Speed Vs Sustainability: How Rapid Expansion Plans Might Affect Your Startup Growth

Building businesses with a focus on value creation is crucial. And founders would do well to think about 'speed' and 'sustainable' where both can co-exist

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Starting up is exciting but not easy. It is the most difficult career option and the most risky. But once the die is cast--product launched, customers started to buy, key team in place and early funds raised--the startup is on the go! Time of exhilaration? Yes! And No. A major milestone reached but the road to growth has just started.

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Now the most critical challenge is to grow. The question that arises is what is growth: a focus on speed of growing revenues or build sustainable business for the long run?

With innovative solutions disrupting existing businesses, technology and digital enablement creates not only larger markets but a varied customer profile. And the pandemic has broken down geographic boundaries further to create enticing markets for startups to build customer base and revenues rapidly. And this has been further fueled with the increasing funds available to startups: from angels, family offices, VCs, both in India and overseas. Large markets also breed competition: it therefore becomes imperative for an entrepreneur to focus on marketing, sales and revenues.

At the same time, is speed the only essential? 

As businesses grow, it becomes increasingly critical to build a business focused on the topline (revenues) as well as the bottomline (profits). This creates businesses for the longer run creating both value and valuation. But how do startups/early-stage businesses build such “speed plus sustainable” companies.

A double focus on unit economics and even more importantly, on cash flow ensures that sustainable businesses are built. This will need focus on several aspects:

  • Innovative product is a good start but it needs to evolve continuously, aligning with customer demands, including creating completely new products to meet new unmet demands. Stagnation is not an option
  • Business models need evolution: companies have swiveled from  B2C to B2B to align with changing customer requirement and not slow down business growth
  • Team building: focus on team is imperative, complementary and high performing
  • Rapid customer acquisition is imperative but with an eye on CAC (customer acquisition cost)
  • Product development is essential but an eye on cost of building the product is lower than sales price. In other words, an eye on gross margins vs just revenues is imperative
  • An overall capital efficiency with control on expenses helps for a positive bottomline

The trick is really a sharp focus on the cash flow: it is the most critical dashboard for the founder at all times. There is no business without cash and the pandemic has brought this out well: many businesses could not raise monies (debt or equity) died as they just did not have cash to sustain.

Therefore, the founder’s job is difficult: to ensure a hockey stick revenue growth while keeping the ship afloat. His/her job is to ensure that while it grows revenues, the bottom doesn’t fall away.

This fine balance needs to be well strategized and planned. And here, mentors who are first generation successful entrepreneurs, building garage to IPO business, bring the valuable advice. They have walked exactly the path that today’s entrepreneurs are walking. They not only help the founder think through the various optional strategies, help build the operational plan, but also help build for scale (suggesting systems, processes, tech enablement), mentor the key management team to inspire and knit it together, etc. This mentoring cannot be over emphasized which can help a founder build a leader.  

Building businesses with a focus on value creation is crucial. And founders would do well to think about “speed” and “sustainable” where both can co-exist.