Every businessman want to have unlimited business growth. We shall understand the scaling up of business with one simple analogy of regions (area), you are serving your customers.
How much area do you want to serve with your business? Many a time people start business keeping this very important aspect in mind. They either plan their business for Society/Village level or City level or State Level or National level or International Level now Universal Level. Last one is new entrant in this list.
Any business can grow to the extent of your mind. Each business cannot fit in each category, but with time you can either increase or switch over your business. And those who are planning to start new business must decide their region for scale-up capability.
e.g. If somebody want to start Morning Snack Business like Samosa, Jalebi or Idli, Vada or Locha, Khammad; he will start at one corner in town or city. Once setup is done & peoples start liking it, cash will start flowing in. Now after some time that business owner, think for another outlet at other location in same city. Can he go to state level or national level? Chances are very less. Because same type of snacks may not be preferred by other people and also at same time it’s not easy for business owner to customized the type of snacks location wise.
Same can be the case for transport business (trucks), can this business grow out of city, yes off course it can grow. It can grow best up to state level. But to move out of state i.e. national level, it will not be easy.
The level I am describing here are with respect to no. of customers i.e. from where your customer are approaching to take your product or service.
Once internet is connected to your business to bring customer, your business become global. Like you are selling your product online within India, then your physical outlet doesn’t matter. Customer can place you order from any where in India. Only you need to manage your supply chain. If from outlet, you are providing service to 50-60 peoples per day, then through online these number can be 5X or 10X or may be more.
Let’s take example of Amazon here, at very early stage this company was operating within one region in one state, not now it’s operating in more than 100 Countries across world!.
Other Example can be MacDonald’s, this business was once upon a time operated at one place, then after making this outlet a successful outlet, it was duplicated at multiple locations. Today this Global foodservice retailer is operated and franchised a total of 38,695 restaurants worldwide in 2019.
It’s like, once upon a time you learn one skill and now you are utilizing that skill at multiple location and harnessing the benefits from all these location.
Wealth = No. of Unit x Cost per Unit
To create amount of wealth, either you increase no. of unit sold or increase cost of your product which customer is willing to pay.
Now let’s take example of Samosa, The person in samosa business can be Lakhpati or with more outlets can be Crorepati (millionaire) but sure shot never a Arabpati (billionaire).
Because this business has a limitation of Unit cost, it cannot be on higher side, at the same time there is limitation of making no. of units and timely delivery at outlets in good quality condition.
Other example we can take is Tesla Cars. For the full year 2020, Tesla delivered only 4.99 cars to customers compare to 95.28 Lacs of car by Toyota. And the price range of Tesla Cars in India is ₹ 60 Lacs to ₹ 2 Crores.
Now you can understand the power of Unit cost in wealth formula. With even less number and high cost you can achieve a big success. In year 2020, tesla has become world’s number one automobile company.
Time to reach $100 billion mark (India)!
In recent years, companies market cap are increasing like never before. Once upon a time to reach a company market cap to $10 billion was a big challenge. Now in India there are three companies having market cap >$100 billions & those are RIL, TCS and HDFC. HDFC is recent entry in this list.
RIL, founded in 1973, took almost 34 years to reach $100 billion market cap in 2007. TCS, founded in 1968, took almost 50 years to reach $100 billion market cap in 2018. Whereas HDFC, founded in 1994, took only 25 years to reach $100 billion market cap in 2019.
Time to reach $1000 billion mark (World)!
Now look globally, worldwide reaching a market cap of $500 billion was a huge challenge. Now even $2 trillion is not the limit. (just to have idea, $1billion > ₹ 7000 Cr & $1 trillion = $1000 billion).
First company to achieve $1 trillion market cap was state oil giant Saudi Aramco. With this it was a breakthrough in the market cap limit.
Apple, Founded in 1976, while it took consumer electronics multinational founded by Steve Jobs, Steve Wozniak, and Ronald Wayne, 42 years to hit $1 trillion in value in 2018, the other trillion dollars came in just two years.
According to data from YCharts, Apple’s market cap stood at $981 billion on March 23, 2020. The company added its second $1 trillion in market cap astonishingly in just 21 weeks even as the world economy grappled with the slowdown amid the Covid pandemic.
To put Apple’s $2.13 trillion market cap in perspective, the company comparatively is now worth around two-third of India in terms of annual GDP of $3 trillion and nearly 7X of Pakistan’s $278 billion GDP. Apple is also bigger than some of the leading economies globally in terms of GDP such as Italy ($1.9 billion), Brazil ($1.8 billion), Canada ($1.7 billion), Russia ($1.6 billion), Spain ($1.39 billion), Australia ($1.37 billion), according to the 2019 figures by Statista.
New Trend (IPO)!
There is also a new trend across world, if your company is performing well in segment, then you can plan IPO. With this IPO, over the night your own value and off course your company’s value will be in billions of dollars.
We can take reference of Radhakishan Damani (D-Mart Owner, India). In March 2017, D-Mart went public by offering its IPO, under the name of the parent company- ‘Avenue Supermarts’. The IPO was a big hit. Avenue supermart offered its shares to the public at a price of Rs 299 and got listed at Rs 604 after over-subscription and he became a billionaire along with few other family members.
So in today’s world it is possible to have unlimited business growth. If your presence is global and you are serving millions with your product or service, you company valuation will definitely cross a billion dollar mark.
“Strive not to be a success, but rather to be of value.” – Albert Einstein