Three Learnings for Companies in Growth Stage

TOPICS: Business Development , Digital Marketing

by Alan Yip

It has always been my honor and privilege to co-found and lead Guru Online, a digital marketing house. In a collaborative endeavor, we have grown from a startup of 4 to a hub of 300 talents. We have grown from a local-focused business, starting out in a grade-C office located in Mong Kok to a regional, publicly listed company with 5 offices across 5 cities. We have grown from a nonentity to an industry recognized company who has won 50+ awards from Facebook, LinkedIn, Tiktok, Weibo and different marketing award competitions.

It all started 13 years ago, when we made a bold strategic call to focus our resources towards Facebook, which only saw, at the time, less than 30% traffic of its major rivals like Myspace, Friendster and Xanga. It is important for every company to cultivate a trailblazing culture through action. The Olympic torch relay had always been physical, until we decided to step up the game and led youth Olympics’ first-ever virtual torch relay via mobile technology – the tech we built ran across 200+ countries and delivered a never-seen-before digital torch relay experience with 100+ million user engagements. Thanks to our great, passionate team, we have co-created many first-time memories since: enabling the first unmanned store in Hong Kong with Alibaba; reaching 2 billion customers across 5 countries for a Fortune 500 brand via a TikTok challenge campaign, driving the brand’s products sold-out on Amazon.

When it comes to company growth, drawing my experience from diverse great companies and leaders we partnered, here are some points worth noting.

Three Learnings for Companies in Growth Stage

1)      Scalability is good; Scalability with increasing unit margin is great:

Most startups won’t make net profit in its early years. Therefore, founders should take unit economics as a crucial guiding principle in growth plans development. Think on “per-unit” level, separate and estimate variable costs and fixed costs on a per-unit basis. When devising a business model, always ask ourselves: Can our products and services scale up easily? Are they standardized? How will the variable costs and fixed costs vary throughout the scaling phases, in other countries? Will new orders generate increased, similar or decreased margins per unit basis, to what extent? 

2)      More than profit & loss; Consider “future ROIC”:

When most companies focus on profit & loss statement– how revenue flows to gross profit and net income, as they are more intuitive financial indicators. Great companies emphasize both P&L and ROIC - Return on Invested Capital, net operating profit after tax divided by invested capital. It tells us how much return we can expect per each dollar of capital we invest in the core business. For startups, consider an adjusted version of the model - “Future ROIC”, which gauges the projected ROIC when and after a critical mass has been reached post-scaling.

When businesses grow, COGS (cost of goods sold) is often the focus in business planning, as it straightforwardly conveys “the cost of the products”. On the other hand, invested capital provides a bigger picture for a better decision basis, given that it considers all capitals required for growth, from increased net working capital to CapEx (capital expenditure) required. For advance usage, compare projected ROIC against the company’s WACC (weighted average cost of capital). For start-ups that focus equity fund raising, the WACC may be the company's expected IRR return of venture capital investors. 

3)      Don’t just acquire new customers; Acquire customers and make them stick with us:

It is tempting to spend majority of time and resources in customer acquisition, as it manifests growth. That’s good. Great companies see growth as a combination of net customer growth (new minus lost customers) and stickiness increment of existing customers. Acquiring new customers is not an easy task. Making them stick with us? Even harder. So ask ourselves often, have we developed plans that enhance customer stickiness? Have we included new incentives and payment options for 3R purposes – enhancing recurring revenue (vs one-off revenue); repurchases (vs drop-offs) and referrals (vs silent customers)? Have we incorporated additional services that increase customers’ switching costs?


About the Author

Mr. Yip serves as the Chairman and co-founder of Guru Online (Holdings) Limited, a publicly listed Internet company in Hong Kong. Guru Online inspires to digitalize traditional businesses by leveraging creativity and innovation. The company thrives as a forerunning powerhouse with collective wisdom from hundreds of Internet specialists.

Started from 2007, Mr. Yip has founded Guru Online as one of the pioneer digital marketing companies in Asia that firstly leverages social media platforms and develops diverse digital projects with dozens of Fortune 500 companies. Headquartered in Hong Kong, Mr Yip has successfully led Guru Online to a regional enterprise, with branches in Beijing, Nanjing, Guangzhou and Taipei.

Prior to the foundation of Guru Online, Mr. Yip worked at Procter & Gamble Hong Kong Ltd. (P&G). He graduated from The Chinese University of Hong Kong and the Entrepreneur CEO program at The China Europe International Business School (CEIBS).