The time has come to grow, and you’ve heard it’s important to scale your business sustainably. But does sustainability need to be your focus? Isn’t growth the goal when scaling up? We explore why scaling sustainably is essential in the current economic landscape. And we unpack the expert analysis on the key steps your business needs to follow for scale-up success.
1. Decide when to scale
Scaling up is a special type of growth. It’s the exponential kind that you have to buckle in for. It’s when your business adds revenue and customers faster than it adds to its cost base.
Timing is everything
When to begin your quest for growth is a crucial question requiring an accurate answer. Nearly 75% of start-ups fail to scale because they attempt the journey prematurely. Fortunately, there are three lead indicators for when a start-up is ready to scale.
- Product-market fit: your product or service has overcome any teething difficulties, and you know who your customers are, and how to market to them effectively.
- Revenue and funding: over three years, you have consistent revenue that’s growing at 20% or more annually, and you’ve already attracted funding to back your start-up.
- Process and structure: if the days of quick and dirty solutions are waning, and if they’re becoming an irritant for your customers and investors: it’s time to smarten up and scale up.
For more information read our article, Moving from start-up to scale-up: five tips for success.
Why how you scale matters
In the 10 years leading up to 2020, start-up investment globally and in Australia hit a purple patch. Growth was good: the more growth the better. Just when the funding frenzy looked set to falter due to the pandemic, it accelerated instead, reaching record-breaking heights. Uber is arguably the poster child of this phenomenon. The ride-sharing company has a foothold in more than 10,000 cities worldwide. And between 2011 and 2020, Uber completed 32 funding rounds, floated on the New York Stock Exchange and managed to raise US$25.2 billion. In 2020, despite the pandemic, Uber notched up US$ 57 billion in gross bookings but didn’t make a profit. Indeed, it hasn’t turned a profit to this day. 
Boom, bust and beyond
What went up in 2020 and 2021, had to come down. In 2022, investor funding for start-ups began a painful correction that continues to this day. Growth for growth’s sake is over. War, geopolitical tensions, spiralling inflation, rising interest rates and supply chain disruption triggered the market contraction. Although these are negative events, it’s not all bad news for start-ups. The silver lining is that founders and their investors are having to rethink their growth journeys and target sustainable growth instead.
Making the cut and making it count
If start-ups want to secure investor backing, they need to demonstrate their path to profitability and optimise their company’s top and bottom lines along the way. The upsides to sustainable growth are many. Founders are less tempted to plough ahead with innovations that don’t cut the mustard. And with investor funding coming at a high price in terms of equity dilution, entrepreneurs today are less exuberant about chasing multiple funding rounds. They’re aware of the perils of growth at all costs and that it could mean losing control of their business and its future profits. As for investors, they’re exercising more caution before backing start-ups or scale-ups. So they’re more likely to achieve the return on investment they’re looking for.
The Four Intangible Capitals
We know what sustainable growth is. It shuns the never-never on profitability and makes achieving a return on your investment the goal. It looks less impressive than unbridled growth in the short-term but pays dividends in the long run. Experts, including growth strategy guru Scott Snider, have identified Four Intangible Capitals. Once identified and analysed within your business, these four elements will help you manage risk so your venture can achieve the rapid, yet sustainable growth it needs to scale successfully. Let’s consider, in broad strokes, how you could leverage the Four Intangible Capitals to scale your business sustainably.
2. Human Capital
Human Capital is crucially important for scale-up success, yet it’s probably the most difficult intangible to navigate for most start-ups. It’s the sum total of your team’s strengths and your capabilities as a founder or leader. That means your combined talents, ability to execute and respond to challenges. Building and empowering the right team is notoriously tricky, especially for fast-moving start-ups with limited resources. But it’s an essential ingredient for sustainable growth. Look at where you can expand your team’s skills, improve their existing ones and outsource weak areas. Reflect on your mindset and capabilities as a founder and business leader. Seek out advice on where and how you need to change to enable your business to move forward.
