What's stopping the scaleup journey?
As Lancashire’s scaleup businesses grapple with the consequences of the pandemic they are also having to overcome major barriers standing in the way of their journey to growth.
Business leaders in the county believe access to markets, talent and finance are the biggest obstacles they face as we move into 2022, according to a detailed report into the UK’s scaleup landscape.
Despite these, and the continuing Covid challenge, our scaleups, remain resilient ambitious and forward looking.
Over the course of 2021 they have continued to adapt their business models, processes and practices, and increased their focus on innovation and R&D activity, according to the Scaleup Institute’s annual survey.
Access to markets – both at home and abroad – continues to be the most significant issue they face, according to the report’s authors.
The report says: “Scaleups want greater opportunities to collaborate with, and the ability to sell into, the public sector and large corporates, however barriers still remain.
Not enough scaleups are getting the opportunities to supply to large corporates or work with government
“Not enough scaleups are getting the opportunities to supply to large corporates or work with government. Collaboration rates remain extremely low with only two in ten collaborating with government, just three in ten collaborating with large corporates and four in ten with universities.”
They also want better introductions to buyers in overseas markets and more information about opportunities that are out there.
Access to finance and growth capital remained a priority throughout 2021. Scaleups continue to be far more likely to use external finance than their SME peers.
According to the report, 82 per cent of scaleups use external funding as part of their growth strategy, although 45 per cent still feel they do not have access to the right funding for their needs.
Of those using external finance, five in 10 are using equity or plan to use it “in the near future” – with VCs and Angels identified as the key sources of equity provision.
Finding the right talent, whether this means young people entering the workforce, recruiting from overseas or developing and retaining existing staff, scaleups have consistently highlighted this as a major barrier to growth. However, the report says it is “dialling up as a challenge once again”.
Scaleup leaders are calling for greater support to take on new employees, including grants for taking on trainees, along with improved careers advice about the opportunities that exist in companies like theirs.
The 2021 survey reveals there are 675 scale up businesses in Lancashire, ranging from the care sector to logistics. They employ just over 58,000 people and have a total turnover of £10bn.
Despite barriers in front of them, nine out of ten scaleup leaders in the UK are expecting growth in 2022, with one in four predicting that growth to be more than 50 per cent.
A Chorley company which manufactures energy management systems has set its sight on continued high growth following rapid expansion over the past 18 months.
EnergyAce makes energy saving systems, helping businesses to reduce costs and improve their carbon efficiency. The firm has grown around 80 per cent after developing a range of new products and services as its customer base was hit by Covid-19.
It received support through the pandemic from the county council led scaleup partnership Two Zero’s ‘Scaleup Resurgence’ programme and has now set its sight on continued fast growth over the coming years.
Managing director Gary Vizard says: “We typically operated at a high price point when comparing our products with some foreign imports and when Covid-19 hit we found that many of our customers were less interested in orders due to strains on their own business.
“We identified a portion of the market which was reliant on imported products and suffering from supply chain issues.
“We were able to source cost effective components, made some modifications to how we manufactured, and developed a new product to market to these companies on the basis that it was British manufactured. That has been the main driver of our growth.”
Before Covid-19 hit, EnergyAce was growing turnover at around 20 per cent per year. After an initial slowdown during the early weeks of Covid, the company recovered to record 80 per cent turnover growth for the 2020-21 financial year.
There is a range of support available to help Lancashire businesses on their growth journey, as Alex Tofalos, owner of Garstang-based CBD One has found to his advantage.
With lockdown having had a massive impact on sales, he began working with Access to Finance (A2F) Lancashire to investigate ways of funding the business as it prepared to push sales online.
The business has developed a range of products that use CBD oil, a legal product derived from hemp, which is proving increasingly popular as a health and wellbeing supplement. The company sells CBD through a range of oils, patches and CBD-infused skin creams.
Before lockdown, 75 per cent of the company’s business was through wholesale and selling directly to health food stores, with just a small proportion of sales online.
With orders dropping as the High Street was forced to close, Alex started to look at the web as a way of boosting sales. He had already started to look at selling online and directly to customers before Covid-19, and this research was soon to pay off.
He teamed up with a specialist advisor at A2F to work out the best way of funding a switch to online sales and was successful in pitching to Rosebud, a local authority funding programme targeted at county businesses, and in securing a loan.
That £75,000 ‘forecast-led’ funding, along with a government Bounce Back loan, gave the business fresh impetus and a way to fully develop its website and online strategy.
It led to a massive 400 per cent growth in online activity, and within 12 months CBD One had replaced the business it had lost at the start of lockdown with an 85 per growth in online sales.
The business was also referred to ‘Route into Retail’, a subsidised commercial scaleup programme run the county council, while also completing a ‘Preparing for Investment’ course with the University of Central Lancashire.
The substantial package of support has also allowed Alex to move ahead with the launch of two new products. He says: “It has been an incredibly difficult 18 months for so many companies but there is help out there if you’re prepared to look.”
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