When starting a business, nothing is a given. The oft-cited start up failure rate of 90% goes to show the treachery of the waters of entrepreneurship. Building a business that manages to scale up to $10 million in its fifth year of revenue is even harder — only 0.5% of enterprises manage to do it.
“The Italian way of growing a business revolves around hard work and a lot of it,” says Gianluca Bernardi, a designer, and entrepreneur. “But hard work alone will not be enough to scale up a business.” To help budding entrepreneurs out, Gianluca Bernardi shared three pro tips for scaling up a business.
Maximize Cash Flows Early On
Different types of resources are used to fuel a business’ scale-up, and money is one of the most important — and most fickle. “Too many things can go wrong when it comes to money,” explains Gianluca Bernardi. “Entrepreneurs might fail to secure funding, keep the costs down, or allocate it where it’s used most effectively.”
A business that doesn’t want to have money as an obstacle in their scale-up needs to maximize their cashflow early on. Securing funding — including backup sources — is a good step, as is adopting a profitable pricing policy and applying for grants. To fully maximize the cash flow, however, entrepreneurs also need to optimize the expenses by keeping the costs down while looking out for any tax breaks that might apply to a growing business.
Invest Heavily into Market Research and Product Development
A mismatch between a product and a market is one of the most common reasons a business fails. Entrepreneurs who are too eager to place their product might overestimate the demand for it or its quality. Or, they might simply offer it to a completely wrong segment of the market. These issues need to be addressed before a business scales.
The first step should always be to make sure that the demand is there to stay. “Even though there might be some demand initially,” says Gianluca Bernardi, “there needs to be enough demand to justify the scale-up.” The next step would be to make sure that the product offered can fulfill that demand.
Have Experienced Entrepreneurs in Charge of the Scale-Up
Scaling up a business requires a different skill set than the one needed to run the day-to-day operations, or create products or services. Entrepreneurs might not necessarily have those skills, but they might also be too protective of their business for its own good.
“Some entrepreneurs might be too precious with their business,” explains Gianluca Bernardi. “Having someone who is invested into it on a different level, and who knows how to grow business, is the best way to secure good leadership during the scale-up.”
For parting advice, Gianluca stressed that growth is a natural part of running a business. “A business that doesn’t grow stagnates and dies,” he said. “Entrepreneurs should know that the only way to keep the business alive is to keep it growing.”