Why Are Scale-Up Companies on the Rise?

The number of scale-up businesses in the UK is rising fast and almost half (42%) have been founded by people aged 34 and under, according to a new report: Dream bigger: The scale-up moment, from Smith & Williamson, the accountancy, tax and investment management group. In a sign that young entrepreneurs are taking the high-growth business community by storm, the study found over twice as many 18-34 year-olds heading up scale-up businesses as there are among their slower growth peers (18%).

The number of start-up businesses that are successfully scaling up increased by 12% in 2016, partly because of targeted government support for growing businesses. There were 35,210 scale-ups, defined as companies that increase their revenues or staff numbers by 20% over three years, in 2016, up from 31,440 the year before (SUI).

But there are still relatively few businesses which experience the scale-up moment – less than one in 40. To address this, Smith & Williamson undertook the largest ever sentiment study of this business community, interviewing 500 scale-ups and over 500 slower-growth businesses.

Why are young entrepreneurs storming the scale-up community?

The study explores what traits these highly successful businesses and their founders share. One key conclusion is that their attitude towards tech and innovation is giving them an edge. This perhaps gives a clue as to why younger entrepreneurs, who have grown up as digital natives, are flourishing in today’s business environment.

Half (50%) of high-growth companies say tech advances have been critical to their growth, compared to just 18% of slower-growth firms. More than a third (34%) also believe that having an innovative business plan has been key to their success. This falls to a quarter (27%) among non-scale-ups, and to 21% among micro-companies, employing ten or less people.

Competitive, hungry, ready: the scale-up mindset

The research also shows that scale-ups display a greater sense of urgency than other businesses. Almost one in three (32%) reach their high-growth status in the minimum possible time of three years, while eight in ten (84%) join the club within a decade of launching. After this, the chances of a business achieving consistent high growth fall significantly.

Scale-up founders also have a more bullish mindset than other firms and this extends to two of the biggest business issues of the day; Brexit and GDPR. The high-growth firms in the study were more than twice as likely as non-scale-ups (37% vs 12%) to think the UK government’s current policy, such as its approach to the EU or UK trade negotiations with the Trump administration, would have a positive effect on their business, and almost three times as likely (38% vs 15%) to believe that new regulation would benefit them.

John Morris, Scale-up lead at Smith & Williamson, said: “It’s been fascinating to gain insight into how such extremely successful companies think and feel. We have uncovered considerable differences between scale-ups and the rest of the business community, in both mentality and approach. But, 91% of businesses want to grow further, and I am convinced almost any of them can emulate scale-up business success – provided they have the right growth toolkit.

“Scale-ups are more optimistic, more bullish and consequently less risk averse. They embrace technology and innovation, using it to their advantage. They are eager for growth and foster a culture of learning and openness, while keeping a close eye on the competition. These traits need not be exclusive to high-growth businesses; any business leader daring to dream bigger can use them as the building blocks for future growth.”

(Source: Smith & Williamson)

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