We continually hear success stories of entrepreneurs who within a handful of years have grown and monetised their businesses, amassing vast fortunes in the process. But, the reality is that successes on this scale (especially in the UK) are rare and are often the brainchild of ‘geniuses’ who happen to ride the perfect wave and sell at the right time. I don’t think I’m a genius, and I suspect you don’t think you’re one either. Sadly, the statistics for normal people like us are stark:
70% of start-ups never reach a turnover of £300,000 a year
only 1% of start-ups ever exceed £7.5 million in annual sales
90% of business start-ups fail
Funding focus The current culture for most businesses keen to scale up is to focus on funding, which many entrepreneurs believe is an integral component of a successful growth strategy. This is a belief which may well have been imported from the Silicon Valley model of product & funding focus, which is trending in the UK tech scene. But Britain and Silicon Valley are not identical. I’ve recently spoken to several CEOs of ambitious UK tech firms who have confirmed the level of funding available in the UK is generally a lot less than in the US (a few million v tens or hundreds of millions). In fact, UK augmented reality start up Blippar moved to California last year to be closer to investors. Another question you should think about is - if you do decide to go for funding, do you believe that the money invested will necessarily drive growth? It’s important to consider that it might well drive growth if it is invested in pulling the right levers, but equally it might not and let’s not forget that it needs to be paid back at some stage. Everyone needs some seed/start-up capital, but funding is not necessarily the silver bullet to scale up your enterprise. Serial entrepreneur Luke Johnson 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 Instead of spending all your efforts on pitching to investors, spend it on attracting customers. My experience is that a clear focus on selling can allow you to take control of your own growth, close sales and grow your top and bottom lines. This sales focus essentially creates a ‘self-funding’ model which can enable you to:
create a business that's attractive to investors or potential buyers because it has robust revenues
grow and exit (if that’s your intention) on your own terms and retain control (and your precious equity) along the way; and
sleep well without worries or pressures from venture capitalists (VCs) because you have the tools, knowledge and confidence to scale up your business organically
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 is also a proponent of the power of selling: “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 to take control of your business growth So creating a sales engine to power your growth could be a game changer for you, but what practically is the first step if you want to focus on selling to 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 up and do some ‘founder selling’. You are the guys with the passion and by using a consultative selling approach combining a strong proposition, good questioning skills and your inspiring levels of passion you need to impress prospects and make those all-important sales. Once you’ve mastered this stage and the first few months of consistent, high-value sales are in the bag, you can then start recruiting sales people to give your scale up a serious surge of momentum. So, next time you feel that you need ‘funding’ for the first time or a subsequent round, stop and consider your options. Say you're looking for around £250k for a new intake of people and some more marketing spend - do you really need investors to provide that money in return for equity in your business? Or can you or your sales team go out and make sales revenue to that value? It’s your choice, but if you do go for the latter option not only will you protect your precious equity but you will also gain confidence in your own ability to drive your own scale up.
Gordon McAlpine is an entrepreneur, author and mentor For further detail on this topic, Scale Up Millionaire by Gordon McAlpine is available on Amazon