roundtable


The questions should always be asked: Why are we really doing this? Is it right for the business or simply an ego-boosting career milestone for those involved?


Sikorski recounted awareness of “a deal done on a napkin by two CEOs over dinner", which foundered after the boardroom began to ask "Why?". “If you want to scale-up you have to commit to wanting to do it. And keep all options open for growth – acquisition as well as organic.”


Evans: “It’s easy to pour cold water on M&A and say it doesn’t always add value, but what’s the alternative? CEOs are driven to add revenue, to grow faster than the market, and large companies are often bad at innovation so they go out and buy it.”


Sanger: “If you become good at M&A and really understand it, then buying and selling businesses can be very fruitful and really good fun.”


Some acquisitions simply add sales volume, explained Evans: “The large company buys something you are selling, then simply pumps it through their sales and distribution channel and makes 50 times more revenues than what you were – the gross margin they make within two years exceeds the acquisition price.”


Scale-up deals seeking economies of scale, can struggle suggested Freeman. “The complexity of the new large organisation rapidly overtakes any economies. Surprisingly, smaller businesses can be more cost-efficient.”


Leadership: Will the chief distraction officer let go?...


Evans itemised aspects that prevent 30-person businesses scaling: “The founding CEO is salesman-in-chief with all the key contacts; too often he won’t ‘let go’ and delegate his work; or product isn’t shrink-wrapped and you can’t sell it through other people.”


Founder entrepreneurs may “become chief distraction officers running around the business, nudging the machinists or designers saying ‘No, no, no, left click.’”


Claire Edmunds: “Everyone does everything when you are a small business, and many people enjoy that generalist approach. But, as businesses get bigger they become more specialised; need better domain experience, and a leader has to recognise and accept that.


“It’s also no use having a leadership that gets 20 different ideas every day, otherwise you end up with organisational whiplash from everyone constantly changing direction.


“The leadership challenge is that what THE BUSINESS MAGAZINE – JANUARY/FEBRUARY 2018


got you to a certain success point is not going to get you to the next.” Reinvention of your existing resources or recruitment of new ones becomes the quandary.


Valentine: “Mindset change for a hands-on CEO can be very difficult – understanding that if you want to scale up that you have to let go of some control, step into another role and let your team take on your day job so that you can lead the acquisition growth. First, that means getting the right team around you.”


Bob Atkinson concurred, but noted that with continued founder input/control, a business could be unsaleable. Passing on their skills or knowledge was vital for succession management and proper future business governance.


Tamsin Napier-Munn: “So, it’s about releasing the entrepreneur to be free to work on the business, not in the business.”


Sikorski: “Control is the enemy of growth. A strong non-exec chairman saying ‘you have to let go, release and free-up the business’ can help resolve the founder’s dilemma.’”


Atkinson suggested the same mindset surrounded gaining scale-up loans. “Founders may reason that they can keep the business going with a bit more sweat equity, and scale-up loans will actually lose some of their financial control.”


Others don’t know where or how to go about getting scale-up finance, fear its unknown complexities and costs, so settle for their ongoing business status quo.


Edmunds: “As a startup you have nothing to lose. As a 30-person business you’ve got something to lose and responsibilities. If you decide to scale-up you have to put it all on the line again.


“You need bigger infrastructure to get to the next business level, but you can’t afford it so you have to make the inner choice to stay as you are or invest beyond your means.”


Freeman: “In order to be successful you have to be prepared to fail.”


... or buy a Cotswold vicarage?


“Why do US businesses scale-up faster than the UK? Because of the “Cotswold vicarage problem,” stated Evans, “UK entrepreneurs start later, it’s harder to secure equity, businesses grow slower, and when the opportunity to sell comes along, the owners, now in their late-50s, buying a nice Cotswold vicarage is a very attractive ‘job done’ option.”


The US ethos is very different. “It’s a question of different scale, appetite and less risk aversion.”


Continued overleaf ... businessmag.co.uk 37 Michael Dunne Graeme Freeman Sara Valentine Paul Boswell


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48