One can run a small business and make it extremely profitable or one can make a business that can scale really large but does not make a profit. The trick for startups is to scale while remaining profitable, Amrish Rau a senior executive at fintech firm PayU said at an event on Tuesday.
Speaking at IT lobby Nasscom’s Product Conclave (NPC) 2019 in Bangalore, Rau weighed in on profitability and scalability of fintech companies in India. According to him, multiple online-based businesses in India have several revenue leaks. These leaks can be fixed if these platforms start billing the customers adequately.
Currently heading fintech investments and partnerships at Naspers-backed PayU, Rau had co-founded online payment gateway platform Citrus Payments in 2014. Two years later, it was acquired by PayU in an all-cash deal of $130 million.
At a panel discussion titled “Tales of Scale: How I Scaled My Business,” in the event, Rau suggested it is better to let go of as much as 10% of customers if this very 10% contributes to 80% of a company’s losses. “If you are not brutal enough to take them away, you’ll never be able to scale your business profitably,” he said.
Rau used an anecdote to support his argument. During his CEO days at financial services company First Data Merchant Solutions Asia, the company used to get 5 % of the revenues of Shoppers Stop. However, since the retail chain was making losses, 5% of Shoppers Stop’s business was contributing to First Data’s losses. First Data then went on to get rid of its business with Shoppers Stop, Lifestyle and another unnamed retail chain, said Rau.
Other panellists in the discussion included Rajesh Yabaji, co-founder and chief executive at logistics startup Blackbuck, Varun Khaitan, co-founder at local services marketplace UrbanClap, Vishal Gondal, founder and chief executive at fitness tracker wearables-maker GOQii, and Clint Oram, co-founder and chief strategy officer at Cupertino-based software technology company SugarCRM.
Khaitan spoke about how and why Gurugram-based UrbanClap went on to creating a full-stack marketplace model in order to meet training and supply chain needs of its day-to-day business.