Scaling a start-up
“How can I grow my business? How can we scale?” These are the common questions I got after my talk and after the panel discussion in Slingshot Cebu 2017, a gathering among tech start-ups and medium, small, and micro enterprises (MSMEs) organized by the Department of Trade and Industry (DTI) Cebu. Almost in unison, these companies expressed apprehension, at the same time, optimism, on what is in store ahead amidst threats and opportunities in presented by technology drivers.
There is reason to be worried. Nine out of 10 start-ups fail, according to a Fortune survey among founders of failed business ventures. While locally we are seeing the strongest resurgence of the startup craze since the dot-com era, we will not see them all succeed commercially. Why do they fail despite the plethora of business incubators, venture capitalist funds, and courses on entrepreneurship?
In my 2015 article in BusinessWorld titled “From 1 to 10: Scaling your business,” I explained why this is so, which I will recount here. Our informal education teaches us quite well about how to start a venture from zero to one. In fact, the seminal book of PayPal founder Peter Thiel, Zero to One, inspires readers to invent something new for the future. There are scores of other selfhelp books and training courses on how to start a business.
On the other hand, our formal education teaches us how to incrementally grow and sustain a business from 10 to 10,000. We are thought how to craft strategic plans, manage finances, and so on.
But what is sorely missing is the framework, preparation, and training for an entrepreneur to grow a business from one to 10, commonly referred to as scaling, and this is the main reason startups fail.
From my experience in scaling and advising startups and growing business units, my conversations with venture capitalists, coupled with teaching Master in Business Administration students, I have crystallized a framework on scaling a business.
But for scaling to work, the foundations of a startup should be in place — having the right product or service that meets customers’ needs, having the right set of people with the right set of skills, having a simple business model, and having enough cash to weather the startup storm.
The opinions expressed here are the views of the writer and do not necessarily reflect the views and opinions of FINEX. The author may be emailed at reylugtu@reylugtu.com.