How to successfully transition from Startup to SME

The South African climate has long been fertile ground for startup ventures and entrepreneurs. With incubators and accelerators for almost every industry, funders constantly in search of viable businesses to invest in, and the government doing their bit, South Africans are no strangers to startups.

So why is that, according to Forbes.com, even with all the incubators and accelerators at our disposal, 90% of entrepreneurs fail. What are we missing?

Here are Six Steps to Ensure our Startups Successfully Transition into Sustainable SMEs.

1. The Lone Ranger is a Fossil

Transitioning successfully from a startup to a small business or enterprise is a tricky balancing act; you need the income to drive you forward but not too quickly that you can’t expand the staff at the same time.

Outsourcing – thankfully something South Africans are no strangers to – is still the best interim solution. Outsource your accountant, marketing and even your PA so that you can bridge the gap as your business transitions from one phase to another.

Also, consider a business coach to guide you through this transition phase. The value of a coach’s guidance as you let go of the old and embrace the new will ensure you don’t leave what’s important behind.

Bring people around you. That ensures you are free to focus on the core functions of your business, while they carry on with the peripheral functions.

2. Focus on What Matters

Throughout the startup phase, and beyond, it’s important to set achievable goals and regularly review your progress against them.

However, instead of focusing on growth, stay focused on your key objectives and what makes you different from your competition. Focus on your team and create a great customer experience, rather than growth: growth is a by-product of a successful business.

Progressing from micro to SME shouldn’t change your company attitudes and culture: these make you unique.

Hold onto these and incorporate them into your bigger profile as you develop your business.

3. Bloom and Grow

Your next big step is to hire a full-time key member of staff – a production manager, operations manager, perhaps a senior accounts manager. I know this is a large financial commitment, but you will see a return on your investment.

Firstly, the boost in morale will lift the spirits of the existing team, as this senior position will alleviate some of their workloads. Secondly, the added seniority on the team will help support your leadership.

According to Paul Lees, chief executive and founder of Powwownow, which has gone from a start-up to a well-established SME in the last decade, believes that often the hardworking individuals who have built a business from the ground up, are not equipped with the skills to take it to the next level.

Invest in knowledgeable individuals, hold on to the knowledge of the original team, and your business will transition start to grow.

4. Know What You’re Worth

In the beginning, most startups exchange low prices for their school fees. I.e. you and your team are still learning how this thing called ‘startup’ works, so you charge lower fees as your service or product might take a little longer to be delivered, and might have a glitch or two. You probably also take jobs that might not be your core business, but you need the work, so you do it.

No problem. Learn, dig deep, eat humble pie, say yes and grow. However, you are not meant to stay in this phase forever.

With time, you gain experience, confidence and expertise. When you are ready to transition, you no longer need to stay in the cheap and cheerful seats. It is likely that your value and team have scaled and you now qualify to play in a different price league.

When you initiate the transformation to expand your business, be sure to evaluate clients and their worth.

• If necessary, walk away from a client or two who might not be willing to evolve with you.
• Be consistent and never compromise on your quality of service.
• Weigh up your strengths and weaknesses, what you enjoy doing and ultimately what gives you the best return.
• Prioritise these core areas of strength to drive your business forward.
• Identify what your ideal customer looks like, so that you can cater to their needs, and make your offering more attractive to them. A good marketing company or brand coach can help you with this.

5. Think Big, Act Small

If you’re an entrepreneur and you’re still in business, congratulations – you are doing something right. With only 10% of startups surviving, it is important that you don’t walk away from everything that got you here in the first place in exchange for ‘growth’.

• Startup Culture: Your culture is a foundational pillar when you’re a small company – it’s what carves out your reputation and generates those highly-coveted streams of repeat business. Have big goals, but protect the energy and agility of your startup.
• Start Somewhere: ‘Think big, act small’ also implies that each big dream has to start with that first small step.

In a post from Google’s Think Insights, Google’s former Senior Vice President of Adwords and AdSense, now Senior Vice President at YouTube, Susan Wojcicki explains, “No matter how ambitious the plan, you have to roll up your sleeves and start somewhere. Google Books, which has brought the content of millions of books online, was an idea that our Founder, Larry Page, had for a long time. People thought it was too crazy even to try, but he went ahead and bought a scanner and hooked it up in his office. He began scanning pages, timed how long it took with a metronome, ran the numbers and realized it would be possible to bring the world’s books online. Today, our Book Search index contains over 10 million books.”

• Update How You Do Things: ‘Think big’ also means it’s time you stop running your business with free-trial software and patchwork systems. If you want to compete with the big dogs, adrenaline and will-power are not enough to go the distance.

I know this is not glamourous or very ra-ra, but if you want to emerge as an SME to contend with, it’s time to improve your internal systems, software and policies. The systems you use now will buckle and fail under the strain of rapid growth.

Does someone in production consistently produce great work in record time? Map out what he does and how he does it, step by step, then make that a new production policy, so that your product delivery becomes reliable and consistent. A business coach could help you here.

Still using Excel to handle your orders, invoicing and reports? It’s time to look at a more holistic, smarter approach that will scale with you. Business Operating Systems (BOS) – the next generation of ERPs – automate the admin of your business so that you are free to grow. A good BOS should cover quotes, production management, stock control, timekeeping, reports, invoices and accounting. If you have a big budget, look at SAP. If you want software that will grow with you and has friendly support, we like QuickEasy BOS.

6. Jack Be Nimble

Finally, never cease to innovate. Stay nimble. You’re the boss, right? That’s one thing that large corporates envy about SME’s: if you have an idea, you are able to immediately put it into action. Test it. If it works, great. If not, try something new.

About Heinrich van der Vyver

Heinrich is a South African entrepreneur who started his software business 20 years ago when he saw a need for accurately estimating software in the print industry.

He has since grown his business to include all business sectors and all business processes all over South Africa.

QuickEasy BOS is the result of Heinrich’s passion for producing easy-to-use ERP software backed by friendly support.