How over 70% of scale-ups fail and what entrepreneurs can do about it

It’s a startup’s worst nightmare – having grown to over 100 employees everything suddenly slows.

The bills start piling up but without growth you’re unable to meet the higher costs that your bigger business is consuming. Everything you spent years building is about to come crumbling down.

Jason Goldberg, founder of 10XE, has helped tens of entrepreneurs scale their business.

Speaking at the Western Cape Funding Fair, held at the Cape Town Convention Centre on 10 May, Goldberg says while just the top one percent of startups end up scaling their business to a more sizeable firm, over 70% of these scale-ups end up stuck in a type of no-man’s land.

‘It’s like the Bermuda Triangle of growth’

“It’s a very bleak stage to live in,” he says, admitting that he’s seen ”a lot more failure than success”.

“It’s like the Bermuda Triangle of growth,” he says. “It means that you work for 10 years and after 10 years you’re poorer than you were 10 years ago.”

So why do so many growing firms get stuck? “It’s because everything changes when you scale a company,” says Goldberg.

“At the start you are trying to figure out your offering. After that works you’re busy scaling a business, building a management team,” he says.

“The irony is because you succeed the size and type of organisation changes,” he adds.

Along with this the company culture changes – the relaxed everything-goes culture of a startup will no longer cut it.

“When you’re a startup you hire a Swiss army knife (of a person), but when you’re at a 100-person company, you need specialists,” explains Goldberg.

He adds that often the most valuable, loyal contributors to your startup will no longer do when you’re a growing scale-up.

Crucial is building the right middle-management team. Goldberg lists this as “the number one” distinction between those firms that got stuck and those that are able to scale successfully.

It also means staying true to oneself as an entrepreneur and asking where ones strengths lie and serving these.

When running a scale-up one needs to mindset that steps out of the day-to-day running of the business and ask “what am I doing here” and “Am I attracting growth”.

At times it means acknowledging that you might not be the best person to lead the business but might need to call in an outsider to takeover, he says.

Concedes Goldberg: “It’s very difficult to be honest and shift to the boring world where you’re building processes. It’s about disciplined entrepreneurship.”

Featured image: Boudewijn Berends via Flickr (CC 2.0, resized)