How to scale your business beyond £1 million – why mindset is so important
Founder and former CEO of finnCap Group, Sam Smith explains how business leaders can develop the ‘growth mindset’ needed to scale a business in this extract from her new book, ‘The Secret Sauce’.
If you are fully committed to growth, and constantly thinking and talking about growth, you will scale your business.
When you set out a plan, no matter how big or optimistic it is, you increase your chances of success simply by saying, ‘This is the plan, and we’re going to get there’.
If you are a business that has just reached £1m turnover and you say, ‘I just can’t see how I’m ever going to get to £5m’, you are not going to get to £5m. If you say, ‘Right, we’re getting to £5m,’ even if you have no idea how, it then becomes absolutely possible.
The first £1 million is always the hardest
In the early days of finnCap, when we were a small division, our first task was to cover costs with revenue and to start making a small profit that we could reinvest to keep the business growing. That early stage of trying to hit £1m revenue is always the hardest step because you’re working so hard and taking on every single role. It’s worth remembering that growing gets incrementally easier as revenue grows.
Once you have got to £1m revenue you have done the hard part and proved that you have commercial potential. That is why venture capitalists and investors start looking at businesses at around £1m revenue, or certainly £1m of annual recurring revenue (ARR), because they have proved their commercial concept.
If you want to scale, you need to set a target
However quickly you want to scale is up to you, but the most important thing is to set a target. You don’t need to know yet how you’re getting to £500k or £1m, £2m, £3m or £10m; you just need to be clear that that’s where you’re going.
The planning comes later but the growth trajectory is set. It’s all relative: if you’re at £200k turnover, £2m or even £1m seem far away, but you need to be thinking constantly about the next milestone on the journey and believe you can get there.
It takes almost the same amount of effort and energy to double revenue at each stage. That’s why it takes a long time to scale a business, and it can’t be done overnight.
A lot of people get disheartened when they hit £500k revenue because they have already gone through many doubling journeys – but the next doubling journey will get you to £1m in revenue, and that will be no harder than getting from £250k to £500k. As you grow, you will build your skillset and the process of doubling revenue will get easier as the numbers get bigger.
What was the finnCap growth journey?
After finnCap had hit £1m revenue, our next aim was to get to £2m. When we hit £2m, we aimed for £3m, and so it continued. We hit £1m revenue fairly quickly but it took much longer to hit £2m consistently, and then much longer again to hit £3m consistently; in fact, it took ten years from first setting up the division for us to achieve that, around the time we completed our buyout in 2007.
The next target had to be more exciting and definitely beyond £1m increments, and we had reached a stage at which it was possible to scale that bit faster. Our next target was much more aggressive – we set out a plan to get to £10m revenue with a mission to become a market leader in the microcap company space, which was a small sub-sector within the growth-company space.
We started thinking about scaling up after 10 years
For us, the 10-year point was the right time to think about really scaling up, largely because we grew organically, reinvesting our own profits into the division. We had raised no outside finance by this point, which may have made the process somewhat faster.
I grew at the pace that felt right for me and the business. Trusting your gut about the speed of scaling is important and will differ for each person and each business. It can come down to personal circumstances and personal choice, and how much external financing risk you are prepared to take.
My choice was to keep reinvesting profits for the first ten years to build our proposition and learn how to do each part of the job. I was twenty- four when I took on the role of building the division, so I had a lot to learn! Scaling too quickly without acquiring the necessary skillset can lead to problems, so work at a pace that feels challenging but not out of control.
She was the first female chief executive of a City stockbroking firm and has worked on over 200 transactions, IPOs and secondary fundraisings. Under her leadership, finnCap became a leading advisory firm for the business of tomorrow. Sam is now an adviser to scale-up businesses and a non-executive director on the board of Sumer Group Ltd.
Sam’s new book, The Secret Sauce explores how empathetic leadership can help superscale any business and empower the company’s talent.