To Scale or Not to Scale?
In any aspect of life, each of us will have different dreams and aspirations, and what we wish to achieve. This is no different for entrepreneurs and business founders. And why should it be? It can often be wrongly assumed that all founders are looking to scale their business as quickly as possible and to grow it to be as large as possible.
In many ways, it is only stating the obvious to say that some founders are indeed looking to achieve great scale and to do this rapidly. For these individuals, the typical game plan would be to maximise enterprise value as soon as possible with a view to selling the business to a financial or a strategic investor for the highest valuation as soon as viable, whilst achieving a good value.
In order to achieve this, it is often necessary to raise external investment to fund expenditure on marketing, senior hires and other staff recruitment, product development, and other similar items. For those on the steepest trajectory it would be expected to raise funding a number of times but with the business having a higher valuation on each occasion. Whilst each fundraising round will of course dilute the founder’s percentage, the increase in the value of the total business will more than compensate for any dilution. It also enables the business to continue growing and increasing enterprise value more quickly than would otherwise be possible.
To scale a business to a significant size, and to do so quickly, brings in a whole range of different dynamics and added complications to simply growing a business in a slower, more organic way, or indeed not attempting to scale in any way. There are two other large groups of founders that sit alongside those seeking to scale quickly.
The first are those founders that simply wish to establish and run a lifestyle business. These founders have far more modest ambitions than those with grand scaling ambitions and are typically looking simply to earn sufficient income to replace the need to have a salaried job. This level of income may well be significantly more than they might earn by working for others but nevertheless, they are not aiming to sell the business as soon as possible for the highest price, and do not want the extra pressures and demands that go with scaling a business quickly for that purpose.
The last group of founders are those that have some form of side-hustle. This group can be seen to be split into two parts. One part is simply people looking to earn some extra income, maybe from an interest or a hobby and have no intention of becoming a full-time entrepreneur and founder. The second part is those that have started a side-hustle with the very intention of turning this nascent business into their full-time occupation as soon as it has gained sufficient traction to have undeniable proof of concept, or it generates sufficient income to enable them to leave their existing paid job.
Running a side-hustle or a lifestyle business is often done with the intention of fitting it around some other time or family commitments, whereas to scale a business aggressively becomes a much more demanding and time-consuming process. Which is right for you as a founder will depend upon many things, but most notably your personality, financial position, time and family commitments, and even your age. But like everything in business and in life, your original views might change along the way.
So, whether your intention is to scale or not to scale does not alter your commitment to achieving whatever your own personal goals are. Nor does it mean that those goals may not change over time but stay true to whatever it is that you want to achieve.