Scale Up: How To Take Your Business To The Next Level Without Losing Control And Running Out Of Cash

By Colin Mills

Plenty of books have been written on startups, but not much has been written about what happens next, when you want to scale and move your business into an advanced stage of growth: the classic “too big to be small and too small to be big” stage.

In Scaleup: How to Take Your Business To the Next Level Without Losing

• Language: English
• Publisher: Brightflame Books
• Release date: Dec 1, 2016
• ISBN: 9781988179131

Book preview

Acknowledgements

Writing a book is always a team effort, and this must be true in this book above most others! Thanks to all those who helped; however, extra thanks to:

Sara Daw, who encouraged me to write this book, after a failed initial attempt. Sometimes business founders like me get lucky in life, and when Sara joined me in 2005, I got very lucky. She is now The CFO Centre Group’s CEO, allowing me some time to do things like writing books, thinking about the future, developing other Liberti Group businesses, and visiting our CFOs & management teams around the world.

Rob Cuesta and his team at BrightFlame Books, who turned the manuscript into the book you’re now reading.

The FDs and CFOs who contributed with stories and anecdotes: especially, Richard Walker, Nick Thompson, Crispin Mardon, Martin Levoir, Stuart Spink, Martin Cartwright, Clive Gilham, Gary Pyle, David Roberts, Mark Richardson, Jeremy Walker, Bill Starr, Tom Rosa, Ian Young, Patrick Brooker and Steve Copplin.

The clients featured in our case studies and examples: Green Gourmet, DBI Group, Queensland Leaders, Foregenix, Corona Environmental Consulting LLC, Craster, Gift Universe, Audability, Fast Track Holidays, Jewers Grain, DRWakefield, and a number of other clients who wished to remain anonymous.

Lastly, my wife Julie, who not only gave me the encouragement to start the business in the first place but who provided the initial funding to pursue the dream.

Table of Contents

Acknowledgements

Preface

A Note on Language

Introduction

What Is A Scaleup?

Expert Interview

James Paulsen, Queensland Leaders Network and International Leaders

Chapter One

Why Scaleups Matter

Chapter Two

The Scaleup Problem: What’s Stopping You From Getting The Scaleup You Want?

Chapter Three

What Does A Scaleup Look Like From The Inside: The CFO Centre

Case Study

Craster

Chapter Four

The Emotional Toll Of Scaling Up

Case Study

Foregenix

Chapter Five

Resolving The Financial Headaches Of Scaleups:  An Introduction To  The 12 Boxes

Chapter Six

Operational Finance Levers

Case Study

Corona Environmental Consulting, LLC

Chapter Seven

Strategic Finance Levers

Case Study

Gift Universe

Chapter Eight

Business Support Levers

Case Study

Audability Inc.

Chapter Nine

Scale-Up Lessons For Success: From the Leaders Who Have Done It

About The FD Centre / CFO Centre

Country and Brand Contacts

Preface

When I started The FD Centre in the UK back in 2001, it was in many ways my escape route from corporate life.

Before setting up The FD Centre, I had been a corporate CFO for a number of years with a great income stream but a horrible lifestyle. Towards the end of my corporate life, I was CEO of a European business that had manufacturing operations in different parts of Europe and the UK. That meant a lot of travel for me: if it was Monday I’d be in Milan, Tuesday I’d be in Lyon, and by Wednesday I’d be thinking Where the hell am I? I have four kids and a mortgage, and never see my wife.

I decided to act before it was too late, and take back control of my life rather than being controlled and ‘owned’ by a corporation. That was my ‘why’: my reason for starting the business.

It’s the same for many people, and in our business, we call it a Freedom Play. I felt strongly that I wanted to do something I would enjoy, that I was good at, could earn money from and importantly had variety, challenges and was interesting. The idea was always to build a business, but it would take a few years to decide what that business should look like and what the business model should be.

Initially, I was trading myself as a CFO and doing the work. I took the skillset of a fully-qualified, fully-fledged, highly experienced CFO—in other words, someone who had been there, seen it and done it—and made it available to smaller businesses.

I saw an opportunity to take that CFO skillset and make it available to mid-tier businesses of £2m-£50m ($3m-$75m) that were looking to grow and scale up but didn’t need—and possibly couldn’t afford—a full-time CFO, but who still required that skillset for particular situations or on an on-going basis.

That phase of the business—me working on my own as a CFO-for-hire—lasted for about four years. Over time, however, I drew people in a similar position to me. It soon became very apparent that there were more CFOs than I realised out there who felt rather like me.

