Making the move from startup to scaleup

Ameer Washington worked for 13 years at a Cleveland title company, all the while dreaming of owning his own cleaning business. In 2005 he started a residential cleaning business while still employed full-time, finally taking the official entrepreneurial plunge to start Precision 1st Commercial Cleaning in 2010.
Business has been good for the Euclid-based business over the last five years. That success comes as a result of strategic planning, persistence and assistance, he says.
“We do apartment cleaning; we make it ready when tenants move out,” Washington says. “We do windows, kitchens, bathrooms, strip and wax floors. We do everything except the walls."
Moving a company from startup stage to scaleup is not simple. While the term “scaleup” is defined differently by those involved in helping startups transition into more established companies, the premise is largely the same.
“Scaleups are companies with four or more employees with the ability to achieve a high growth trajectory and sustain that trajectory for three to five years,” says Michael Jeans, president of Growth Opportunity Partners (GrowthOpps), a JumpStart spinoff that focuses on scaleups in low and moderate income neighborhoods. “That company might need guidance services and capital to achieve their growth goals.”
“As an entrepreneur, it’s not a black and white situation," says Greg Zucca, vice president of lending and lending operations at the Economic Community Development Institute (ECDI), a nonprofit that helps small businesses with training and securing loans. "(Scaling up) is not a science, it’s an art.”
A decade ago the push was on in Cleveland to create an entrepreneurial ecosystem to boost the economy and create jobs. Since then, organizations like JumpStart, ECDI and LaunchHouse have helped hundreds of entrepreneurs pursue their ideas and launch their companies.
That ecosystem is maturing, proponents say, as businesses that were once considered startups  are now thriving, growing and hiring within their markets. Entrepreneurs and experts shared advice with Fresh Water on making the transition from startup to scaleup.
Keeping up with Demand
Washington, who ran the business with his son upon starting out, turned to ECDI for help growing Precision 1st  when more workers and equipment were needed to keep up with demand.
“Ameer had reached the point where if they didn’t grow they would become stagnant.” says Marco Grgurevic, ECDI relationship manager. “He needed to buy more equipment to do his job more efficiently and have two crews because he was getting more calls than he could service. He needed working capital because sometimes his cash flow doesn’t support him doing more jobs.”
Precision 1st Commercial Cleaning employee Marcus Lewis
Through ECDI, Washington was able to secure loans to buy equipment and hire five additional employees. Now he's ready to expand his business again – this time into fire and flood cleanup.  To this end, he received the necessary certification and partnered with local industry leaders. He's also searching for a storefront to house his company.
“Just stay at it,” Washington says of the scaleup process. “Learn everything about the job so that when you expand, you’re certified.”
Don't Get Ahead of Yourself

When startups begin to succeed, the temptation is to grow and grow. Resist that urge, says Todd Goldstein, co-founder and CEO of LaunchHouse, a coworking space that recently shifted its focus from being an accelerator to providing investment and entrepreneurial education.
“To me a startup is pre-revenue, it’s just an idea,” Goldstein says. “A scaleup is past the beta stage – beyond friends and family and you have paying customers buying repeatedly month after month.”
A scaleup does not mean hiring a bunch of people to show off growth. “The most important thing is strategic hiring,” says Goldstein. “A lot of times when companies grow, they hire a lot of employees. My strategy is try to do more with less.”
Rage On founder Mike KrilivskyRageOn bills itself as the world’s largest all-over print online store, selling t-shirts and other apparel. Launched by Mike Krilivsky in 2010, the company has taken off after relocating to Cleveland from Boston in 2013.

The company endured some rocky times when Krilivsky didn’t heed the advice of his mentors, Goldstein included, and hired more workers than the payroll could handle.
“I was told don’t hire a lot of inexperienced people, hire a few amazing and great people,” he says. “In hindsight, if I could have afforded to hire the best, I would have."
Krilivsky laid off several staff earlier this year, refilling those positions as business picked up. “You really want to watch your spending," he says.
Zucca of ECDI says growing too fast is a common mistake. “It’s a balancing act,” he says. “While you want to be aggressive in trying to obtain customers, don’t push the throttle too hard before everything is firmed up.”
Krilivsky move methodically in making company decisions. “The goal is to project the company to a multi-billion dollar platform,” he says. “I don’t care about the money. I just want to market it and scale it. All great things in life are made from difficult and intense processes.”
Implement the Right Teams

