Posted on December 10, 2018
What is common among top firms such as Amazon, Starbucks, Facebook, Apple, LinkedIn, Domino’s Pizza, Dell, and Zara? The answer is Scale Up! All of these companies achieved supersonic growth to reach the impact and sustainability they are at today.
By definition, a scale-up company is one that has an average annualized return of at least 20% in the past 3 years.
We can break down the lifecycle of a company by 3 major phases, the formation, the validation, and the growth.
In this article, we will focus on the growth phase by providing critical tips to be able to survive this tough period. So here are 5 tips to scale up your startup.
Reinforce your core foundations values, mission, and BHAG (Big Hairy Audacious Goal). The core should be activated in all the company and should be aligned with the strategy, not just the words posted on the walls.
From our experience, you will have to act bold by removing whatever slows down the fast growth including non-profitable products/services or non-performing employees.
Whenever you start your business, you usually say “Yes” to everything even though you are not sure you will be able to deliver. When you want to scale up you need to concentrate on winning your niche which means rejecting everything that is not aligned with your scale-up goals.
Know your top strengths and your differentiation factors and double down on them.
For example, Zara’s strategic success was largely driven by its ability to keep up with rapidly changing fashion trends and showcase it in its collections within weeks, while maintaining high quality, trendy and affordable prices to the customers.
No competitor was able to be as fast and consistent as Zara, which allowed it to grow rapidly and get rewarded with a big market share and dominance in its sector.
Get “A” players by paying high and hiring less. Attracting and hiring the right people is very critical. These people will make or break your organization especially in the fast growth phase.
In addition, processes should be put in place with specific Key Performance Indicators (KPIs) in order to be able to measure, to identify operational waste and improve accordingly.
For example, in one scale-up implementation we supported, the customer support response time was one of the important KPIs for the online services which measure the time to reply to incidents to solve clients problems.
The most important execution rule is to have the executive team and managers aligned. Unhealthy alignment will compromise the scale-up. The execution should be implemented based on quarterly goals priorities.
In addition, fast feedback and regular meetings are highly important to listen to concerns and know where the challenges are in order to take quick corrective action.
From our experience, weekly meetings are one of the most important factors to highlight operational problems. A clear action plan with a person accountable for each task with a clear due date is to be done after each meeting.
Furthermore, make sure to celebrate your wins after each milestone to keep your people motivated and engaged to reach the end results.
Cashflow is critical during scaling up. Growth sucks cash. Based on our experience, you will need to have at least 3 months of operating cash available to weather potential storms.
Try to minimize your Cash Conversion Cycle (CCC) in order to have more cash on hands. CCC measures the duration of time for which each dollar is tied up in the production and sales process before it gets converted into cash received through sales.
For example, Dell was able to reduce CCC from 63 days to negative 21 days which means it gets cash 21 days before spending it on producing the laptops. This reduction in CCC increased cash drastically to fuel rapid growth.
In case you think starting a business is a tough experience, try scaling it up. It requires more efforts and more challenges to be solved. Nevertheless, now that you know the essentials, you can better plan your scale-up or get the help from experts to have a smooth experience and reach well-deserved sustainability and dominance.
About the author
Ziad Chemaly is the Managing Partner at Consulting Peak helping startups and existing companies to thrive in a highly competitive environment.
During his 14 years of experience, Ziad led several business transformations especially in his last endeavor where he led a scale-up by increasing the number of employees from 200 to 500+ and doubling the revenues of the multi-million-dollar entity. In addition, he was an engagement manager and operations manager in the information services sector where he had the opportunity to lead several projects for more than 300 clients totaling approximately 60M USD for large conglomerates and global industry leaders across multiple sectors including financial services, telecommunications, oil & gas. (Orange Telecom, Orascom Telecom, Ooredoo, Qatar Gas, BLC Bank)
Ziad is a Computer and Communication Engineer and holds a master’s in business administration (MBA) from IE Business School in Spain. His main hobbies are social work and teaching chess.