The Must-Do Steps for Startups to Scale Up

Aldagh McDonogh 24.05.2016

I remember a challenge that I faced first hand way back during the dot.com boom of the late nineties and early noughties, when I worked with a couple of other guys to set up an online recruitment software company, Jobpartners.

In order to progress beyond the garden shed where we got the product up and running, we really depended on some specialist advice. We found this in tapping into an advisory board of people who were much more experienced in the business and finance world as well as the industry we operated in!

Now I find myself giving advice to new businesses being pioneered by a new generation. It is generally true that the most successful start-ups-come-scale-ups combine the energy and ideas of young trendsters with the wisdom and experience of oldsters…even ones like me!

Growing without pains

Small is beautiful, so they say, but most start-up companies want to remain beautiful as they scale up in order to expand market share. One of the biggest challenges they face is keeping their personality while recruiting new people with the requisite skill sets. This is something we experience more and more at Morgan McKinley as exciting young and growing companies, very often founded by young, technically gifted entrepreneurs, turn to us to help them to locate suitable talent.

In this and subsequent blogs, I would like to share some of my observations of the difficulties that arise in making the transition, with a particular focus on recruitment issues.
Probably the most important lesson is that you should not even try to scale up until you have at least 70-80% successfully completed the start-up phase. 

Don’t try to run before you can walk

Many successful start-up companies try to scale up before the basics are in place and fail for a number of reasons, including lack of second round finance, lack of market testing, having inadequate technology and systems in place and failing to get the message out through the right channels. Until you have cleared these hurdles you will be relying on your own hard work and long hours; but once you can see the light at the end of the tunnel, along come a new set of challenges.

Start-up companies are typically run by great visionaries and entrepreneurs (architects) but lack people who can execute (builders). In particular, entrepreneurs in the online and mobile space are great at developing technology, and have no problem identifying other individuals who can do the same. But they are often poor marketers and communicators and can make bad choices when it comes to recruitment. Sure, they can preach to the converted, winning the first few clients, and word of mouth is the best advertising. However, word of mouth does not scale. Today, it is essential to build a strong online and social media presence through good content and contextual marketing.

"When you are in scale-up mode, you should aim to outsource anything that is non-core business."

Don’t over-recruit when in scale up mode

On the other hand when you are ready to scale up it is also a mistake to over-reach yourself. For example it is a temptation to over-recruit permanent headcount: When you are in scale-up mode, you should aim to outsource anything that is non-core business. When it is essential to recruit in-house, you must be very careful to select only individuals who are flexible, multi-talented and the perfect fit for your business.

Perhaps the most important point of all: You need to be able to let go. You need to get to the stage where your business can function without you! Many entrepreneurs are highly driven egomaniacs and find it very hard to let go, ever. The start-up may have been your brilliant idea, but now you must rely on others not just to do the legwork but to come up with the ideas and initiatives that will carry the enterprise forward.

"Perhaps the most important point of all: You need to be able to let go."

If a start-up was a person?

One way of looking at it is to make an analogy between a company and a human being. A start-up is rather like a child. A bundle of energy, ready to learn, able to pick itself up quickly each time it gets knocked down. But hugely dependent on the wisdom of parents, teachers and others who care for it.

A company that is in its first scale-up period is like a teenager. Still infused with energy, still learning, challenging the world of grown-ups while gradually adjusting to it. A period when it truly discovers who it is and what makes it unique.

Once you have successfully made the transition from teenager to young adult, you have to be ready to reinvent yourself. Perhaps the skills that you have acquired become redundant and your life takes a new direction. Or you need to make the transition from being a single person to being a part of a family. The point is that at various stages in your life you have to pause, take stock and give yourself a new platform for personal growth. Your circle of friends and business acquaintances will change. It is just the same with a company. The graveyard of companies that failed to do this is already full to bursting point.

"Look for people who are not risk-averse, who are willing to trade salary today against equity in a potentially high-growth company."

Who to recruit – and who not to

When transitioning from start-up to scale-up, you will obviously need extra hands on deck, but you must be very careful on whom you choose. You want to recruit people with experience but generally that experience will have been gained in a corporate environment where things work very differently and resources are available, so you have to manage expectations very carefully. Look for people who are not risk-averse, who are willing to trade salary today against equity in a potentially high-growth company. A lot of people think that working in a start-up will be “cool” but are then shell-shocked by the long hours and lack of support. This does not suit everybody. Even when I set up a company that was itself specialising in HR, I found it indispensible to buy in some expertise on screening individuals to ensure that they were the right cultural fit.

Chemistry set

You also need to be aware that the personal chemistry that made the start-up work might fail once you move to scale-up. You want to retain the entrepreneurial spirit to avoid becoming like the legacy companies you are competing against. This spirit might be embodied in one person but now most of you are managers and leaders of teams. A great example of a company that managed this effectively is SalesForce, with Marc Benioff the public face of a really well-managed organisation founded in 1999, that took on the likes of Oracle and SAP and is now worth billions! So it is possible!

At Morgan McKinley we help companies at all stages of their lifecycle to recruit the best talent for their unique needs and cultures and so if you need a hand just let us know!

Transformation Director
amcdonogh@morganmckinley.com