When it comes to scaling up, age is nothing but a number. Natural beauty and vegan firm Faith in Nature was a 38-year-old business when founder Rivka Rose appointed chief executive Joy Parkinson in 2012 to use her blue-chip consumer goods background to accelerate growth.
“Rivka needed new, outside skills,” explains Joy, who has previously worked for some of the UK's leading brands. “I brought in a new senior sales, marketing and finance director to develop us from a leader in independent health food to a national retailer presence. It took us three years to launch into Holland & Barrett, and in the last two years - after we invested in a brand redesign - we have launched into Boots, Sainsbury’s and Waitrose.”
The company grew from a £2 million turnover to £5 million in 2018 and £10 million today and it is even eyeing up £20 million turnover by 2023.
Mouse or gazelle? GAZELLE!
Graeme Quar, scale up specialist at business advisors Elephants Child, says Faith in Nature has turned from a mouse into a gazelle. “Mice businesses cruise along making money whilst gazelles, or scale ups, grow fast and create a disproportionate amount of wealth and employment,” he says.
According to the ScaleUp Institute there has been a 23% rise1 in the number of UK ‘visible scale up’ firms to 5,4562 in the past 12 months. Defined by the OECD as businesses with average annualised turnover and/or employment growth over 20% over a three-year period, they contribute £1.3 trillion3 to the UK economy.
“Gazelles aren’t just trendy tech firms, they can be from any sector,” adds Graeme. “You can be a start-up or a firm like Apple, which for its first few years grew at mouse-like pace and then, after inventing the iPod, took off.”
Four key drivers
The owners he advises on scaling up are encouraged to look at four key areas – strategy, execution, people and cash. “Strategy is clearly defining and targeting where you want to be in, say, three years, your vision, core customer and products,” he says. “It means weekly meetings and setting quarterly targets. So, developing a new website in 90 days rather than a year, or chasing customer payments promptly, or rolling out new products without delay.”
Execution means developing consistent processes from sending out quotations to dealing with invoices. “Good process leads to quicker decision making,” says Graeme. People means “getting the right people on the right seats going in the same direction”. He adds: “Keep or hire A players and train your B players up.”
With cash it is about tighter financial management. “Growth sucks cash because you are spending on new hires and technology and there is a time lag for that return on investment. So, send your bills out one week quicker and chase invoices harder. You also need to consider funding growth by invoice discounting, bank loans and overdrafts,” Graeme explains.
Joy says strategy, people and communication have played a huge role in Faith in Nature’s growth. “We’ve added depth and breadth to our team and invested in machinery because demand was blowing the roof off our factory.” she says. “We’ve set very clear and visible targets, consistently communicated in monthly team and individual briefings. We explain what we are doing and why.”
It’s also about responding to signs of strain. “Tremendous 75% growth this year meant we had to play catch up on capacity and our service levels dipped. But we have invested in putting a second shift on in our factory to get through it,” she adds.
Faith in Nature also has two non-executive directors with a marketing and finance background to help them cope. “We are open to anyone helping us,” Joy says.
Help and advice
Where then can owners go to help them spark growth? They can speak with their St. James’s Place Partner to find out how the Entrepreneur Club can help plan for growth. In addition, they can look to mentors, non-executive directors and peer-to-peer networks.
When it comes to investment, owners should look at angels and venture capital as well as funds and Government grants. The ScaleUp Institute has mapped around 194 UK programmes dedicated to fast growth. “We are seeing increasing evidence of programmes that help tackle scale-up challenges, such as access to talent, markets, leadership capacity, finance, and infrastructure,” says the Institute's Stuart Rock.
The right mindset
He says good programmes have a clear structure focusing on developing individual leadership capabilities, confidence and knowledge. Graeme agrees that a leader’s mindset is key to scaling success. “Some owners find scaling up too much of a rollercoaster,” he says. “But for others they enjoy the challenge and excitement. It’s like being a start up again!”
Please note that angel and venture capitals are unlikely to be the first option for raising finance, as there will be conditions attached to any agreement reached, which by their nature will be more onerous than those imposed by a mainstream lender. Please be aware that these schemes are only suitable for sophisticated investors willing to take a high risk with their capital as there is a risk an investor may lose some or all of their capital if the company invested in fails.
1,2,3 The Scale Up Index 2019, the ScaleUp Institute
The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management.