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The 5 biggest growth challenges for ambitious start-ups in 2016

Speculating on the year ahead, our Startups Awards winners reveal the biggest hurdles obstructing scale and how they plan to tackle them...

The start-ups in our network of Startups Awards winners are a successful bunch, with a number of the entrepreneurs having several impressive businesses to their name.

But while there’s no denying their current start-ups have plenty of potential, ambition, and solid traction to-date – scaling a business is never without challenges, however experienced you might be.

And while having to overcome barriers is by no means easy, what’s reassuring is that all 10 of our start-up founders faced similar problems, despite the varying stages of their businesses and different sectors and industries.

Challenges are part and parcel of start-up life, but a problem shared is a problem halved – and often issues can unexpectedly become valuable lessons.

Here, 10 of our Startups Awards winners share the five key challenges ahead of them in the next year, and how they plan to overcome them to flourish. Chances are you may recognise a few of the pain points too….

1. Access to finance

Shelley Lawson, Frog Bikes

“We’ve been entirely self-financed; we’ve put everything into the business. Just a couple of months ago our bank has become a lot more generous, now we’ve shown consistent profit for a couple of years they feel a bit more comfortable about loosening the purse strings, albeit with massive personal guarantees from us.

“They’ve also done a lot of trade financing for us, which enables us to finance the stock – we have long lead times between committing to buy the bikes and componentry through to building them and getting them shipped to the UK and getting the money for them. About five months in total. So when you’ve got periods of growth it’s incredibly difficult to fund.”

Natasha Frangos, haysmacintyre

“Presenting reliable and well supported numbers is definitely vital for businesses accessing finance. Investors need to be able to understand these and the assumptions that go into them with businesses spending sufficient time supporting and stressing these assumptions.”

2. Keeping your focus

Julien Callede,

“For us, what’s going to change is that we’re going to go back to our roots. We’re now in six countries in Europe, including Germany and France (and the UK obviously) which are our big ones. We’re only three years’ old in France and one-year-old in Germany which are big markets so we want to go back to focusing on our core business. We are not going to go into any new country this year.

“First we’re going to try and expand our current ranges. We’re not well-known for small items because we’re new in that area and our model is too focused on a select few items that we buy quite a few of. We’re trying to find ways of designing accessories that will work for us. We might need to source from somewhere new in Europe.

“The other thing is we want to focus advertisement on investment in the countries we are in. As an online brand, one of the challenges you have is to decrease your marketing spend in your P&L. We are quite well-known in the UK although we still have room to grow. And rather than investing in new countries we want to spend our cash on investing in France and Germany (and our other existing European countries) because the more we grow our earned customer base (what we call people who come back free of charge) the better.”

Amer Hasan, minicabit

“The next 12 months the theme is very much around focus, but of a different kind. We’ve been working on partnerships for a while and we’ve focused generally on travel & leisure. This year I’ve noticed the penny has really dropped in the travel sector, where they can package flights, hotels online and are now wanting to include cabs. SkyScanner has now integrated our cab quotes and so partnerships are progressing well for us.

“We were intentionally focused as we were bootstrapping until last Autumn when we did a bigger raise. Now that we’ve got some funds, we are needing to retain that focus while making bigger investments in customer acquisition.”

3. Getting more customers

Oliver Bridge, Cornerstone

“Our view is that it is a race to be the biggest in our sector in the UK, so we are investing very heavily in marketing to keep powering our growth. In our space, there are some very large, well-known brands and the challenge as a start-up is to be smart and nimble enough to stay ahead.

“We have done a good job so far – growing from 5,000 to 70,000 subscribers in 12 months, but our ambitions are much bigger than that.”

Steve Purdham, 3rings

“Word of mouth is our biggest opportunity so the key challenge is getting enough scale so this becomes meaningful. In 12 months’ time we’ll either fly or die, survival doesn’t count.”

