From startup to an enterprise – The paradigm of scaling a business

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In my previous article, I shared my thoughts and opinions on the topic “The dilemma of tourism startups as they scale up”. Having allowed readers ample time to ponder on some of the guidance and steer provided, I am hopeful that we are at this juncture today where we are over the dilemma and ready to grow exponentially. My thoughts today are mostly geared around the growth aspirations of a startup company and a critical path that a startup needs to reference when they are ready and eager to scale sustainably.

I may have used growth and scaling interchangeably in my opening remark, but I doubt the majority of you picked up that growing a business and scaling a business are premised on two different fundamental principles. Growth may come about as a result of a massive capital injection where one can afford to deploy resources to acquire new business, new clients, new assets to name but a few. We more often than not attribute this to an accelerated growth and it is mostly akin to business success. Without a solid business foundation and plan, accelerated growth can be become the biggest nemesis and pitfall to the success of a startup due to it not being sustainable.

Scaling is incremental and comes about with a steady increase in revenue, skill and intellectual capital, a comprehensive customer value proposition and a solid business plan. Scaling is a carefully crafted equilibrium between revenue and business growth. As your revenue grows, it creates sufficient liquidity to aggressively increase your client base and not vice versa. I have more often than not said that as one “prays” for a business growth, a “prayer” for the ability to manage and sustain it is equally important.

Scaling involves getting the fundamentals right. Putting in place processes, people and systems in order to establish a formidable business culture and brand identify is imperative. To this end, the foundation of scaling is as important as the team that realizes the dream and aspirations of the business. As you scale, you are transcending past employees to managing an end-to-end stakeholder matrix, embodying partners and other key parties that will accelerate your growth ambitions. A key component past employee is the customer and what solutions and innovative product range you can offer.

I once invested in a property in a suburb where my occupancy rate was 45%. Why? Because I had me in mind and not the needs of the customer. It is critical that when you develop a solution, you think of the market first and the gap that your product or solution aim to close before you move forward. According to a study by the Kauffman Foundation, only 1 in 10 businesses scale successfully.

To ensure that one knows when to scale, you need to watch out for areas that are advantageous and have shown consistent growth. Triggers for scaling include revenue growth, customer acquisition and retention, gross margin, market share and the effectiveness of your management team. Horizon scanning such as competitive landscape, regulatory and the macroeconomic fundamentals are essential.

Akwasi Obeng-Adjei is the Director of Absa Group Internal Audit: Investment Management and Insurance and an academic with a vested interest in Future and Digital Transformation. A mentor and a coach for Tourism startups and an established speaker on tourism. PhD Candidate (Univ of Witwatersrand), MBA (Univ of Stellenbosch), MCOM (Univ of Witwatersrand), BSc Hons: Management (University of Johannesburg), BSc IT & Mathematics qualifications.

This article was first published in the June 2024 Issue of VoyagesAfriq Travel Magazine

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