How to Help Entrepreneurial Businesses to Scale.

Some entrepreneurial businesses have a vision to scale. However, as we all know, statistics say that 80 to 90% of all start-up businesses fail. There is a common thread here and by far the most frequent reason for failure is poor management, representing about 42% of business failures. The next most frequently seen reason for failure is the lack of a market need for the product, wherein the entrepreneur believes there is a market need but he has not validated this sufficiently before embarking on the production process.

The top one dozen reasons for failure are shown below:

  • Poor management
  • Lack of market need for a product
  • Insufficient capital from the outset
  • Poor planning
  • Not hiring the right people
  • Poor business processes
  • Lacking the cash to grow the business to reach critical mass
  • Lack of scalability of the business model
  • Insufficient awareness of competition
  • Not talking to customers enough
  • Poor marketing
  • Pricing or cost issues that make the business uncompetitive

This is the dark side of entrepreneurial businesses. So what should entrepreneurial businesses be doing to ensure that they don’t become part of the statistics?

Well firstly, the business owners/promoters should talk to lots of potential customers to discover if their product idea is something that their customers want, and that it is something that the customers would be prepared to pay for. They need to talk to lots of potential customers and make their decisions based on qualified and quality feedback. If the feedback is positive, then they should develop a low cost minimum viable product that addresses the articulated market need of the customers to whom they have spoken.

The prototype should then be tested with as many potential customers as possible, and if the feedback is still positive, then the product should be refined to reflect customer feedback and the saleable product should be created, provided that the financial return for the effort is adequate. If there is little or no demand for the minimum viable product or a derivative thereof, simply discontinue. Stopping at this stage saves a lot of heartache later.

If the product is a good one, and there is tangible market demand, then the product can be launched in its chosen market or test market. Success may mean survival and a lifestyle business for some owners but what if the owner wants to scale the business and generate wealth?

The owners need to be fully aware of their own strengths and weaknesses, as well as the strengths and weaknesses of their business model. They should continuously work at honing their model for success, while following already established core principals. Any gaps in the business should be identified and plugged rapidly. The owners need to not only identify what they must do, but they must also do each thing in the right order. This is called sequencing their strategies.

To grow the business effectively, the owners need to be able to reach escape velocity and get beyond the limitations that keep some entrepreneurial businesses below a glass ceiling. It is all about a strong belief in what they are trying to do, single-mindedness in approach, a clear understanding of their customers and the customers’ unmet needs, and getting the value equation right. Having a philosophy of continuous improvement will also help.

So what specific actions need to be taken to scale a business? There are several things that need to be built into the business model to allow the business to scale. Firstly, it must become predictable so that future revenues may be anticipated if the business is run properly. Secondly, it must be repeatable so that the business can be replicated in different locations and the same results can be achieved in the new locations. Thirdly, it must become replenish-able to allow fresh ideas, processes and products to be added to the mix. Fourthly and above all, profits need to be sustainable.

Once these elements are in place, the owners need to be able to take a step back without the business falling over. They must learn to delegate effectively so that the business is not dependent on their direct input. They need to ensure that business processes are built to facilitate repetition. Next, they need to automate as much as possible to allow the business to operate like clockwork. Finally, they need to be able to outsource any functions that don’t add any direct value to the business.

It sounds easy, right? Well it isn’t. That is why entrepreneurial business owners hire people like us. If they have the wisdom to know what they don’t know, then it will serve them to look outside of their business and to get the professional help that they need.

This article was partially crafted from ideas put forward by Jennifer Russell and Bryan Franklin –

Niall Strickland