Andrew Jennings, Berrywhite

“We’re selling in retail in the UK and abroad, but where we have huge success is in Foodservice particularly in secondary schools, colleges and universities. Hundreds of thousands of students see our products every day and we are seeing an uplift in retail as a result.

“The key thing for us is promote healthier lifestyles by selling drinks with no added sugar in 250ml and 330ml (not 500ml) size formats. Sugar is the new tobacco and Foodservice companies like Compass are taking the issue seriously, we hope that in time UK supermarkets will follow their lead.”

4. Building a great team

Amer Hasan, minicabit

“[One challenge is] the team itself – we had about seven or eight people last year and now we have over 20. Trying to keep that spirit, I want it to feel like a club. We have a very low turnover of staff so far which I want to retain.”

Oliver Bridge, Cornerstone

“For us, it’s scaling things like customer service, building a team of relatively low-wage workers, in an expensive city to live in doing quite a boring repetitive job, while everything around you is quite sexy.”

Steve Purdham, 3rings

“We’ve built high quality staff for the engineering and technology team but primarily it’s currently a family business.

“With other companies I’ve built, if you create that desire from the beginning people will follow that. We’re trying to keep it small as adding more people doesn’t necessarily mean more efficiency.”

Natasha Frangos, haysmacintyre

“We find that share option schemes, when used well, can be a great incentive to retain and incentivise key staff. By aligning key staff's objectives with the founders’ it can enable them to help grow the business with the founders and share in the potential benefits in a tax efficient way.”

Mark Smout, ForrestBrown

“We have big growth ambitions for the business, but in order to scale without risking quality we need to find the right people. We ask our staff to deliver on a number of fronts – technical excellence, relationship management, and business development – and finding that mix is hard.

“Focusing on our brand and the culture that stems from it helps to attract talented people, as well as outlining the opportunity for progression as an expert in our field. But we’re still very much finessing our approach to recruitment.”

5. Standing out from and dealing with competitors

Amer Hasan, minicabit

“I’m personally driven by functionality because I’m a bit of a product geek, but one thing that sets us apart from our competitors is our feature set. You can book multiple stops, there’s a luggage selector etc. and that actually leads to a higher average fare. Our average is around £40 which is why partners like us.

“But I don’t want to end up with a huge IT budget, it’s all about focus and pacing it.”

Andrew Jennings, Berrywhite

“We initially started selling Berrywhite three years ago in a glass bottle. We’d never have started the business if we’d known we’d need to go into cans as the barriers to entry in terms of the volume are very high. So we started as a glass bottle knowing we’d want to go into PET and cans at some stage but we were a very small start-up off a kitchen table and that was the only route in.

“We had to do a major change about 12 months ago when our bottler bought our largest competitor and suddenly we found that our wastage rates of our juice went from 5% to 25% and we got a price hike on our bottling so we had to leave. We then launched as a can and PET. Our glass bottle was very much sold via independent stores, not through supermarkets because it was glass. And we had to go through a complete change.

“We raised money on Crowdcube to enter a more mainstream market. Although we’ve actually now gone down a youth market and we’ve found our product is selling very well in schools for various reasons. We’re schools compliant, no added sugar, we’re organic which works well with catering companies at schools.”

Julien Callede,

“The first biggest challenge [for any start-up] is to prove the business is working. Then the challenge is not to explode, you might kill yourself because you’re growing too fast (and we had tough stages, we had moments where we were growing too fast and we had execution issues). Next is expanding, but then after six years you see you’re not the one chasing people, everybody, rather, is chasing you – to a degree.

“You were innovative six years ago and you need to remain innovative and be willing to take a few risks in your business model. If you don’t do that – [your competitors] are going to kick your arse.”

Views were expressed at the Startups Awards Winners’ Dinner held at the exclusive Covent Garden Hotel.

Aimee Bradshaw
Aimee Bradshaw

Writer and researcher

Aimee recently joined Startups as resident expert in business tech, products, and services. Having ran her own egg delivery business from the age of 12, she is an advocate of self starters and small businesses.


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