Rather than hiring, consider using an outsourced team of professionals to help grow the company, says Jeans of GrowthOpps, who cites bookkeeping, compliance issues and quality as areas where a business owner may seek help.
“There is tremendous value in having the right professional partners around,” he says. “Have an experienced team who might not necessarily be on staff to help manage growth.”
Manage Growth Wisely

There are a number of red flags to consider when a company is trying to handle aggressive development, Jeans notes. For example, companies may underprice their product or service to garner customers.
“You can have high sales and not necessarily be making a profit,” says Jeans. “You can feel like 'we’re doing it right, this feels good, we’re in this number of locations and we’re getting products to market.' It begins to seem that this is what success feels like.”
This can lead to a false sense of comfort. “You could be spinning your wheels,” Jeans says. “Go back to the balance sheet. You could be branding yourself as a lower cost service provider than you  intended to be.”
Zucca advises proper planning. "We understand your enthusiasm to want to hire people,” he says. “But take baby steps. Don’t shoot for the moon too fast. Have a plan for growth, but also a plan for realistic growth.”
Implement a Plan from the Beginning

Any successful enterprise starts with a solid game plan, says Jeans. He recommends companies begin with a solid business plan, and re-examine that plan when they start to expand.
“Small business owners typically wear multiple hats,” he says. “Look at your systems and processes. A lot of people look at their systems and say ‘we’ll cross that bridge when we get to it.’ You find yourself at a disadvantage if you don’t have the foundation or infrastructure in which to grow.”
The Right Capital
Having enough capital is critical to any business's success, so don’t hesitate to look for direction as well as finances from outside sources, says Jeans. “Undercapitalization is the number-one reason most businesses fail,” he says. “Ask yourself if the company needs equity or debt – it depends on the wherewithal of the individual starting the company.”
Though some company owners have capital sitting aside they can use until they break even, Jeans cautions owners not to dip too far into their own pockets. “Unfortunately, folks use more of their retirement funds than is advisable,” he says. “If things don’t turn out well, there’s a ripple effect in a household that can last a couple of years.”
Get Past the Fear

In 2013, Clark Pope was busy running Pope’s Kitchen, a catering business that offers a line of salsas, Bloody Mary mixes and hot sauces to area farmers markets and retail venues that support local food companies. Then Market District called and said they wanted to carry his products.
Suddenly Pope was in big-time scale-up mode. He hired additional staff so he could fulfill Market District’s orders along with the orders of his other customers.
“When you’re scaling up you better believe in yourself as much as you ever did,” he says.
Pope, who works out of the Cleveland Culinary Launch and Kitchen, is now wearing all the hats of a small business owner. His days find him running a warehouse and filling large orders with the help of a small staff. He's also coming out with six new products this year.
“The number-one rule in scaling up is you need to do it before you have to do it,” says Pope. “It’s less personal in that it’s more a level of commodity. So I have to have the staff making stuff and have it sitting in the warehouse. I need the people in place and the product in place before that product is needed.”

Carlton Jackson and his partners grew Tunnel Vision Hoops literally from the ground up. In 2009, Jackson, Todd Alexander and about 30 other friends went to Michael Walton’s urban farm to help build a hoop house. What they thought would be a weekend project ended up taking more than a week. At the end of the project, Jackson, Alexander and Walton decided there had to be a better way.
Carlton Jackson and Todd Alexander, co-owners of Tunnel Vision Hoops working on a hoop house in Ohio City
So the trio brainstormed Tunnel Vision Hoops, which designs, manufactures and installs high tunnel hoop houses and kits for everyone from the backyard gardener to working farms. After five years, Alexander and Jackson have turned the company into a successful venture.
TVH’s first clients were CWRU’s Valeevue Farm and the Cleveland Botanical Garden. Today the company sells high hoop house installation kits and installs hoop houses across the country. As of its fifth anniversary in June, this year, TVH's total sales were just shy of $1 million.
Scaling up is no easy feat, but worth it in the end, Jackson maintains.
“It's is kind of like going public – it’s very expensive,” he says. “But scaling up is an experience too. We waited until we fleshed out our product line and went through design changes. We went at the thing knowing what we wanted to achieve.”

Photos Bob Perkoski
Signup for Email Alerts