4 best practices established start-ups use to scale, then exit.
You are a few years into your start-up and you have built a company that is aiming to be successful long-term with a great product and a team of 10 employees, you are gaining traction and turning a profit – the future looks bright.
However, to scale up to 30 and beyond requires more than crossed fingers and a half made list as you fly through the night.
Here are 4 best practices established start-ups use to scale, then exit.
1.Hire for the future – not for now.
Hire the best and build a team with broad and complementary skills. Choose candidates who will fit in with your culture and can grow within a company that will expand to 30, 50 or 100 employees. You need them to be agile, to change roles, learn new skills and deal with change. If you can’t afford them, give them your best pitch – sell them the dream, show them your passion and do everything to get the best on-board. Nowadays good candidates who rock up for an interview are super well prepared. They have the credentials and the smarts to get through a great interview so get additional insights through a Psychometric test for the 2 shortlisted candidates after second interview. This helps ensure you find the perfect match to the profile for your role. Like all decisions – there is an element of risk in every hire – but combining a solid interview for the skills, competencies and cultural fit along with the data/science provided by the psychometric testing – should give you a good result. Don’t make do with second best. Your people need to be better than the competition — from billing to the board-room, from the lab to customer service. It’s not just about the smartest people, it’s also about the most flexible people, the ones with the attitude and cultural fit, collaborating in high-performing teams.
Now, you have the best on-board, doing what they do best, communicate the vision clearly and let them know how their work fits into the big picture and where their responsibility and authority lies, then get out of their way to allow them to function efficiently – relinquish the power and delegate. In many cases you chose them for skills that you don’t have. Being conscious of your own strengths and development needs, and requesting feedback is essential to learn and grow.
“It’s better to hang out with people better than you. Pick out associates whose behaviour is better than yours and you’ll drift in that direction.” Warren Buffett
2.Leverage, leverage, leverage, or die.
Systems, processes, automation everywhere. Start-ups are sometimes chaotic places. The team can spend a lot of time firefighting. They are also trying to land new customers, hire new employees, build new products and business owners don’t always make (have?) time for something that doesn’t appear to have immediate impact – such as processes.
To increase revenues and keep operating costs low, you need to decide which operations can be reproduced in a quick and cost-effective manner and which can be automated. You could start with simply automating Purchase Order approvals, annual and sick leave forms, time sheets, employee on-boarding processes etc. It may require investment in IT and training if you can’t do it in-house, but it also demands discipline, a commitment to measurement and reporting and the flexibility and relentless focus to drive efficiency. But sometimes it is just too easy to not change anything and keep doing things the same way as when you started out. But “winging it” isn’t going to bring you to the next level! You need to constantly ask yourself, is what we are doing essential for our core business? If it is not – stop doing it and impose more structure on your organisation.
A quarterly review meeting is a great way of looking at what you should stop, what you should start and what you should keep doing, based on analysis of the past quarter and prioritisation for the next quarter. This strategic focus on results for the last 90 days, major roadblocks or obstacles, strategic account planning and KPIs will in the end give you more time to focus on the most important tasks that will lead the business forward in a strategic way and help you stop saying “yes” to tasks that bring little or no results. In other words, “work on the business and not in the business” – it should be 80/20 on the business and not 80/20 in the business. Although you can have an “open door” policy and be available – protect your boundaries and don’t let yourself be interrupted when you are working on the business. Your most important job right now is scaling the business and not dealing with operations. You have hired others for that job. (Ask me about our CEO 90 minute “Reset for Results” workshop @ www.peopleandresults.ie).
3.Invest in your network.
According to Ernst & Young, you can “catalyse your companies’ growth by building and fostering critical relationships”.
Building the right connections is of critical importance to scaling your business to ensure long-term growth. Doing business revolves around meeting people and relationships – especially when you are trying to raise money. If you are a founder who has less than 500 connections on LinkedIn – work on developing your profile, marketing your company and get out and network with the right people – who will make a difference. Choose your networking events carefully – but no matter what networking event – you never know who you are going to meet and how beneficial that new relationship might be. The most surprising events are sometimes the ones where you make 1 or 2 very important connections – be they potential customers, a possible mentor or coach, or a future investor. So, don’t go for quantity – go for quality.
4. Succession planning is the path to successful exits
You now have a history of steady growth, stability, profitability, recurring revenue and value and you may be planning an exit. However, if you are the face of the business, you’ll need a management team with the right strengths and capabilities in place to be able to operate once you are no longer at the helm. As well as looking for long-term value, one of the primary assets for a buyer is the Human Capital of your company. As early as possible, you need to identify future leaders and create a personalized development plan for each of them.So, be proactive in terms of your succession plan. Research in the US shows that in fact only 63% of high net worth business owners have an exit strategy – and they are mostly Millennials and Generation X, rather than older owners.
At the beginning of your business, you knew how important a business plan was for the company’s financial success, now as you prepare to move on, you need a sound Succession Plan – it will be an integral part of your successful transition – one of the most important financial and personal events of your life !