The challenges of scaling-up a business part II
The business news that matters
Hello and welcome to Off to Lunch…
In last Monday’s edition of Off to Lunch I reflected on the lessons from our latest Business Leader podcast episode, specifically the challenges that a business faces in going from a promising start-up to a medium-sized business and then a multinational company. I am going to do the same today about our newest podcast episode, which features Suranga Chandratillake, one of the leading venture capital investors in Europe, because that episode has highlighted a different challenge.
The challenges behind scaling-up a business will be a focus for the relaunched Business Leader magazine. This is a big issue for the UK. If the UK could convert more promising start-ups into big companies then it would help productivity and level-up the economy across the country. The UK is home to plenty of promising start-ups - there are more unicorns (tech businesses valued at $1 billion or more) than anywhere in the world apart from the US, China and India. However, other countries are more successful at turning promising start-ups into big companies. The US is one example of this. Check-out today’s “And finally…” for a promising start-up that achieved this…
Last week we looked at how the leaders of a fast-growing business need to adapt their style and deal with significant setbacks as the company gets bigger (you can find that edition here). But today I want to look at why businesses should be concerned about key members of staff burning-out on the gruelling journey of building a venture.
This issue is more relevant than ever after Jurgen Klopp announced he was standing down as manager of Liverpool last week and said he was “running out of energy”. Klopp has been the manager of Liverpool for nine years. That is a long stint, but few people would question that he was still the right person for the job.
Our latest podcast episode looks at the issue of burn-out because Suranga Chandratillake stepped down as chief executive of the technology company he founded due to similar concerns. He is now focused on supporting the bosses of the businesses he invests in at Balderton Capital, the venture capital firm where he is general partner.
This issue is often overlooked as a challenge for businesses that are trying to scale-up. But it is pivotal. How do you ensure that you get the best out of your key staff over a long period of time, not just the short-term, and that they stay with the business? Are some businesses failing to scale-up because the founder, chief executive or other key figures simply run out of energy?
This is what Chandratillake said about why he stood down as a chief executive in 2014. It sounds similar to what Klopp said last week…
“I was definitely at a stage where it was increasingly tough. I really enjoyed the early part of the journey - the first three, four years. I learned a lot from the following six or seven years. By the time I got to year number ten, I'd got to the point where I wasn't really learning very much anymore. It was just the same thing over and over and over again. It’s a treadmill where you have to get a little bit faster each time round and there's a point at which that was too much for me.
“So I was pretty sure that I wasn't going to last a lot longer at that point. I was lucky to spot that fairly early and manage a graceful exit. I became the chair of the board, I was able to promote my number two to CEO, and he ended up being a great CEO for the next four or five years. I was able to manage it quite well. The danger point is when people don't spot this early on and have a bit more of an actual crash, which can happen. But luckily that didn't happen to me.”
He also said this about the challenges of being a business leader:
"Being a CEO is a unique job. It's a funny position where you're sitting in the middle of lots of different people all asking different things of you. It puts a lot of pressure on you. The most obvious way of dealing with that pressure is to work yourself into the ground. But actually that doesn't work because unfortunately running a company is not a sprint, it's a marathon. It's something which takes 10 years, not one year. Sufficiently motivated people can work themselves into the ground for about a year or two, but you can't cram forever. At some point that breaks."
So what should business leaders look to do about this challenge? Chandratillake offers some guidance:
“If you look at the founders who have really gone the distance and been at the top of their game for decades, they are people who were able to balance the different aspects of their lives. For different people it's different things. For some people it's family, for some people it’s being physically active, for others it's about having more than one business. But the point is that keeping that balance is really important to be able to last the distance.
“Following on from this conviction we had, which was strongly held but had little evidence behind it, we decided to find out if it was a real thing or whether we were just imagining it. We [Balderton Capital] did a large survey. We found that, actually, we were right. The resounding majority of founders believe that they do not have sufficient balance in their lives. As a result they are more stressed and more tired for too much of the time. That isn't just bad from the point of view of the way they feel. But actually the majority of them believe that it means they end up making substandard decisions and they end up sacrificing, ultimately, the success of their company because they are so overworked.”
You can listen to all of the episode via Substack here, Apple here or Spotify here.
For more on Klopp and what his success can teach leaders in business and other fields, I highly recommend checking-out Simon Kuper’s excellent analysis in the Financial Times. You can read that here
Other stories that matter…
1. A collection of well-known businesses are looking to make job cuts, according to reports at the weekend. The John Lewis Partnership could cut up to 11,000 jobs (story by The Guardian here), while Channel 4 could cut 250 roles (Sky News story here). Struggling fashion retailer Superdry has said it is looking at “various material cost-saving options” following a report by Sky News that there could be “significant” store closures and job cuts. Superdry has more than 3,000 staff and 200 shops. You can find the Sky News story on Superdry here and the company’s announcement here
2. Ryanair has lowered its forecast for annual profits. The low-cost airline said it has had to cut prices to sell seats on its planes because a collection of online travel agents - including Booking.com - have removed Ryanair flights from their website. Ryanair has described these online travel agents as “pirates” and accused them of “screenscraping bots to digitally pirate our flight info, prices and ancillary services, then repackage this unlawfully obtained info via their websites to consumers whom they overcharge and scam with hidden mark-ups…”. You can find the company’s statement here. Talking of lower-than-expected profits, nearly one in five listed UK companies issued a profit warning in 2023, according to new data from EY, the accountancy firm. There were 294 profit warnings in total, which is actually down from the 305 in 2022. You can find the EY report here and a story by Bloomberg here
3. Positive news on the housing market from Zoopla. The number of agreed property sales in January 2024 is up 13 per cent compared to the same month last year, suggesting that activity is picking up. You can find that report here
4. The Newcastle-based business behind Tommee Tippee, which makes bottles and other products for babies, has posted strong annual results. Revenue rose 9 per cent to £220 million in 2022 for Mayborn Group while pre-tax profits rose 7 per cent to £25 million. Mayborn is owned by Ping An, the Chinese insurance group. Story here
5. HSBC has opened its first-ever cash pod. The pod is located in Nailsea, Somerset, and will replace the branch that the bank is closing in the town. The pod is similar to a cash machine but offers more services - you can use it to pay-in cash as well as withdraw it. HSBC plans to open nine more pods around the UK this year. You can find more details here and a story by BusinessLive here
And finally…
On February 4 2004, 20 years ago next month, Mark Zuckerberg and a collection of fellow students at Harvard University launched TheFacebook from their dorm rooms. Two decades later, the social media network is valued on the stock market at more than $1 trillion (and the company is now called Meta Platforms). The Sunday Times published an excellent feature at the weekend on the history of the company and what may come next. It was written by Danny Fortson, its California-based business correspondent, and you can read it here. The anniversary is a good reason to rewatch The Social Network, an excellent film about the origins of the company. The film makes a brief appearance at the start of our latest Business Leader podcast episode. You can watch The Social Network for free at the moment on ITVX. The film is here
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Best
Graham