Scaling up a business is no easy feat, as my colleague, Scot Wingo, pointed out in a recent LinkedIn post. He drew attention to the difficulties presented in Verne Harnish’s book “Scaling Up: How a Few Companies Make It . . . and Why the Rest Don’t.” The poignant core fact from the book can be summarized as follows:
A mere 0.061% of startups manage to surpass $50 million in revenues, while a staggering 96% of all businesses fail to surpass $1 million in revenues. These statistics left me contemplating the underlying reasons behind this phenomenon.
One significant factor lies in the scarcity of well-educated entrepreneurs. According to the US News & World Report, only 39 universities are recognized for their exceptional undergraduate entrepreneurship programs. Assuming an average class size of 1,000 students per school, with only 10% specializing in entrepreneurship, equates to a mere 3,900 highly regarded entrepreneurship graduates each year. Considering the average career length of 44 years, the number of well-prepared entrepreneurs remains relatively low.
Additionally, entrepreneurs often face a multitude of challenges on their scaling journey. The lack of access to capital, limited resources, and fierce competition are just a few of the hurdles that entrepreneurs must overcome. Scaling requires a delicate balance of strategic decision-making, effective resource allocation, and diligent execution.
Another crucial aspect rarely discussed is the psychological toll that scaling a business can take on entrepreneurs. The pressure to succeed, the fear of failure, and the need to constantly adapt to an ever-changing market can lead to stress, burnout, and mental exhaustion.
So, why is scaling a business so difficult? It is a complex combination of limited education opportunities, various external challenges, and the immense psychological burden placed on entrepreneurs. Recognizing these obstacles is the first step towards finding innovative solutions and support systems that can enable more businesses to successfully navigate the challenging path to scalability.