What is holding back our business growth in spite of having high scalability? The quantum of scale-up is not getting reflected in growth? Should we have put in place, a few fundamentals before heading for a scale-up? These are some of the critical questions that are always playing on the mind of Leaders & Management of high-growth firms.
According to research, The research found that 74% of fast-growing Internet high growth companies fail due to premature scaling (scaling before being prepared for it), and 93% of high growth companies grow but never cross the $100k-a-month revenue threshold. Data shows that 70% of tech companies fail in their 20th month of initial funding. In the absence of financial assistance, companies cannot sustain their own growth and go bankrupt. (Read the HBR feature of Why your startup won’t last, Dec. 2019). Additionally, if the fundamentals & requisites for the next level of growth are present, then the high-growth companies are able to enjoy growth 20 times quicker.
From the above stats, it is evident that a common mistake, many of the high-growth firms end up making is they go for a scale-up even before they are ready for it. Without proper preparation and focus on the right elements, rapid growth, in most cases does not hold up, inevitably leading to either of the 2 situations – the high growth firm remains in a continuous flux of taking a step ahead & going backward by at least 2 steps (plateauing of growth & diminishing rate of returns) and/or all of it comes crashing down, like a house of cards.
For a firm to translate scale-up to a growth metrics, it would need to get a few things right in the following dimensions (not in the order of importance):
- People & Culture – Building & growing the A-team & Organizational Culture
- Strategy – Setting Vision, Goals & Growth plans for short term & long term
- Execution – Ensuring operational efficiency, alignment & innovation with having the right systems & processes in place to get the job done & on budget.
- Financial Stability – Aligned Cash flow, balance sheet & real-time financial data
- Leadership Development – Continuing Leadership development of key people & teams
So, what’s the most challenging part here, post knowing the above factors as pre-requisites to optimize scalability. It is having a clear & defined strategy in place to manifest the above factors, maximizing the chances of scale-ups creating tangible & sustainable value.
Take The Brew’s Scalability Maturity Index to see where your company stands in readiness for scale-ups & building a strategy post the diagnostics to drive sustainability & more value out of it i.e. sustainable scalability.