Founding and growing a business is not for the faint-hearted. In April, KPMG Australia surveyed 70 business founders who reported working an average of 64 hours per week, well above the notional standard 40-hour working week. Founders report it’s an all-consuming enterprise — they rarely have time off work, don’t get to spend as much time as they’d like with family and friends, and the hours, focus and anxious moments in keeping the show on the road take a toll on physical and mental health and wellbeing. This, in turn, affects business performance. The KPMG research was an effort to establish some baseline information on high performance in Australia’s growing community of business founders. The likes of Startup Muster have filled a gap with the largest survey of the Australian startup ecosystem, but there is still much to do.
“When we first started looking at high performance as it relates to founders, it was almost impossible to find data,” writes KPMG’s head of High Growth Ventures Amanda Price in Fitness, fulfilment and foresight: Research into the wellbeing of startup founders and entrepreneurs.
The research was born out of two hypotheses. “Firstly, a founder’s ability to lead their business is a critical success factor that determines the fate of their startup. And secondly, that a founder’s personal wellbeing, their physical and mental health, informs how they lead — everything from how they communicate and how they hire, to how they foster and build the culture necessary for a startup to succeed,” Price wrote.
“While our ecosystem has become excellent at teaching founders the hard skills required to build a tech startup, we have not placed enough emphasis on soft skills.”
“65 per cent of startups that fail do so due to ineffective management by the founders.” – Noam Wasserman, The Founder’s Dilemmas
This view is supported by investors including Gary Visontay of Right Click Capital, who wrote that many founders struggle with the soft skills required to effectively run and build their business. Harvard Business School Professor Noam Wasserman, the author of The Founder’s Dilemmas, says that 65 per cent of startups that fail do so due to ineffective management by the founders, not product or marketing problems.
The eight common elements of success
- Begin with the end in mind: Have clear long-term objectives for the business. For example, is this a lifestyle business? Is this a family dynasty? Are you going for world domination?
- Nailing it and scaling it: What value will you deliver to whom, how will you deliver it consistently, what’s your go-to-market plan, and what’s your profit formula? Refine the business model, then scale up (and repeat the process).
- Pivot with a purpose: When a business model isn’t working, be prepared to pivot to a plan B to maximise the chance that your model will appeal to customers. Pivoting can be both costly and extremely valuable.
- Let go as you grow: Realise you can no longer do everything — hire, delegate and consult. When you start out, you’re really in touch with customers, technology and the market, you run the business by instinct and it works well. As you start to grow, you can no longer do everything yourself.
- People agility: Hire the right people — especially those who can be fluid in their roles.
- Build scaffolding for growth: Develop the structures, systems and processes needed to scale up.
- Cash rules: Speed cash flow through the system — it is the oxygen that fuels growth.
- Targeted execution: Develop a metric-driven culture and focus on key priorities.
The ASX’s recent Entrepreneur’s Guide: startup, scale-up, IPO is a resource of practical advice for entrepreneurs at every stage of the startup journey. The book features contributions from more than 70 authors across the business spectrum, including Queensland’s Chief Entrepreneur Steve Baxter, and Colin Kinnear from Startup Onramp, plus contributions from multinationals such as Google, KPMG and Pottinger, as well as institutions like NAB and StartupAus.
To read the report, click here.
What’s it take to scale and grow fast?
The Growth Project, a global study by Professor Charlene Zietsma from Penn State University, tracking companies across seven countries has identified common features. University of Technology Sydney (UTS) Business School Associate Professor Danielle Logue MAICD, who leads the Australian arm of the project, says there is much attention in Australia on incubators and startups, but fewer insights on how to build high-growth firms and the scaling process. Logue says it will help us better understand the challenges of growth and how Australian companies are responding.
The study has examined 70 companies in countries, including Canada, the UK, Australia, the US, Israel, the Netherlands and Pakistan. They come from a range of sectors and have revenues of $8m to $200m a year and have grown at least 30 per cent a year or more for at least three years.
“Scaling a business is difficult — only one per cent of firms make it past the $10m a year mark,” Zietsma says. “But it is such an important part of the entrepreneurial process and creating jobs and economic benefits.”
The Australian companies include those from capital cities and regional areas, ranging from high-tech startups to innovative firms in traditional industries such as hospitality, mining, agriculture, construction, tourism and manufacturing.
Initial findings have identified eight important features that fast-growing companies have in common. Logue says these factors transcend industries, countries and cultures.
More than 21 companies in Australia have participated in the survey, including manufacturing, electronics, hospitality — a mix of more traditional and new businesses. Among examples of the companies are payments platform ZipMoney, and Learned Hub, which provides online maths tutoring.
Scaling for growth
Startup growth has some common challenges. Elad Gil, a serial co-founder, investor and advisor to numerous tech companies, summed it up in recent podcast by Silicon Valley venture capital firm Andreessen Horowitz (known as a16z).
“If you think about it, the surface area of a startup is really simple at the early stages. There are three things: don’t run out of money, don’t fight with your co-founder, and find product-market fit. That’s all you have to do. It’s incredibly hard.”
Gil, author of High Growth Handbook: Scaling startups from 10 to 10,000 people says when companies shift from startup to scale-and-grow mode, the issues become more complex and require different approaches.
“All sorts of things can break — from executive hiring to buying companies for the first time, to whether you should go public to how do you do you do late-stage fundraisers.”
Gil says, “If you are 10 people you can sit in a room and talk; if 100, there are two to three layers. As the layers multiply and the ability of information to move up and down the stack changes, you have to move the modes of communications in a deep way.”
He adds that it’s important to build out a strong executive team to support customer needs at scale. “The surface area of what you are doing expands rapidly so you have to really learn how to delegate and manage at scale. The complexity keeps notching up across the board.”
To hear the podcast, click here.