Ajai Chowdhry, one of the six co-founders of HCL and a Padma Bhushan awardee, reminds entrepreneurs leading fast-paced ventures about some of the basics of dealing with challenges that comes with scale
India is a young ecosystem when it comes to the number of start-ups running successfully. While we have seen a few online ventures becoming multi million dollar (a some, billion dollar) start-ups, the success ratio is still not too high. Several business plans/ventures fade out at the development stage due to lack of clarity or a clear strategy for execution. While new trends are being explored, what cannot be ignored is the need for constant innovation and value addition at the product development/service level. While owning a successful start-up is a thrill, it is the right experience and skill that decides its future course.
For a start-up witnessing rapid growth, it can be both a blessing and a curse. On one hand, the revenues go up, the brand builds a strong position in the market and the entrepreneur is recognised for all the hard work put into the company. On the other hand, to scale the business at an accelerated pace, dealing with the organisational challenges and managerial decisions that come with it can be overwhelming for a new entrepreneur, thus leading to several pitfalls.
I told the team to move from monthly targets to daily targets. I told them to measure their performance based on daily run rate.
Here’s a list of basic reminders that every entrepreneur leading a fast-growth venture must keep in mind:
Bring in experienced hands, at market salaries
Like I have stressed earlier, having a good team is extremely critical for managing the growth of a start-up. While young members bring in the energy and creativity, it is important to get experienced members on the Advisory Board to guide and advice on strategies, future planning, growth and dealing with investors. An awesome team, as often as it is repeated, is crucial across levels, right from lower middle management. Back in 1976, when we started HCL, we went and hired four IIM graduates at the best prevalent salary (more than what we were drawing) to join our team.
Mahatma Gandhi rightly said “Every worthwhile accomplishment, big or little, has its stages of drudgery and triumph: a beginning, a struggle and a victory.”
Mismanagement of funds, sometimes on building brands, can backfire hard
A new venture needs to change as it passes from the initial start-up to the growth phase and financial management plays a key role in this transition. Entrepreneurs should place high value on creating an exhaustive financial plan that chalks out all the risks they may face.
Most start-ups focus only on profit and mistakenly underestimate the importance of cash flow. A successful entrepreneur should be able to regulate funds and resources effectively and not underestimate operational costs. Cost for advertising/marketing is another cause of mismanagement of funds. In order to build a brand name and gain visibility, money is prematurely spent on marketing which leads to loss of capital, which could otherwise be spent more efficiently.
Hire specialists for special roles
There are several other strategic and organisational challenges that confront fast paced start-ups and the entrepreneurs who lead them. One of the other important aspects is recruitment and retention. Many entrepreneurs believe they can handle the growth and pressure but that is a serious mistake. Running a business is a skill and it is fundamental to understand the point where you would want to bring in experienced people/specialists on board. As new opportunities and business challenges come in the way, it is wiser to have someone on board who has the experience of dealing with such situations.
Hiring for specialised roles is challenging and while recruiting, start-ups should ensure they hire candidates who not only possess the skill but also share the passion, as working for a start-up can be a daunting task. If you’re dealing with a complex supply chain challenge, bring in a person who has dealt with a similar situation; not a generalist who might be skilled but will not know the finer nuances.
Master the art of delegation
It is also important that, as the business grows, entrepreneurs delegate properly, trust their management team and give up day-to-day control of every detail. As business becomes more complex, leaders need to focus on more strategic activities rather than managing day-to-day issues. Also, the start-up culture is known for its energy and fast productivity. As the company grows, they should attempt to keep up this culture and limit bureaucracy and excessive approvals. This will help create smaller teams that make faster decisions. While scaling is all about more employees, more customers, more revenue and more processes, it is also important that entrepreneurs keep a check on what not to lose. Again, as often as this is repeated, you cannot afford to lose on the passion!
Clear focus on goals; move from monthly to daily targets, if needed
Fast growth also opens doors to a vast number of opportunities, but some of these need to be turned down. It is important for the leader to ensure that the team is focused on the goals, metrics, mission and vision devised and not get distracted with opportunities that may seem lucrative but do not align with organisational objectives. Once when I was helping scale a team to faster growth, I told the team to move from monthly targets to daily targets and gave them the example of cricket. I told them to work on the ODI model and measure their performance based on daily run rate. The business just took off and doubled its revenues in one year.
The last mile
Running a start-up and managing its growth is a fast-paced, always-changing process and it is impossible to know everything about it before you begin. It is the founder’s responsibility to ensure that the company can scale properly to cope up with the new reality. Motivation and constant reminder of ownership is another facet that needs to be inculcated consistently to avoid complacency, which can easily sink in seeing the success of the business.
As Mahatma Gandhi rightly said “Every worthwhile accomplishment, big or little, has its stages of drudgery and triumph: a beginning, a struggle and a victory”, it is the struggles entrepreneurs need to overcome and make way for success to eventually become success stories.Ajai Chowdhry Financial Management Fund Management HCL Technologies Leadership Scaling up Startup Hiring