Top financial barriers that scaling start-ups must look out for in 2020

Growth | Reports | Start-up

Written by Andrew Johnson, FD of PowWowNow

The transition from start-up to scale-up is one of the most challenging hurdles to overcome when heading up a business. Where many start-ups figure things out as they go along, a scale-up has a proven model and scaling revenue.

On its way to consistent accelerating growth, scale-ups carry the expectation to deliver consistent positive results. According to research, only one in 200 start-ups actually make it to scale-up status. So the question is, how do business leaders prepare for this huge leap and what hurdles must they overcome in 2020?

Brexit

Brexit, the buzzword of 2019, will undoubtedly throw up a host of unforeseen obstacles in 2020. Issues around decreased investment, potential difficulty in attracting talent and uncertain access to European programs mean that some start-ups are starting to look to expand outside of the UK. However, it is not all doom and gloom. If businesses can learn to adapt and manage Brexit by working actively with European partners to simplify access to EU-based investors and create harmonious new relationships, they will be able to weather Brexit.

Personnel resources

A thriving start-up culture organically develops from the people you hire, and as a company scales up, so does the team’s demand for up to date resources and technologies. Investing in modern technology has and always will be a huge financial barrier when it comes to growing a business. According to the Lloyds Banking Group, a small business spends around £2,440 on their IT start-up costs, as well as additional monthly charges for phone and broadband.

Despite these initial expenses, the investment in technology is essential in order to promote productivity and efficiency that will facilitate the jump from start-up to scale-up. One alternative solution that can minimise this initial outlay is to adopt communication tools that enable remote and flexible working. This will not only boost staff wellbeing and productivity but also reduce initial office costs.

Increased competition from rivals

With more start-ups emerging year on year, there will be more competition than ever before in 2020. While business is a competition, as a start-up competition should be viewed as a positive. Increased competition pushes you to be innovative and stay more focussed on your end goal. Having a challenger hot on your heels pushes you to develop faster and drives innovation, inspires perseverance and builds team spirit.

Funding

Foreign investment in start-ups has fallen 92% since the referendum in June 2016, and this stat could increase as we edge ever closer to Brexit deadline day in 2020. However, there are still a range of government grants offered by the Department for Business, Energy & Industrial Strategy as well as The Start-up Loans scheme; an initiative offering loans of up to £25,000 and advice on writing up business plans, and free mentoring from business experts. These schemes are invaluable for growing start-ups and could provide essential support when they look forward to 2020 planning.

The progression from start-up to a scale-up this year will mean that businesses need to prepare for some a period of adjustment. So, when start-ups look towards 2020, they must ensure they are more adaptable than ever before in order to manage external factors and achieve the next level of growth.

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