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What Startups Need to Take Stock of During their Scale-up Phase

Startups must be mindful of several factors before they consider scaling their business, and staying balanced is the key in the phase

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CIOL Bureau
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Startups

“Think big, start small, then scale or fail fast” says a famous quote. This saying is more or less the mantra for startups in today’s day and age. Once a startup is established, the next step for a new-age business is naturally to look for avenues to scale. However, the actual scale-up process and the journey towards becoming a unicorn and maintaining the unicorn status is far from dreamy.

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An IBM-sponsored study called Entrepreneurial India released in 2017 says a different story. According to the survey, as many as 90 percent of Indian startups fail within the first five years of their inception. In addition to that, nearly 77 percent of the venture capitalists believed that lack of innovation was the primary reason for the failure of startups. While considering these stats, what are some of the factors that startups need to keep in mind before expanding their business? Let’s find out!

Important Things Startups Must Keep in Mind While Scaling

Check if business is scalable: The primary question that startups need to ask themselves is if their business is ready to scale. The important factors that need to be considered here are customer lifetime value (CLTV), which is basically the average revenue a single customer is predicted to generate over the duration of their account and customer acquisition cost (CAC) - the average expense of gaining a single customer. If a startup is for some unsure of this, scaling up would basically be an unsuccessful exercise. 

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Innovation: Constant innovation is a key to any successful business. In order to sustain, businesses must be open to improving and evolving. Several businesses have lost their unicorn status as they were not able to offer anything new. In fact, figures released by the Geneva-based World Intellectual Property Organization (WIPO) had stated that In 2014, India filed 1,428 international patent applications as against 42,381 by Japan, 25,548 by China and 13,117 by South Korea. However, the Indian Government claims that the positive initiatives announced by them has addressed this issue. Some of the key initiatives taken by the government over the years that has bolstered India's IP regime includes fee concessions like 10% rebate on online filing, 80% fee concession for startups, small entities and educational institutions, and provisions on expedited examination for startups and MSMEs along with other categories. Due to these initiatives, filing of patents have increased from 42,763 in 2014-15 to 66,440 in 2021-22, which is an increase of more than 50% in a span of 7 years.

Hiring the right people: An idea is only as good as its execution. And execution completely boils down to the team that has undertaken the task. Having the right people taking care of their responsibilities along with the appropriate culture fit supporting the organisation will certainly help take the startup to greater heights. Furthermore, hiring should be done at an appropriate speed. Hiring employees too soon may impact the culture of a company in a detrimental and uncontrollable way.

Customer feedback is supreme: While startups benefit from a happy customer, they would benefit more from an unhappy customer as well. Like the popular saying goes, “customer is king” and learning lessons from the feedback given by customers will help businesses go a long way. Along with the product the company is offering, superior customer service and experience must be given utmost importance. Acquiring new customers, while retaining old ones should be a priority as well.

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Mind the cashflow: A study has found that most startups fail because they end up exhausting their funds before they turn profitable. Therefore, funding and being supported by the right set of investors while a startup scales is extremely important. There should be a strong cashflow, and businesses must be mindful of the cashburn.

Remember the intent with which the company was started: Several companies often tend to forget the intent and passion with which they started their venture once they become profitable. Staying true to one’s DNA and working on the strengths of the company should be a consistent and ongoing process. Companies should always make an effort of maintaining the standards that made them successful.  

Vikas

The article has been written by Vikas Bhonsle, CEO – Crayon Software Experts India