“Thinking Scale”: Why is it important for startups?

Many entrepreneurs end up becoming self-employed and they confuse it with entrepreneurship.

The youth of today is empowered, it doesn’t fear to choose the path less travelled. As more and more youngsters venture into entrepreneurship, it becomes very important to understand the value of scale.

The Art & Science of Scaling
The Art & Science of Scaling

Most of the ambitious college going students are eager to start-up on their own – sometimes just for the sake of it, sometimes they actually are driven by a wild idea that they want to make real. It’s a very nice thing to start-up, in fact the best thing, because no matter what the result is, it makes your personality all-rounded and teaches you the nitti-gritties of surviving, excelling and extracting what you deserve in this highly competitive world. But, when they say they want to start-up, it’s very important to learn that the business that they are putting their flesh and blood into has a scale.

Scale, in its broadest sense, can be explained as the value of market of the business. Generally, it’s measured in terms of money – e.g. if I am planning to open a corporate gifting business, what is the total market of corporate gifting in India and the answer could be 100 crores or something like that. Scale is also measured in the number of users of a website, the time spent on the website etc. When you are starting up, it’s very important to understand that the idea that you are choosing has a potential to be scaled up. I’m a big fan of Steve Jobs philosophy of starting-up to create an ever lasting company, rather than for starting to exit/getting acquired, and when you talk about creating an ever lasting company, scale becomes the most important factor.

A lot of people start up interesting ventures without taking into account the scale and later realize that it’s impossible to sustain. For example, if you are starting up a venture where your revenue model delves around extracting money from Indian authors to promote their books, know that you are bound to remain small. Because, first of all, Indian authors aren’t pretty rich and some of them who are, they would always prefer to hire a prominent PR agency instead of a company, dealing with book promotion.

Many college people start with a t-shirt venture, which is the most competitive and disorganized domain to start from. They don’t realize that in a domain whose overall market is around 3200 crores, with over 10000 scattered player, the maximum piece of cake they can scale to will be around 100 crores. Is it enough? No. Why not? To get to 100 crores, one needs an investment of around 20-30 crores, and if it reaches 100 crores, there is nothing more to scale it up to.

Now consider the case of Flipkart: if I’m a t-shirt venture, I’ll keep on manufacturing tees, will become big – as big as 100 crores someday, and tomorrow, I’ll list my products on Flipkart(as it’s going to start apparel retail soon) and sell it through. Now see, when we are talking about scale, Flipkart has it. It is not only restricted to your apparels, but innumerable other t-shirt ventures. And not only t-shirts, but also all kinds of consumables. It can go on and on and keep on adding more and more things into its mega-store. The scale has no limit.

The inference to draw here is not that we should all start Flipkart. It’s just that the bigger vision should actually be BIG – really big. If you are starting a cafe, make sure you aim to turn into into a chain as big as CCD. If you are starting a software company, make sure it doesn’t stagnate after five years by becoming a mediocre web-development company but instead become Microsoft. Many entrepreneurs end up becoming self-employed and they confuse it with entrepreneurship. Entrepreneurship is about making your hands dirty, establishing the foundation to make it able to scale, and washing your hands, shaking hands with big investors and then steering its growth.

Remember the movie: The Social Network. ‘A million dollars is not cool. You know what’s cool? A billion dollars.’

What’s your opinion?

[About the author: Harsh Snehanshu is a former entrepreneur and the author of three books. He’s currently hitchhiking across India all alone, meeting diverse people for his fifth book, ‘Route to Roots – A Hitchhiker’s Guide to India‘. He can be reached on twitter @harshsnehanshu]

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