Paul Lancaster on the barriers of scaling businesses and how to overcome them
In the ScaleUp Annual Review 2019 recently published by The Scaleup Institute, the top five challenges and barriers to growth according to 509 scaleup CEOs surveyed are:
Access to Talent: The social and technical skills of their existing workforce and the inability to attract highly-skilled, experienced talent that can help them grow.
Access to Markets: The demand from scaleups for greater collaboration with, and the ability to sell into, the UK’s public sector, academia and large corporates is currently not being met. The knowledge of how to expand internationally is also a significant challenge.
Building Capacity Through Local Support: The need for higher quality leadership coaching, peer-networking and mentoring solutions, plus clearer guidance on how to access public sector procurement, private sector contracts and international trade opportunities.
Access to Finance & Growth Capital: The age of scaling businesses who do not think they have access to the right amount or type of finance has increased from 40 per cent to 60 per cent this year.
There are still huge disparities between regions with scaleups in London and the South East more likely to use equity finance - including equity crowdfunding. Half of all scaleups regard London and the South East as the region where the majority of this type of funding resides and, therefore, potentially harder for them to access.
Infrastructure: Scaleup leaders consistently cite the importance of suitable workspace and high speed broadband to their business as it complements all other factors needed for growth.
So on a macro level, 61 per cent of scaleups expect Brexit to have a negative impact on their business with one in four saying it will have a significant negative impact.
Only 11 per cent expect Brexit to have a positive impact on their business. Scaleups are highly international with half of them currently exporting outside the UK, and therefore they are particularly vulnerable to increased barriers to international trade.
Although the ScaleUp Annual Review 2019 shows that the North East has 27 per cent more scaleup companies than in 2016 and the density of scaleups is ahead of the national average, the region still has some major barriers to overcome if it is to compete on a national and international level.
The total number of people starting or scaling a business in the North East still lags behind most other UK regions, high-quality talent attraction and retention is still a major challenge.
There is not enough awareness of or access to experienced CEOs and business leaders with recent experience of ‘scaling up’ as most of these people or the programmes around them tend to take place in London.
Despite equity crowdfunding platforms being available to anyone, the knowledge of how to successfully raise through one is poor in the North East, and the opportunity to meet or network with experienced angel investors or VCs is minimal unless the CEOs and business leaders are willing to spend more time in London, Edinburgh or other major investment hubs.
Furthermore, although there are some amazing new workspace developments opening soon, I fear there are not enough freelancers, early stage startups, established micro businesses and SMEs to fill the current options available.
Some serious thought needs to be given into how to increase awareness of, and reduce the cost of what is available to get them all full and thriving.
There is a huge amount of time and effort already going into tackling each of the barriers above, largely funded through the North East LEP’s Business Growth Programme, so I would encourage anyone reading this to make sure they have taken the time to understand and engage with what is currently on offer.
From a personal perspective, I continue to respond to each of the challenges and recommendations outlined in the ScaleUp Annual Review 2019 by using it to inform the format and content of our fourth annual Newcastle Startup Week festival.
It will be taking place in multiple venues across Newcastle, Gateshead and other parts of the region between May 18 - 22, 2020.
2019’s event brought 800 entrepreneurs and business leaders from the North East, across the UK and around the world together to be inspired, collaborate and learn from each other how to start and scale their organisation.
If you want to scale up, you need to be there in 2020!
Follow #ScaleupFocusWeek on Twitter and get in touch @Bdaily with any questions you have.