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How entrepreneurs can scale up with a self funding model

Updated: May 6, 2021

When I’m out and about day-to-day meeting and advising entrepreneurs in the UK tech world, I’m struck by the fact that the number 1 topic which comes up the most in conversation is ‘funding’. And I think it’s fair to say that most scale up businesses seem to focus a lot on funding as a key component of a successful growth strategy. From what I’ve surmised, this view appears to come from the Silicon Valley model of product & funding focus, which seems to be regarded as the best practice approach for scale up in the UK tech scene. But is it really the best approach? After all, the UK and Silicon Valley are very different places?

And you might well assume that all this funding is driving companies to ever greater levels of success? Well sadly, despite all the investment, the stats still seem disappointing (whichever ones you choose to believe). Approximately 90% of business start-ups fail and only around 1% ever reach £7.5 million in sales. Everyone needs some start-up capital, but ask yourself this key question as you scale up - if you do decide to go for the series of funding rounds model, do you believe that the money from funders will drive growth in your business? It might help you grow if it is invested in the right areas, but equally it might make no difference (and often doesn’t). And each round of funding you go through will dilute your share of the business you started. Which means if you want to exit in the future you will need to grow the overall value to a much higher level to ensure you personally get a fair return for all those years of sacrifice. Serial entrepreneur Luke Johnson also warned of an over reliance on funding in The Sunday Times recently: ‘Sometimes it seems that an entrepreneur has arrived if his start-up has received bountiful funding from venture capitalists, even if it has modest revenues and makes large losses. Too much cash leads to waste and permits poor economic models to persist for much longer than they should.’

Focus on selling So, with Brexit negotiations likely to create uncertainty for quite some time in the business world, instead of spending all your efforts on pitching to investors (and believe me this will sap a lot of your time), I’d strongly advise you to take control of your own growth by instead spending that valuable time on attracting new customers. In fact, my experience is that a clear focus on selling can allow you to make sales, take control of your own growth and increase your top and bottom lines. This sales focus essentially creates a ‘self-funding’ model which can enable you over time to:

  • ​Create a business that's attractive to investors or potential buyers because it has robust revenues and solid profits

  • ​sleep well without worries or pressures from venture capitalists (VCs) because you have the tools, knowledge and confidence to scale up your business organically

  • ​grow and exit (if that’s your intention) on your own terms and retain control (and your precious equity) along the way; and

The Scale-Up Report from The Scale Up Institute specifically mentions the critical importance of sales as part of its six-point plan and best-selling author Daniel Priestley also states: “Very few businesses survive long-term without an exceptional sales approach; the biggest brands in the world such as Google, Facebook and Microsoft employ armies of sales people and spend millions on training them.”

Founder Selling - the first step to scale up

So, a focus on selling could be a game changer for you, but what practically is the first step if you want to adopt a ‘self-funding’ model and take control of your growth? Whether you believe you are a ‘natural’ salesperson or not, a first positive step is for you and your fellow directors to step up to the plate and do some ‘founder selling’. My experience is this approach is effective because you are the founders with the inspiring vision, the guys with the passion, and that passion is a powerful tool to inspire people to buy your products and services. Believe me, your potential clients would rather meet you (than some hired ‘sales director’) as a founding director to hear your passion first hand, find out why you set up the business, what your vision is and why you believe you can add value to their business. Even if you have already started building a sales team, your top prospects and clients will still be keen to meet up with you, so don’t make the mistake (like many founding CEOs) of feeling like you need to keep scurrying back to your PC to make a ‘dent in the inbox’ as you feel ‘my job is to run the company’. The best of the best entrepreneurs always make time to get out there to passionately sell their vision to anyone who is prepared to listen! And don’t worry, there will always be plenty of prospects and clients to share round with your sales team, so everyone should be happy :-) In my next post, I’ll explore in more detail how you can channel your passion using Founder Selling to help you scale up faster and further.

Gordon McAlpine is an entrepreneur, author and mentor For further detail on this topic, Scale Up Millionaire by Gordon McAlpine is available on Amazon

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