In 2005 I decided to test the marketplace and invited some of the people who had approached me to come and join the movement. We grew from one person to around twenty CFOs. By then, I had learned a lot of what to do and what not to do, particularly from a sales and marketing perspective. In 2006 we had our first conference, bringing together all our CFOs and at that time I seized the opportunity to turn what we were doing into a formal business. Over the next four or five years, we gradually grew the business and built up cash reserves of our own, which was the beginning of our own scaling.

In the last five years particularly, we’ve expanded the business throughout the UK and internationally. Our growth curve resembles the classic hockey stick: it took fifteen years to be an overnight success.

Today, we have 400 CFOs working with us in fifteen countries, across five continents. We have worked with more than 2,000 clients over the years, and we are still growing. 

Why I Wrote This Book

Our CFOs are making a positive difference in our clients’ lives. I know this because they tell us.

We regularly ask the clients for feedback on the experience of working with us. In our latest survey, 81% of clients rated us 9 or 10 (which correspond to very good or exceptional) and told us they would be happy to refer to other clients.

Beyond the numbers, however, I also know it from the comments I get:

This is the best-kept secret.

It’s changed my life.

I’ve added at least £1M million to the sale price of my business.

This cash forecasting has enabled me to sleep at night.

It is comments like these that inspired me to write a book for the mid-tier businesses because I noticed that not much was written from a practical, pragmatic view of scaling up. There were books written from an academic perspective outlining what you could or should do, but hardly any from a practical, real-world perspective of what does and doesn’t work.

Who This Book Is For

This book is for the founders, entrepreneurs, CEOs, MDs—those people who have overall responsibility for growing the business. Spoiler alert: I won’t just provide a bulleted list saying what you should do. What I’m going to do is share what works, codify it, then give it to you so that you can grow your business. I’m going to include real-life experiences and stories from our clients and from our CFOs so that you can learn.

And don’t assume that this is just about technology companies. The term ‘scaleup’ is most often associated with the sexy, high-tech environment, where many scaleups do happen and happen quickly. In this book, you’ll also find examples of companies in very traditional industries, with traditional business models that we’ve worked with, that have experienced some high growth and great results with the help of our interventions.

In a nutshell, if you are ambitious and want to grow from a startup, or you’re about to embark upon that journey, or you’re already on it but for whatever reason have become stuck; or you are keeping the business small because growing looks too hard, this is the book for you.

How To Get The Most Out Of This Book

To get the most value from this book, you need to know the current state of your company’s finances, so I’d like to offer you a free, confidential financial growth check for your business.

HOW DO YOU MEASURE UP?

Use the ‘F Score’ profiling tool to rate the performance of your company finance function and uncover untapped opportunities for non-linear growth…

www.scaleupbook.com/f-score

When you’ve finished, come back to the book and discover how a part-time CFO can truly be your company’s best secret weapon in your business scale-up.

On behalf of The CFO Centre Group of companies, I’d like to wish you and your company every possible success.

Colin Mills,

Founder & Executive Chairman, The Liberti Group,

The CFO Centre Group, and The FD Centre Limited.

A Note on Language

Within the company, we have debated long and hard on the use of FD (Finance Director) or CFO (Chief Financial Officer) to describe both the professionals that we put into our clients, and the company itself.

FD is the term used primarily in the UK and some Commonwealth countries to describe the senior executive who leads the finance function of a company. In the rest of the world, the term CFO is more common—and is more widely understood in countries where English is not the main language.

For that reason, I will use the term CFO to describe the role throughout this book.

When I set up my company, as I said in the Preface, it was called The FD Centre—it was a UK company serving UK clients. In many of the territories in which we operate, the local company is called The CFO Centre/Center, and our global brand is The CFO Centre.

So, from this point forwards, unless I am deliberately talking about a specific group company, I will use the name The CFO Centre to refer to all our companies, wherever they are in the world, including the UK.

By the same token, we spent many hours deliberating on whether to use UK spellings or US. In the end, since the company is based in the UK, we settled on UK spellings: so you’ll see organisation rather than organization, for example. The only exception is where I am quoting someone else’s words, in which case I used the spelling they originally used.

And finally: scaleup, scale-up or scale up? There is very little consistency in the literature, so I have adopted the following standards.

I refer to companies that are in the process of scaling up as scaleups (similar to the use of startup as the designation for early-stage companies).

When used as a description, I use scale-up (e.g. ‘during the scale-up stage’).

