‘Scale-ups’ are those companies rapidly increasing their turnover, profit and recruitment. They need to have increased turnover year on year by at least 20% in the past three years. For founders and companies wanting to emulate the hundreds of companies achieving this exceptional growth, there are a few important things to consider.
The biggest challenge for businesses hoping to expand is raising finance. 35% of Irish businesses* have tried and failed to secure finance and Irish businesses still gravitate towards banks for funding. Since the recession in Ireland in 2008/09, banks have tightened their belts and rejection rates for Irish SMEs have been high. Luckily for business owners, there are plenty of other funding options.
Knowing your target market is crucial to success. A business must consider the breadth of their addressable market when looking at whether they can scale effectively. One of the key difficulties new and emerging businesses face is established competitors in their sector or niche.
Angel networks, venture capital and private equity are making their presence known in the Irish market. The traditional method of bank loans and overdrafts are slowly but surely being replaced with new, alternative sources of funding. Venture capital is normally provided in the early stages of a fast-growing business’ expansion. This means higher risk but higher potential rewards for the investor.
Can you scale up?
Firms making steady profits and performing well in their market are good candidates for scaling up. Expansion has many costs and risks attached that business owners need to consider. Can they make a good return on the cost of expansion? Planning and forecasting is key to the effective management of a business expansion. The more detailed your plan, the more likely your expansion will run without issue.
* “Dream Bigger: Funding Ambition”, Smith & Williamson research, June 2019