This article is about Technology
You've probably heard the term “scale-up”, but do you know what it means? Understand how it is possible to make your company reach this coveted status, where the term came from, and the differences between startups and scale-ups.
“Scale-up” is one of the terms most used today by companies from different areas, and for a good reason; after all, becoming a scale-up is the goal of many and a feats that few achieve.
But after all, what is a scale-up?
The definition of the term scale-up is a company that manages to grow and maintain this growth for several periods.
The term was coined in a document called “The Scale-up Report,” with over 130 pages detailing economic growth in the UK.
This report defined scale-up as any company that averages 20% growth, either in profit or jobs, over three years. It is important to highlight that according to the model created in the document, the company must have at least ten employees since the beginning of the period.
There is a debate about whether, for a company to be considered a scale-up, it would need to have been in the market for more than ten years, but it is very common for companies with five years or less to have all the necessary attributes to have this denomination.
After all, business growth is different from what it was eight years ago when the term was created, and this is largely due to startups. There is even common confusion between the terms “scale-up” and “startup” because they sound similar.
Despite sounding similar, the terms refer to different concepts and are not exclusive because a startup can be a scale-up.
If the startup is a company at the beginning of its journey, with few employees and looking to generate constant growth until it turns a profit, it makes sense that eventually, it could become a scale-up.
Startups can conquer their space very quickly, but to be considered scale-ups, they need to maintain their growth within specific standards, more than 20% per year, for three years, which is much more complex.
Therefore, only some startups will be a scale-up because only some fast-growing companies will reach and maintain this level. However, highly successful startups can indeed be considered scale-ups.
“The Scale-up Report” was initially commissioned by the Economic Information Council, an industry-government union in the UK.
This document aimed to determine how government investment could help industry and ensure economic growth.
For this they invited Sherry Coutu, one of the main investors in the world. To put just a few of her achievements in context:
In the report, the investor states:
“Getting our ecosystem to produce increasing scale-ups is more ambitious and difficult than producing many startups or celebrating entrepreneurs. Abundant evidence from around the world shows that collaborative initiatives can "supercharge" an economy and increase the ability of companies to scale and make superior contributions to the economy."
This is an important factor that is generally ignored by companies looking to scale their business: the very report that gave rise to the term “scale-up” mentions the importance of external investments, governmental or otherwise, for the growth of a company.
Therefore, following the logic of the original report: For a company to become a scale-up does not depend only on its success in the market but also on a significant financial contribution to help in the growth process.
We have previously defined how the term came about and the investments required for a company to reach this level, but what are the main challenges to scale business growth, and how is it possible to get there?
“The Scale-up Report” states that:
“The following factors, in order of importance, are the key reasons companies cannot scale in the UK. Companies have problems with the following:
Although the report is about the United Kingdom, we can transpose these same challenges to Brazil or any other country. Therefore, scaling a business involves external investments but goes through all these challenges of planning, hiring, and professional relationships.
After her study, the author suggests several suggestions for the short, medium, and long term so that countries can overcome these challenges and increase the number of scale-up companies:
*Translator's note: UK bodies and agencies
** Translator's Note: American University in Massachusetts
The author herself points out that the impact of some recommendations will only be felt for years to come, showing that it is still challenging for a company to reach the scale-up level. Only those with the best plans, talent and technological support will be able to do so soon.
Qintess: The scale-up partner
Qintess' technological know-how will help you leverage the essence of your business through digital solutions that will make the scale-up process faster and easier for your company.
With our digital transformation solutions, your company will have the foundation it needs to scale growth, be able to serve more customers, follow market changes faster and make decisions with the depth that only data intelligence can offer.
All this with speed and flexibility for your business to become a scale-up as soon as possible. Learn more about us and everything we can offer here.
This article is about Technology
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