Published on July 23rd, 2013 | by Perzen Patel0
Scaling Up: Balancing the Fine Line Between Purpose and Profits
The ability to successfully achieve scale is potentially the key differentiator between a startup and an enterprise. It is only through growing operations, be it through size, geography or markets can enterprises generate a widespread impact as well as scale their profits.
However, scaling up and reaching new markets while balancing profits and purpose is often challenging due to barriers such as small networks, low budgets, etc. Recognizing this, Ennovent hosted its second Thought Leader Session in Bangalore in July where we brought together leading entrepreneurs – Neelam Chibber of Mother Earth and Ashwin Naik of Vaatsalya to debate best practices whilst achieving scale.
While there are several challenges that must be encountered the speakers unanimously agreed that the core focus should be on the market and developing a business and financial model that can be sustainable in the long run. Experimenting with various models and incorporating the learning from each experimentation cycle is key. “Your first priority must be the market. At Mother Earth we banked on design and price differentiation, started our first store, took feedback from customers and then continuously translated this feedback to our producers. These feedback loops with our market has been a key driver for growth”, added Chibber.
Scaling is also about making trade-offs. Trade-offs between budgets and brand building or between catering to new markets and growing the team are ones that many entrepreneurs deal with on a regular basis. Nevertheless, if you have the mission of the organisation front and centre, everything else falls into place.
Naik elaborated on the trade-offs Vaatsalya had to make such as focusing on delivering excellent services to only one segment of customers rather than trying to inadequately cater to the needs of multiple segments. He adds, “Another trade-off was the debate between scaling or figuring out internal processes. The board wanted us to focus on the processes first but we realized that scaling was more important and therefore concentrated on expanding before sorting out the internal processes”.
Another key challenge for scaling, especially for social enterprises that struggle with budget constraints, continues to be retaining employees to build a successful team. Both Naik and Chibber felt that it is important to pay competitive salaries, offer stock options and other benefits at par with other sectors and provide avenues of personal growth in order to retain quality staff. Naik said, “As the organisation grows, so do the challenges. And, at those times it is the enthusiasm and energy of the team that will push you to go an extra mile with your efforts”.
From a practical and strategic perspective, Chibber added, “Paying high salaries was a challenge while we were in the zero to four crore revenue range and so we traded off the lower salaries with more training options for the team. However, once we secured investors and the revenue levels grew we paid market rates to secure good talent and also gave stock options to our producers”.
Touching on the debate between profit margins and social impact, both Chibber and Naik felt that you can only create an impact if you around. Therefore, entrepreneurs must first focus on staying alive while nevertheless ensuring that no negative impact is being created through their activities. They also countered the perception that investments from commercial investors results in a dilution of impact. While Chibber chose the Future Group for their retail expertise, Naik chose investors that supported his vision.
“There are always going to be debates and some level of disconnect between the founder and the investor. However, while the board and the investors focus on data, you are the entrepreneur and you must go with your gut. The disconnect mustn’t affect the plan of action –for example, Vaatsalya launched their first hospital within three months of raising capital” added Naik.
What truly defines the success of an entrepreneurship event is when speakers openly pour their hearts out and Friday’s Thought Leader Session was the perfect example of this. Through the sharing of their stories both Chibber and Naik highlighted that if one wants to multiply the impact of their work, there is no shying away from scaling up.
Hitting the bottom line and delivering impact will always be a fine line but persistence and a strong focus on one’s vision is what will separate you from the rest.
Ennovent offers a range of Scale Services such as expert phone consultations and expert advisory engagements. Learn more about our Scale Services now.