Signs Your Business is Ready to Scale Up
Signs Your Business is Ready to Scale Up 1 1 RAISE fosters startup growth and scale-up within and across Europe

Knowing when to scale up your business is always challenging for entrepreneurs. Scaling up is never easy, as it is expensive, disruptive and can present numerous challenges. However, when the timing is right, many business owners do take the plunge and pursue new avenues of growth. Every step taken in scaling up must be strategic and well-planned. This article outlines six signs that indicate your business is ready to scale up.

Firstly, if your business is constantly exceeding its targets, then it is likely on an upward trajectory, and it might be time to set new goals for the company. Additionally, if your business is generating positive cash flow, you will have the financial security to cover the costs of expansion or growth, such as hiring new staff or acquiring new resources or tools. Furthermore, developing a skilled and trusted team is necessary for any thriving business, and if you know your team is capable of driving the company forward, then it might be time to take the next crucial step.

Moreover, acquiring and retaining clients takes a huge amount of hard work, and it is crucial to ensure that your client base is strong and reliable. If you have established a firm client base that is loyal and returning to you in spades, then it is a sign that you might be ready to scale up. Also, turning down business is a sign that your business is on shockingly shaky ground, and you might need to upscale with enough pre-planning.

Finally, your business must have a reliable infrastructure before scaling up. Risks are necessary to take in business, but only if they are necessary. So, if your team has smashed its targets and your profits are up in one quarter, that doesn’t mean you should necessarily take that as a sign to scale up.

Bloomberg Línea: 2023, a challenge or an opportunity for entrepreneurs to scale up?
Bloomberg Línea: 2023, a challenge or an opportunity for entrepreneurs to scale up? 1024 683 RAISE fosters startup growth and scale-up within and across Europe

Bloomberg Línea spoke to experts and entrepreneurs of European companies with a presence in Latin America to identify the five main challenges they face and what will determine a business’s ability to secure venture capital.

Innovation-driven companies, including both startups and established companies, called “scaleups,” are facing a difficult year. This is due to widespread layoffs in the technology industry globally, and the current economic climate of rising interest rates, high inflation, and lower demand, which will result in less available funding. As investors become more cautious, these companies must come up with strategies that prioritize their project’s viability. 

Scaleups are companies that have achieved a certain level of success and are now looking to grow further. They typically have a proven business model, a large customer base, and a team of experienced professionals. Scaleups are often differentiated from startups in that they have a more established presence in the market, and are more likely to have access to capital, a more mature product, and a larger customer base. Scaleups are in a unique position to take advantage of the current environment of low capital, as they have the resources and experience to effectively manage their growth.

A Dynamic and Evolving Environment

This presents both a challenge and an opportunity, according to Joan Riera, president of Active Development and a professor at ESADE Business School. He thinks that there’s no better time to start a company. In this environment, startups are more flexible and quicker in making decisions and adapting to changes. Riera has started 12 companies during his career, many of which were founded during times of crisis.
Alejandro Gutiérrez-Bolivar, co-founder and CEO of Ladorian, a provider of digital point-of-sale advertising in Europe and Latin America, shares this view. He says, “This will be a year for those with an entrepreneurial spirit, for those who know how to navigate uncertainty.”

More Costly Capital and Less Investment

The current macroeconomic situation is not favorable, with central banks worldwide raising interest rates and consumer purchasing power declining due to high inflation. This has reduced the capital available for investment, and supply chain efficiency is another challenge for 2023.
According to Crunchbase, global VC funding in 2022 was $445 billion, a 35% year-on-year decline from the $681 billion raised by startups in 2021. This decline is steeper than what was seen after the 2008 financial crisis or the dotcom bubble, as reported by consulting firm Preqin.

Ability to Monetize and Grow

Gutiérrez-Bolivar from Ladorian says that with more challenging conditions, entrepreneurs will have to leverage their competitive advantages more effectively, and demonstrating business models that positively impact the bottom line in the short-term will be essential.
Albert Nieto, the founding partner of Seedtag, which provides AI and ML-based contextual advertising solutions, anticipates a difficult global situation. He believes that companies must show they can generate revenue and grow quickly to secure funding. The key is to demonstrate that the product can be sold on an international scale.

War for Talent in the Tech Industry

The tech industry is currently facing massive layoffs while at the same time, society is undergoing rapid technological change. Keeping talented employees in this environment of crisis and intense competition is a concern that experts have highlighted.

Joan Riera also highlights the shift in behavior brought about by the pandemic. “The concept of freedom has taken shape after Covid, making talent retention both a challenge and an opportunity,” he notes.

For Ladorian Gutiérrez-Bolivar, talent retention is critical as it affects companies on both a tactical and strategic level. He explains for Bloomberg Linea that we need to integrate talent in a productive way, adapting to the hybrid scenario of remote and in-person work. However, the new ecosystem has made it difficult to maintain team cohesion, so when it comes to talent, it is crucial for people to work with those who can make a positive contribution.

Juan de Antonio, a founding partner of Cabify, states that the startup and scaleup environment is always striving to refine its tools to better manage talent. He also points out that Spain’s recent startup law, which improves tax conditions for stock options, is a step forward in valuing professionals in the industry.

Innovation at the Forefront

Venture capital is seeking out companies that offer disruptive technologies without sacrificing profitability and scalability. According to Ladorian Gutiérrez-Bolivar, from a commercial standpoint, the markets need to keep a close eye on thriving sectors and those with a stronger presence.

On the other hand, Riera believes that healthcare innovations will have a major impact, particularly in mental health, followed by exponential tech trends such as digital transformation, AI, 5G, and the Internet of Things (IoT).
He concluded that customers are demanding more experiences, they are connected and eager to learn.

Source: Bloomberg Linea

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