Collapse of Appster holds lessons for startup entrepreneurs.


7th January, 2019

Appster’s collapse offers 3 lessons on managing growth for startups

Right before the year’s end, news broke that one of Australia’s biggest software application development companies, Appster, had gone into voluntary liquidation. Its demise holds several important lessons for aspiring tech entrepreneurs.

Founded by two Australian-born technology enthusiasts in 2011, Appster looked set for a big 2019 with massive increases in revenue projections, but instead ended up heading south very quickly as they were hit with unexpected tax changes in India, resulting in their immediate need to sell off assets and close up shop.

This unfortunate change not only crushed the hopes and dreams of the company’s founders, but also left many employees and even some clients in the lurch.

Now, if you’re a startup founder, chances are you’re hoping to hit that kind of stellar growth in such a short timeframe.

But, as we can see from what happened to Appster, business growth comes with significant risks and scaling quickly doesn’t always result in a happy ending.

If you’re a startup founder wondering whether to accelerate or throttle your business growth, it’s imperative that your strategy supports your rate of scale and vice-versa.

1. Have a steady cash flow plan

One of the key issues behind Appster’s demise was its inability to recover from unexpected and very large expenses.

When growing a business, you need to devote a percentage of your earnings to a ‘rainy day’ fund.

Once your business begins turning a profit, consistently putting something away in case a disaster occurs can mean all the difference should unforeseen circumstances arise.

Relying on your own discipline to separate those funds and put them away every month can be challenging, which is just one of the things a reliable, online accounting system is ideal for.

The right systems do the heavy lifting for you, letting you rest assured that the correct steps are in place to ensure your business’s survival in the face of disaster.

READ: How to succeed with cash flow forecasts

Managing your cash flow like this will probably impact your rate of growth by limiting access to cash for growth-related expenses (salaries, travel, overheads, and so on) in the short-term. But it will also make sure that when you do grow, you’ll be growing in a secure manner, and so provide long-term benefit over short-term gains.

2. Take on a manageable amount of work

When it comes to taking on new projects, it’s important not to bite off more than you can chew.

After being hit with tax issues in India, Appster’s immediate collapse meant that (according to some reports,) many of its existing accounts and projects were completed at a sub-par standard, with some even left incomplete.

As important as it is to make sure that you have available funds to weather a financial disaster, it’s also important to make sure that from the moment you take on a job, regardless of the circumstances, you have the resources to complete it to your client’s satisfaction.

READ: Business planning for success

At the briefing stage of any project you take on, a thorough risk analysis should be conducted to look at all the possible challenges that the project might face along the way, and how such risks can be mitigated.

Whether it’s in the form of a risk minimisation table, a SWOT analysis, or a general brain-dump whiteboard session; being a step ahead of the potential challenges you may face puts you a step closer to securing your business’s future.

3. Don’t go international until you’re truly ready

‘Going global’ is one of the most sought-after achievements in the entrepreneurial world. But, as clearly seen from the Appster horror story, it also involves a very high level of risk.

READ: How and when to scale your business

Before launching into overseas markets, you need to begin by learning all the rules and regulations of the region into which you’re considering expanding.

Scaling your business can be like getting into a really hot bath: the water and bubbles look great and the steam is enticing, but we all know what happens if you jump in too quickly.

It’s easy to get carried away with the excitement and glamour of rapid international growth, but if you don’t ease into it and take every step with extreme caution, the consequences can be painful.

There’s no denying it – the success or failure of a business will sometimes come down to luck of the draw.

But by paying close attention to your cash flow and savings structures, by staying in control of the amount of work flow you take on and having a robust expansion strategy, you will significantly increase the chances of your business experiencing healthy rates of growth.

After all, manageable growth provides you, the business owner, the best chance of creating a sustainable future for your startup.