The challenges of scaling
Read time: 6 mins
Though the aim of a technology business might be to scale, founders may find themselves caught out by their own success. When a company finds itself scaling at speed, taking care of the day-to-day running of a business whilst pursuing new opportunities can leave founders stretched thin.
We invited four professionals to consider the challenges founders face when scaling and how an advisory service can help…
Daniel Pike - Co-Founder at SuperCarers
Gary Dolman - Co-Founder of Monzo, Advisor and Start-up Mentor
Andy Huddleston - Partner - London Business Services & Outsourcing at BDO
Adam Baron - Associate Director of M&A Growth Advisory at BDO
From the founders: What are the main challenges of scaling?
For many start-ups and scale-ups, the main challenges are tied into the business cash flow and the difficulty of finding the right talent.
‘The first problem is funding. As a start-up you are cash constrained in the beginning – that’s just the reality,’ says Pike, co-founder of SuperCarers, a platform that connects people in need of care and their families with home care providers.
He believes that once you have the right backing in place, the effort shifts to finding the right talent to drive the business forward, focus rather than just hiring to fill roles. ‘Businesses like ours succeed because the people we hire exceed our expectations,’ Pike explains. ‘You have to find the out-performers who will grow with the business.’
Even with the best planning, the search to find flexible talent with the right mindset can become a pressing issue quickly. ‘In our case, when we started Monzo, there were eight of us and some PowerPoint slides,’ says Gary Dolman, co-founder of Monzo and now start-up mentor.
"Things started reasonably, but when we launched our prepaid card, the business suddenly took off."
The sudden need for more product led to a scaling crisis. ‘The demand exceeded the supply to the extent where we couldn’t print and distribute the cards fast enough. We had to rapidly scale because we needed people for our customer support team to deal with the quantity of customers who wanted the cards.’
The most significant hurdle was hiring talent, whilst not losing focus on the demand at hand. ‘The biggest difficulty we had was finding the talent, onboarding them and training them, whilst also doing the day job.’
From the founders: How have the challenges changed over time?
The immediate need for professionals that could flex with the scaling process often gives way to a need for a company culture. Pike says: ‘Over time, as headcount grows the importance of communicating the business’ values and making sure everyone is pulling in the same direction and share our culture increases. Being a mission driven business it is even more important for us that new people understand this because we will only be successful if our people focus on quality of the product and service we deliver first.’
‘Employees have to believe in the vision and purpose of a business, as well as the more fundamental things that form the culture of an organisation. Identifying smart people that fit with the culture we want to build can still be hard, however,’ Pike adds.
From the founders: How do advisory services provide value to tech businesses?
Pike says: ‘We have participated in various accelerator programmes before. Corporate services-style support is really valuable, because it helps us to build the partnerships and the profile of the business.’
‘Being a new business we spend a significant proportion of our funding on building our brand and the associated goodwill to drive acquisition. Having the pre-established relationships, experience and network of a business such as BDO can help us to expand and explore new partnership opportunities,’ he explains.
The ability for an external agency to help with business focus and scaling takes the pressure off of busy founders. ‘BDO helped us to scale when the finance function was only myself, or me working alongside a treasurer. BDO took a lot of our finance functions on, which allowed us to scale as we no longer had to manage the running of those processes. It was better than hiring a whole new team, as we could use the BDO team on a part-time basis to help us when we needed it to do the basics,’ Dolman says.
From the advisors: What challenges do your clients commonly experience?
For many businesses undergoing growth, the problem is often not that the business is unable to scale, but that it is unprepared to do so within a short time frame. Adam Baron, Associate Director of M&A Growth Advisory at BDO, says: ‘We find that companies that are in a high-growth trajectory tend to scale too fast. They need support with bandwidth, as the management team often need to take time out to front a fundraise or interview key hires. Their financials can take a dip as a result’.
To avoid this, advisory services give a view on the search for talent. ‘We also understand that when companies are growing, they may not have all the key management positions in place, because they have grown at such a pace,’ Baron adds. ‘We’re able to help businesses evaluate if they need interim staff and help them make it happen.’
Andy Huddleston, Partner at BDO, says that the key thing for founders to remember is that they can’t do everything themselves. ‘If you're a founder of a business that is on the cusp of scaling, if you try to do everything yourself, then you will almost certainly fail. Everyone knows that entrepreneurs are busy, and they wouldn't have got the business to that point without lots of hard work.’
‘But part of scaling is recognizing that you need to focus your time on where you can add most value,’ he elaborates. ‘Then, you can outsource or bring in new layers of management to help in areas where you do need support.’
The preparation process can – and likely should – start before an advisory service is contractually involved. ‘We do this even before we’ve engaged with the client. If the business needs the right management team to get them through the process of scaling, we’ll tell them and help them before engagement even starts and even help to introduce them to and interview the talent,’ Baron says.
From the advisors: How can companies counter these challenges?
The main ways in which businesses can guard against the drawbacks of scaling are forward planning and relationship management. Baron says: ‘A lot of the issues that these types of businesses face is growing too quickly without having planned for it. Making hiring plans in advance of when you need that personnel helps founders to retain their focus.’
Huddleston also believes that having a clear strategy can help ease the load on founders. ‘You’ve got to make sure you’re prioritising areas that are core to growth,’ he says.
"Every scaling business will have many opportunities to pursue across different customer segments, product developments, geographies and more, but you have to keep in mind that the critical path to growth is to conserve your resources."
From the advisors: What advisory services are available?
Though many founders might think that advisory services only cater to the main financial function of business, there are a myriad of ways in which advisors can assist in the scale-up process.
‘We can advise on all facets of the finance function internally, or offer support as an outsourced finance function,’ says Huddleston. ‘But we can also help with overseas expansion into new tax territories, finding new funding, and generally being a sounding board for founders who are trying to balance managing the existing business whilst maximising the opportunities ahead.’
The added benefit of having an advisory service help with scaling is the ability for founders to draw on the advisors’ network and prior work. Baron says: ‘My team can help smaller businesses raise Series A, Series B funding and more. We know what we’re good at and that’s positioning a company in the best light for a successful raise. We don’t pretend to be sector experts, but we do have more experience of tech and tech-enabled businesses. We can draw on our experiences and our relationships with teams we’ve worked with, as well as the market leading sector expertise within our M&A team which includes former FDs from blue chip consumer companies and even former surgeons to create a “virtual” team for our client’s needs and particular market.’
‘Not only can we help with the drilling-down of the numbers and the establishment of the right team, we can also float their business concept to investors we’re connected with. All of these processes could even happen before they’re officially on board, so by the time they sign on, their business looks appealing and we already have four or five investors who’d like to speak to management. We believe our value really comes from the way in which we prepare teams giving a more bespoke offering to each of our clients’ Baron explains.
From the advisors: When is the right time to engage an advisory service?
‘It depends who your advisor is and how much goodwill they’re going to show you,’ Baron explains. ‘For example, we’re happy to start speaking to a business up to a year before they sign engagement letters, just to keep close and help them prepare in the right way with adequate infrastructure. When they’re ready, we introduce the opportunity to relevant investors. Not every advisor will offer this, but there is no harm in reaching out.’
Looking to scale your business, or want to know more about BDO Drive? Get in touch by emailing [email protected].
This insight has been compiled with expert input from:
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