monthly meetings in which staff are encouraged to share ideas with management also helps create an entrepreneurial and aspirational environment.”

Securing finance has also been important in the group’s rise, with two major raises in the last three years from investors such as the London Business School’s E100 private angels club and family offices.

“Our first raise was more about developing our technology, and the second, last year, was about sales and marketing to scale further,” says Trup. “We’ve picked Australia and South Africa to grow in this year. It’s about selecting bite-size targets and focusing on them.”

Trup believes the ‘technology strain’ has been the firm’s greatest barrier to growth. “Some of our bigger clients have asked us to develop bespoke services, which is fantastic, but others wanted us to make so many changes that we had to say no,” she explains. “You can go down a number of channels when you grow quickly, and you need to decide firmly which will benefit your business and which won’t.”

Seven tips for scaling up

  1. Create a three- to five-year strategic plan with clear growth targets.
  2. Communicate it to ensure all your management, departmental leaders and staff understand their roles within it.
  3. Align all main functions, such as HR and finance, to the plan.
  4. Invest in your people by identifying skills gaps.
  5. Ensure all management understand how their decisions, roles and responsibilities will impact turnover and profit.
  6. Keep reviewing and evolving your strategic plan as the market opportunity changes.
  7. Secure finance to invest in your current team and operations.

 

https://rbsbusinesshub.com/content/1f0e28af-61b1-bab4-9ecf-efcdc5501694

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