Waiting, waiting – wondering ‘Is this the one?’ I’m sure every investor is the same, not just the Sharks on Shark Tank – who so publicly wait with baited breath to hear the story behind the business idea – wondering is this the next big thing.
The entrepreneurs passion can be infectious – there enthusiasm and energy is exciting… and they truly believe that the ‘Big Idea’ is the next big thing.
We as investors can get swept away in the pitch, inspired to believe the story – and as soon as this happens – we need to bring our years of wisdom to bare. It is not the ‘big idea’ or even the ‘start up’ it is the ability of the founder to ‘scale’ the business that will make it worthwhile.
Its not all about the start up phase real success comes from the ability to scale.
“Success is 1% inspiration and 99% execution”
There is much conversation about #innovation #ideas and #ingenuity in the media – reporting not just on current government policy – but the halo effect of successful businesses such as Atlassian, MenuLog and Campaign Monitor.
Australia has always been a nation of innovators and entrepreneurs – our tyranny of distance has forced us to find new ways to do things – and some of these innovations have become great exporters and employers.
But that is history – the ‘big idea’ is all about the future. We live and work in a global economy… it is not ideas that we need – we need the ability to scale these ideas into significant and globally competitive enterprises.
What we must do as a nation is invest not in the ‘big idea’ but in scaling businesses – not just the idea.
Having seen hundreds of business pitching (not just as part of Channel TENs Shark Tank program) mostly what I (and my fellow investors) are looking for is the businesses ability to Scale – We ask can they grow the business into an enterprise that can and will compete on the global stage.
It’s not about #startups it’s about #scaleups
- Investing in a business that only employs one person (or maybe two) does not demonstrate that the business has the bandwidth to grow. Ideally there is some revenue, proof of concept and customers have seen (and perhaps purchased the product). Whilst this may mean that the business has to ‘boot strap’ or self fund…. lean startup is a valuable model. When the British government faced the exact same challenges it was advised by the Sherry Coutu CBE who wrote the Scale Up Report on UK Economic Growth in November 2014 “A ‘scale-up’ is an enterprise with average annualised growth in employees or turnover greater than 20 per cent per annum over a three-year period, and with more than 10 employees at the beginning of the observation period”
- All the start ups I work with – and any I speak to cash flow is often the greatest challenge. According to a study by Intuit Australia (QuickBooks Online) reported in the SMH in Nov 2015 “Australian small businesses owed $26 billion by their customers which has a Major impact to cash flow with one quarter forced to borrow additional funds to meet their own payment deadlines” What I mean by this is ‘working capital’ to get the idea off the ground – paying suppliers potentially five-six months before customers pay for the product. Quite often large businesses have all suppliers on 60-90 payment terms. The greatest pain for any small business is getting paid…. If big business and government was literally to pay small business on 7 days the cash available to grow the businesses would shift vastly – and instead of sleepless nights worrying about cash they could employ more people, bring the big idea to market and grow the enterprise sooner.
- Big Ideas are about numbers (lot’s of them) taking the time to really assess the performance of the business – beyond a simple Profit and Loss or Balance sheet – Knowing the real numbers that sit behind success. The online tools now available (Here’s some examples of QuickBooks Online dashboards Looking at sales and margin by channel, cost of acquisition of the customer (are you spending more to get a customer than they spend with you?).
- Finding employees who have the skills needed to grow the idea can be very challenging – I am not alone in my anguish around having the right people doing the right job – Mike Canon Brookes co founder Atlassian has spoken at length of Australia’s lack of global competitiveness. The speed to attract and recruit the skills needed can on the whole is long, expensive and makes Australia noncompetitive.
- Building leadership capability and business skills – is paramount to the success of any idea. Just because someone has a great innovation does not mean they have the ability to grow and scale an enterprise. In fact quite the opposite. It takes both understanding and commercial acumen to bring a strategy to life. I have seen too many founders get in the way of their own business – ultimately it is why I wrote Ready to Soar – because it breaks my heart to see people commit their lives to their enterprise – without investing in their own leadership or business capabilities.
Knowledge is power – Knowledge turns and idea into an scaling enterprise.
Having worked in and around small business and start ups for nearly 30 years – I have started my own, invested in them, mentored them – and now written Ready To Soar because I simply cannot sit by and watch the pain and suffering that is caused when a founder gives ‘the big idea’ a crack… only to find that the system is stacked against them… and as soon as they start to scale then the imposts, compliance and red tape sky rocket.
It is not #ideas that we need – we need to #Scale-Up to be the global player Australia can be.
This article first appeared as part of my LinkedIn influencer series