"WWH formula of business scaling" How to scale startup?

It is the tendency of Business to growth and expand. Entrepreneur aims to increase turnover, profits, venturing into new geographical regions, new products and more.  But expansion cannot be done by magic wand. There is a systematic process of scaling and needs deep brainstorming.  

You cannot scale until you have clear written plan of action. It is validated fact that 90% of the startups in India fail within 5 years of commencement because of reasons like product market mis-fit, lack of capital, poor revenue model, inexperienced team, bad timing, etc.

You can chalk out your scale up plan with the help WWH formula that I will explain in three different post for clarity.

The WWH formula is –

When to scale

What to scale?

How to scale?

Lets understand the first ‘W’ that is -  When to scale?

You know when plant grows to become tree; once its routes are strong and are deeply penetrating in ground. Similarly, once business set up its route deep into market of origin then entrepreneur shall think of expanding.

Product solving problems - 

Products needs to be tested in one or two markets and delightful feedback from customer is successful proof of concept. Once product is solving problem of mass consumers and gaining rising traction like increase in revenue, increase in app downloads or website hits, it is ready to scale. But there are many other factors too.

Bangalore based Bike rental startup Tazzo failed due to low customer demand, low revenues, early to market and lack of capital.

Management bandwidth/ succession -

Before management decides to scale it need to go on Auto mode. Yes, Entrepreneur needs to have succession plan, second level leadership that can take committed control of existing market or new market or new product line.

Availability of surplus funds -

It is crucial to have before expansion. It is not advisable to disturb the working capital of one market to enter into new market or new product. Expansion is done from growth capital whether it is generated from profit or new capital is bought in by entrepreneur or Investor.

‘Holachef’ a food delivery startup connecting consumers and chefs, started scaling when foodtech was not profitable and giants like zomato, swiggy, Uber eats were offering huge discounts and free delivery. It was bad timing for scaling, it couldn’t get next round of funding and hence it could not grow.

Right timing to expand -

Most of the businesses are cyclical in nature, hence suitable expansion time is when demand is there or it is up cycle. As in down cycle business will have to face loss for few months till the demand time comes.

If you are in finance or fintech industry rainy season is bad time to invest in expansion, good time is September to march. For education / edtech business, best time to pitch to new market/ customer is December to February.  For e-commerce good times start from August to mid February. For restaurant industry the right will be from October to January.

Further, it is also needed to be considered that how other players are performing, what is consumer behavior and adaptability rate, habits, etc.

“Doctalk” – online medical consultancy app and digital report storage startup failed due to non adoptability by consumers in 2018-19. In India doctor consultancy is preferred offline hence it proved bad timing for Doctalk as it was early for Indian market to follow this model. Today in 2020 it is the right time for such online medical apps.

Considering factors like – Product market fit, management bandwidth, surplus capital, right timing Entrepreneur / management can take a call to scale and start working on other two equations with What and How.  It will be published in this week itself.

Your comments are my motivation.

With Best Regards,

Amit Pamnani