For more information read our articles, Build the start-up team your innovation needs to succeed and Are you planning to move from start-up Founder to CEO?
3. Customer Capital
Measuring your start-up’s Customer Capital centres on measuring the strength of your company’s relationships with customers and more. Think of this metric as encompassing the strength of your entire supply chain. What are the shared values that connect your suppliers, your business and your customers? These are the bedrock for future growth. Sustaining the strength of your Customer Capital and not compromising the quality of your product or service is essential. Try to see your business through your customers’ eyes. That way you can address their pain points, meet their needs and see where your business excels and where it could improve.
4. Structural Capital
Your company’s Structural Capital relates to your venture’s strategy, systems and processes, as well as capital, and financial structure. When it comes to assessing the strength of your Structural Capital, consider how these help your business function efficiently and effectively. Are these tried and tested, and adequately documented? Are they scalable and transferrable to other parts of your business as your company grows? If they are, then you’re on track to scale sustainably. But if you come up short on Structural Capital, don’t panic. Start-ups and fast-growing businesses with R&D fall behind on processes, systems and financial strategies for good reason. Their primary focus is innovation and speed to market.
Engineering Structural Capital to support future growth
Sooner or later, you will need to devote some of your energy to shoring up your Structural Capital, otherwise, your business will simply be unable to scale. Analyse where you can bring in more processes, systems, and standard operating procedures that will save your business time and money, and boost the quality of the product or service and overall customer experience your business delivers. Capital in the form of earnings, equity and debt finance is the fuel you need to turbocharge your growth journey. So having a financial strategy is critical. If your business is eligible for the Federal Government R&D Tax Incentive (R&DTI) you can access it early with R&D finance. R&D financing, for example, a Radium Advance, is non-dilutionary. So you don’t have to exchange part of your business to receive funding. It’s also secured against your expected R&DTI refund which repays your loan when it matures.
For more information on how to strengthen your Structural Capital, especially funding for your business, read our articles, How to leverage debt financing at every business stage and How to build the best R&D capital stack for your business
5. Social Capital
Last but by no means least is Social Capital. This is the secret sauce that blends and optimises your company’s Human, Customer, and Structural Capital. When you measure your venture’s Social Capital, you’re measuring your company culture. It encompasses your brand, how your team members operate and run your business day-to-day, and how they interact with the company’s customers. An effective and enduring company culture can be years in the making, so don’t overlook the need to nurture it. Company culture serves as an important anchor point that secures a business and enables it to scale up sustainably.
If you need help to scale your business sustainably, reach out to our team today. We’re part of the start-up ecosystem. With our trusted network of partners throughout Australia and across different industry sectors, we can connect you with experts who can help you grow. And if you’re eligible for the R&DTI refund or think you might be, we can help you access it early and boost your business cash flow.
 Staff Writer. 2018. How To Efficiently And Sustainability Scale Your Business. [ONLINE] Available at: https://www.sustainablebusinesstoolkit.com/scale-your-business/.
 Pitchbook. 2023. 5 big trends shaping VC investing today By James Thorne. [ONLINE] Available at: https://pitchbook.com/news/articles/venture-startup-trends-charts-q2-2023
 Business Model Analyst. 2023. Is Uber Profitable?. [ONLINE] Available at: https://businessmodelanalyst.com/is-uber-profitable/.
 Business of Apps. 2023. Uber Revenue and Usage Statistics (2023) – Business of Apps. [ONLINE] Available at: https://www.businessofapps.com/data/uber-statistics/
 Forbes Expert Panel®. 2023. 14 Proven Strategies For Sustainably Scaling A Small Business. [ONLINE] Available at: https://www.forbes.com/sites/forbesbusinesscouncil/2021/06/24/14-proven-strategies-for-sustainably-scaling-a-small-business/?sh=693333a314da.