You may think that becoming rich must be the prime motivation of every entrepreneur. But the reality is that people start businesses for all kinds of reasons: some just can’t be happy unless they’re in charge; the ability to fashion a bespoke work environment is important to others; sometimes there’s a need to nourish creativity; or there’s a desire to make a difference, and some people even become business owners by accident. Of course, making money is always lurking about, frequently trying not to be noticed, but other times explained away as being necessary to perpetuate a lifestyle, maintain a mission, or fund a creative endeavour.
Sadly, not focusing sufficiently on appropriate long-term strategies makes it difficult to sustain a business.
Between 500,000 to 700,000 new startup businesses are launched in the UK every year, according to the latest government statistics. A fifth will likely fail within their first year, and three-fifths won’t make it past three years of trading.
Part of the problem is that three-quarters of businesses in the UK only employ the founder(s). They simply do not scale. In fact, only 8,000 businesses have scaled to the point that they employ more than 250 people.
Why do so few companies manage to scale and sell?
The majority of companies fail to scale and sell because they don’t start with the exit in mind. Usually, an entrepreneur comes up with a great idea. Perhaps they’ve spotted a gap in the market or an issue they are able to solve effectively. They develop their product(s) and put it out in the market, expecting organic growth. They see some revenue but only enough to tread water, so they remain a small business and make it their day job.
By starting with a longer-term view in mind, entrepreneurs can take their journey further. They can scale the business, develop a name for themselves, and then sell on, gaining seed money for their next venture as well as a payoff for their hard work.
So, why don’t more entrepreneurs start with the long game in mind?
They don’t know how
Know-how is important to navigate legal, compliance, and fiscal management, for example. This know-how is more accessible to those who have completed an MBA or other business degree, yet these courses don’t teach entrepreneurs how to be different. On the flip side, those without the advantages of a degree might have a better, hungrier mindset but often won’t have the know-how.
Getting bogged down in the weeds
To keep the horizon in view, entrepreneurs need the right perspective. It’s impossible to gain that perspective when they’re overly involved in the minutiae of the business operation. It can be hard to let go of the reigns but, ultimately, it’s essential to trust other people and delegate to maintain perspective and grow.
No coach or mentor to hold them to account
Human beings are great at coming up with reasons not to take action. Explaining these reasons to someone else, however, often shows them to be the excuses they are. A good coach or mentor will both hold the long-term plans to account as well as help maintain a sense of perspective that can otherwise get lost.
Lack of ambition and/or confidence
Some have never considered scaling and selling their business; others don’t think they have it in them to successfully scale and sell their business. As such, they’ve never had an eye on the long-term plan and won’t take the necessary steps to make it happen.
They just don’t want their business to grow beyond a certain level
Some entrepreneurs are simply attracted to self-employment. They only want to earn the equivalent of a good salary with all the flexibility that being their own boss offers. Scaling and selling is hard work and contains an element of risk that some entrepreneurs don’t want to engage in.
Entrepreneurs who want to scale and sell their businesses need a shift in mindset. Rather than seeing the business as a lifestyle choice (an extension of themselves), they need to separate themselves from their business.
An expanding business is twice as likely to survive. So, how can that be achieved?
Real role models
One of the most important things we need to change is getting real role models to share their stories and experiences. The UK, like much of the world, has become obsessed with the cult of celebrity. We look up to and admire superstars, like the entrepreneurs on Dragons’ Den. The problem is that they are a few in a billion, making successful entrepreneurship seem like a winning lottery ticket.
Most successful business leaders aren’t on television. They have quietly walked a successful path to prosperity and now keep a low profile enjoying their wealth. These are the role models we need to hear from, not celebrity entrepreneurs.
Even those who have studied business or entrepreneurship struggle with knowing how to scale and sell their companies. Their go-to is often to seek an investment with a fancy pitch deck. But seeking investment means selling part of their business (often more than they want) at an early stage, reducing their incentive and drive to make it successful.
For those without a formal education in business, it can be even harder. They might have a hungrier, do-or-die attitude, which can be very helpful in growing the business without investment, but they are likely to get stuck along the way.
Better role models and more conversation around scaling and selling will definitely help develop know-how as well as demonstrate that investment isn’t always the best option. We can also try to improve access to educational resources, whether formal or informal, to provide some of the more technical know-how.
A shift in conversation
There is a lot of conversation around starting a business, which is a difficult stage where reading and researching do help. So, it makes sense to have conversations about how to start a business.
What gets neglected, however, is the conversation around scaling and exiting a business. In fact, this should all be part of the same conversation. Scaling and selling need to be on the horizon from the outset to spot and capitalise on the right opportunities.
Starting with the end in mind forces us to think differently. Rather than seeing the company as being an extension of oneself, it becomes a product that can grow with the marketplace and be sold when the right opportunity comes along.
Fiona Hudson-Kelly has built two businesses and sold them for life-altering amounts of money.