What is the entrepreneurial scale-up system (ESUS) and how can it achieve seven-figure success? Kevin Brent explains how it can work for your business
Scaling a business isn’t easy, and there isn’t one simple tip or magic bullet that’s suddenly going to deliver phenomenal success. The statistics reveal how difficult it is – half of all startups fail within five years, and two-thirds within 10. And, of all businesses, nearly 96 per cent are unable to scale beyond 10 employees.
One of the fundamental factors that separate those who successfully scale from those who don’t is forward planning. Those who manage to plan properly don’t simply drift into growth. They work to a proven system and follow clear strategies to scale and build value. Having identified some of the key challenges around creating and building a seven-figure (and beyond) business, I created the Entrepreneurial Scale-Up System (ESUS), which has helped hundreds of companies scale.
Here are some of the key principles from the system to help you on your way to building a scalable, sustainable and valuable business.
According to BizSmart’s own research, 53 per cent of owner-managers admit that they don’t have a clear strategy that works towards scalability and growth, but it’s no surprise that so many businesses fail to put a solid strategy in place.
The word strategy itself conjures up images of spreadsheets, fancy diagrams, lengthy reports and presentations, and can often give us a headache just thinking about what it means. However, it doesn’t have to be intimidating.
Strategy can be broken down simply into four key areas: leadership, values, vision and plan. For a winning strategy, you must ensure that both leadership and vision are strong within the business and that your team is aligned with and passionate about the company’s overall mission.
Have a clear three-year plan in place and make sure that your business’s values and purpose are embedded into all aspects of it. They should also determine the way you do things day to day, from recruitment and onboarding to reviews and feedback.
However good your strategy is, you won’t get far without a team. But while people can be the magic ingredient that makes a company great, they can conversely be the biggest headache.
To really work cohesively, team members need to have a sound understanding of themselves, as well as their peers. The starting point for this is often behavioural profiling, for which we use DISC assessments – behaviour selfassessment tools based on the 1928 DISC emotional and behavioural theory of psychologist, William Moulton Marston.
Getting everyone in your team to undertake DISC profiling is not only a great way to help them understand each other’s personalities, styles, differences, and priorities, but also to learn how other team members respond to challenges, influence others and respond to rules and procedures.
Not only that, DISC profiling can help you, the business owner, ensure that you have the right people in the right roles.
One of the key difficulties that both small and large businesses face is being good at executing their strategies. Whereas strategy is primarily focused on ensuring that we’re doing the right things, execution is about how we deliver against those plans.
A valuable tool to consider as part of your business strategy execution is 90-day planning – a concept that helps to bridge the gap between ‘why’ and the day-to-day actions we need to take.
All businesses – large and small – can benefit enormously from doing this, but most businesses don’t do it. 90-day planning works by taking an annual view of what you want to achieve and breaking it down into 90-day increments, making your goals much easier to plan, evaluate and achieve. It’s a short enough period to see things reasonably clearly, but long enough to achieve something meaningful if you try.
As part of your 90-day planning, try to identify things that you should stop doing, things you should start doing, and things you should continue doing. Also, be sure to include a review of any emerging trends in your industry sector that might impact your business. For example, keep abridge of technology changes [e.g. the rapid move to online working, or the return to face-to-face], or an increasing lack of potential candidates due to the pandemic, that might shake up your market.
When it comes to managing a scaling business, there’s little else more important than managing the cash in the business. You can get by with a decent strategy and some hard work – but not without cash.
Cash becomes even more critical as a business scales up, and ensuring we have enough to get us through transitions and weather storms is very important.
Following the COVID-19 pandemic, the benefits of having a large cash reserve are only too obvious and, ideally, we should be aiming to have at least six months of operating expenses in reserve.
While this might be a pipe dream for many of us, the principle still stands. So how do we manage to get to the point where we’re able to hold some cash in reserve? Aiming for two months of operating expenses in cash in the bank is an excellent target.
It’s a good idea to look at your cash daily or, at the very least weekly, particularly in times of change – for example when you’re growing rapidly, or during times of crisis, such as the pandemic.
Ensure you have a set of financial key performance indicators (KPIs) and ratios that are reviewed monthly, and that at least one cash improvement initiative is undertaken quarterly and included in each 90-day planning session.
While these principles from the ESUS methodology won’t give you answers to every question that you’ll face on your scale-up journey, they should provide you with a structure to overcome some of the challenges that you’ll undoubtedly be presented with along the way.
By following these steps, you’ll be well on track to building a more valuable business and achieving seven-figure success.
Kevin Brent is director of business support provider and franchise at BizSmart and author of The Entrepreneurial Scale-Up System.