How do start-ups transform into solid businesses with sustainable plans for growth?

Over the last few years, we’ve developed brand and growth strategies for some of the world’s most successful scale-ups. These are organisations like ASOS, Deliveroo and FutureLearn, all of whom have made the leap from start-up to proven business - with growing revenues, sizeable customer bases and international expansion plans.

Experience has taught us that, over and above having a great idea at the heart of the business, there are four investments that help transform a start-up into a successful scale-up:

1. Investment in long-term brand building

Start-ups often fall into a never-ending frenzy of growth hacking and customer acquisition. On any given week, they’re running numerous online activation campaigns, all with the singular intention of delivering an immediate return.

Whilst this approach can lead to short-term sales uplifts, customer acquisition costs can become unsustainable over time and it can also run the risk of damaging the long-term prospects of the business.

To overcome this challenge, successful scale-ups invest in their brand. Brand building helps them get even more from their performance marketing spend, as strong brands can more efficiently activate online.

Analysing IPA data, Peter Field and Les Binet think that the right balance in marketing spend is a 60/40 split, with 60 percent focussed on long-term, non-targeted brand building and 40 percent used for shorter-term, targeted sales activations.

For aspirant scale-ups, the first step in this brand building journey is to develop a clear brand definition or ‘North Star’ - codifying a distinct brand image for their company and using this to bring coherence and consistency to all their marketing activity.

This means that internal and external partners all pull in the same direction and ensures their brand stands out from the crowd - making it easier for customers to bring it to mind, recognise and choose it on buying occasions.

2. Investment in planning and playbooks

A founder is both a gift and a curse for many start-ups.

They’ve had this great idea, they’ve got the charisma… They might even end up with their own cult of personality.

Often, these individuals have a knack for presenting a lofty vision, which is crucial to luring in investors and initial hires.

However, a visionary pitch deck should not be confused with a growth plan, as the risk with vision (and visionaries) is that it’s all ‘what’ and no ‘how’ - bad news for people tasked with day-to-day action.

Crucially, founders don’t scale. What exists in one person’s head can carry a team of ten to twenty. But when founders start to spend their investors’ money on building bigger and bigger teams, they struggle to make all their tacit knowledge explicit.

To remedy this, successful scale-ups simplify, document and communicate their strategy. They make clear how the organisation is going to achieve its vision and what this means for everyone in the business (from the first hire to the latest recruit).

If, for example, a company is entering into a new market, the team concerned want (and deserve) to have a clear plan or playbook to follow.

"Having shipped their first products, the dramatic broadening of the skills that the CEO needs stretches the ability of most founders beyond their limits." - Professor Noam Wasserman, The Founder’s Dilemma, Harvard Business Review

3. Investment in research and insight

Many start-ups become successful by marketing and selling to people like themselves. This should come as no surprise, given that many early-stage investors and ‘early adopters’ are actually friends and family. But successful scale-ups avoid the danger of seeing their target audience as people just like them.

It’s easy for start-ups to collect data exclusively on their existing customers. Indeed, it provides reassurance that they’re making good decisions relative to their current audience. However, to scale, they need to burst their own bubble.

Instead of just optimising for current customers and their lookalikes, successful scale-ups also rigorously target new customers.

They invest in segmenting the whole market and identifying their growth audiences - the distinct targets that can deliver sales at scale - and clearly prioritise their primary, secondary and tertiary audiences.

Rather than making glib or lazy inferences about these people, they invest in deep research and insight - taking any lack of consumer understanding seriously, spending the time and the money to fill their knowledge gaps using the most appropriate methodology.

A segmentation of the American population produced by Facebook in 2016 and used by the company’s sales team to encourage advertisers to invest in Facebook advertising. It uses multiple data sources drawn from a combination of different types of consumer data to build its picture of the market.

4. Investment in training

Finally, in many start-ups, a culture of chaos is often the norm. A lack of strategy can lure people into a ‘Move Fast and Break Things’ mindset. (Let’s just do stuff!)

Unfortunately, it’s a culture that breeds aggro-meetings, overwork and ultimately poor decision-making.

It also breeds chronic over-promotion with no safety net: a 22-year old intern who loves Instagram becomes social media manager, then marketing manager, then regional marketing director (in the space of four meetings) only to find themselves eased out of the business by a newly appointed CMO without ever having received any training or even a feedback session.

In place of this chaos, successful scale-ups invest in professional development. As the organisation becomes more complex, they ensure that staff are given training and support so they can thrive. They are clear on the competencies required for any given role.

They put in place the right learning and development programme to build people’s skills and capabilities. Lastly, they set challenging development goals, meaning that, as the organisation grows, so do its people.

This piece is by Matt Boffey, Co-founder and Director of Consulting at Great State and first appeared on the company's website here.