And finally, for the act of scaling up I use scale up (as in ‘when it is time to scale up’).

Again, however, when quoting other experts, I have used whatever spelling they used in their original work.

Introduction

What Is A Scaleup?

Scaleups, a Scaleup company or Scaleup is a business looking to grow/expand in terms of market access, revenues, added value or number of employees…..

—Albert Onetti

This book is about growth. Your growth. Or rather the growth of your company.

We all know what a startup is, and we all have a pretty good idea of when a company turns into an established, sustainable corporation.

Somewhere between those two extremes, however, a new class of business has arisen in recent years: the scaleup.

The scaleup is a business that has met the challenges of the early years company – researching its market, developing that market, and finding a scalable, repeatable business model. In the process, it experiences sustained, rapid growth and reaches critical mass: the point at which the directors and the shareholders know that they have built something with legs; the stage at which the company begins the move into an established and sustainable corporation.

Along the way, however, businesses run the gauntlet of increasingly severe challenges, mostly because they are growing but don’t have the necessary infrastructure to support their expanded operations. While on paper, they may have the revenue, the manufacturing base or customer reach of a substantial business, the culture, the controls, the processes, the personnel and the leadership remain those of a much smaller business that they were a short time before. Worse, they haven’t yet accumulated the resources to build and maintain that infrastructure.

The biggest danger in this period is that the business will either outrun itself or get stuck, like a deer in headlights.

Outrun, as the company spirals out of control and its cash reserves dwindle trying to meet the expanded demands of the business.

Or stuck, as the entrepreneur tries to cope with everything at once, frustrated that the problems he could happily once deal with—back when the business was smaller—are not being dealt with by the people he is employing, often at substantial cost.

This danger phenomenon has been well recognised previously. The coaching firm Shirlaws describes it as the Second Brick Wall. Their experience with hundreds of businesses all over the world is encapsulated in their Stages model (Figure 1), which they believe applies to every company, regardless of size or sector. When a business hits this Second Brick Wall, it’s clearly a crucial time for the business with only three options:

You can get through the wall, and take the business forward to advanced growth.

You get stuck, and the business plateaus (many businesses can stay like this for years).

You hit the wall, and your business declines and fails.

Stages Model

Figure 1: The Shirlaws Stages Model

This is a model we often use within The CFO Centre to capture the feelings of the business owner or entrepreneur as to where they are in the lifecycle of their business. It can give valuable clues as to the specific help a company needs to get through the second brick wall, move into advanced growth, and scale up.

Doug Tatum also recognises the key dangers of scaling up in his book No Mans Land – Where Growing Companies Fail. Doug describes how entrepreneurs dream of rapid growth yet so often fail to cope with the complexities of being Too Big to Be Small, and Too Small to be Big effectively getting stuck in No Mans Land.

Although Geoffrey Moore’s book Crossing the Chasm focuses particularly on technology businesses, he identifies a Growth Chasm post Startup and before Market Maturity. In essence, it’s the same scaleup challenge described above.

This scaleup phenomenon or, as I call it, the Scaleup Problem is revisited in more detail in Chapter 2. If your business is to grow and if you are to achieve Scaleup, it’s critical to understand what the problem looks like and what you can expect before you get there. Even more critical, if you are already there—and I anticipate many of the readers of this book are—it’s essential to recognise the reality of your current situation, as any major change has to start with the reality of where you currently are.

Scaleups Can Mean Different Things To Different People

The British Institute of Scaleups uses the following definition:

Scale-ups are enterprises with average annual growth in employees (or in turnover) greater than 20 percent a year over a three-year period, and with 10 or more employees at the beginning of the observation period.

As The Scale-Up Report on UK Economic Growth by Sherry Coutu CBE notes, this is the same definition used by the Organisation for Economic Co-operation and Development (OECD), Nesta and Endeavour, as well as many national and international statistics agencies. It has formed the basis of many academic studies on the impact of scaleups on economies.

This basis for academic study is fine, but when looked at from a practitioner perspective in the real world, I find it lacking. The Onetti definition stated at the beginning of this chapter, which I prefer, is wider in its coverage and focuses on a desire for sustainable growth. This emphasises the entrepreneur’s ambition and feeling rather than simply the statistic of what has been achieved. Looked at in this way, ‘scaleup’ provides a more meaningful context for entrepreneurs to connect to the idea of scaleup driving growth beyond startup and building a great enterprise over time. It also provides a more helpful framework for entrepreneurs who have stalled out, or who are stuck at