Entrepreneur's Balance

The entrepreneurial roller coaster can often get turbulent and the lesson I have learned over the years is that the delicate balance between unit economics and growth can calm the choppiness.

- Ritesh Agarwal

Ritesh Agarwal

The author is the founder and Group CEO of hospitality chain OYO

In the world of start-ups, this equilibrium is often like a tightrope walk at a village fair—thrilling, nerve-wracking, and sometimes just the right amount of crazy.

OYO, with its growth focus, doubled its topline every year between FY18 and FY20. Then came Covid-19, and overnight, we witnessed a 60% drop in our revenue.

However, here is the crux of it all—you can see such situations either as insurmountable challenges or golden opportunities. Covid-19, for instance, was a difficult time for the hospitality industry. At the same time, it became the forcing function for us to reset our equilibrium, recalibrate our business, concentrate on the right markets, streamline our business model and fix our unit economics. The shift helped us achieve positive operating profits and the path to net profits.

In the midst of a growth frenzy, capital flows freely. Valuations become a focal point of discussion, aided by surging asset prices. During this phase, the yardstick of success is often one’s topline figures. The game is around growth, with profitability taking a back seat.

In the current climate, founders have a unique window to reassess their unit economics and profitability. The trade-off between growth and unit economics varies, and there is no one-size-fits-all approach.

Entrepreneurship requires founders to shift gears, focusing on one aspect at a time to achieve excellence. Companies yet to attain scale should prioritise growth, provided they have the resources to support it. Conversely, if they have reached a certain scale, it is time to look at unit economics.