business: scaling for success
This article was first published in 2018 in the Entrepreneurial Mindset Network eZINE Volume 1 no 2
Jan Frick is Professor in the Business School of the University of Stavanger, in Norway. He lectures on the subjects of Operation Management & Entrepreneurship.
Here he shares with us a story about the creation of a new business and how it was successfully scaled up over time. It’s a fascinating story about the creation of new winter sports resort in Sirdal, a picturesque mountain region in south-western Norway which is characterised by high peaks and scenic lakes.
Jan’s story illustrates many issues which are relevant to starting, running and scaling any project. He highlights the importance of seeing an opportunity, of convincing funders, of getting things off the ground, of dealing with unexpected setbacks, of meeting the needs of customers and of building on initial progress to scale up for even more success. This is Jan’s story…
Image credit: Pixabay
Seeing an opportunity
A group of people, owners of seven farms in the mountains of Sirdal, wanted more activities in the area and to create more local employment possibilities. Together they had an area close to a lake, with a suitable mountain slope, good snow conditions and only 1,5 hours by car from the township of Stavanger. This presented an ideal opportunity for a new alpine resort.
We wrote a business plan that had two purposes. One was to convince the municipality to be included in their plans and the other was that we went to a bank and asked for 2,5 mill Euros to buy a chairlift. Both proposals were accepted.
Getting Things Off the Ground
Since the location was completely without infrastructure, we had to start with building a bridge to cross the lake and roads. Then we bought a huge tent to house ski rental, and bought and established a small ski lift that started in January 2004.
Providing something new
In 2004 we built the chairlift and a building for serving food, and had an opening in January 2005 of the chairlift. This is the only chairlift in the local area and gave us a boost in activity even if there was 4 other small ski lift resorts in the larger municipality.
Dealing with unexpected setbacks
Then came a consolidation period as a lot of things needed improvements. In 2007 we established a small lift in the mountain that enabled us to cooperate with a ski lift company 3 kilometre away as users could go between the two locations. This became a liability since that other company filed for bankruptcy in 2009 and then again in 2011. We lost money both times and had a couple of years with no such collaboration. Business had slowly been improving since 2005, but we wanted to become better. In 2016 one of the founders bought the next door ski lift company on the brink of its third bankruptcy. And we employed a more professional manager as we geared for scale up.
Meeting the needs of customers
To achieve scale-up, we realised that we needed a more complete offer as far as the customer was concerned. In 2016-17 we built a drive-in hotel with 25 rooms and a new restaurant close to the first ski lift. So now we have 9 ski lifts with 21 slopes, 3 restaurants, accommodation, ski-school and equipment rentals. Alpine resort is a seasonal business; in 2017 we had 100 workers in winter (most part time) and 5 in summer.
Building on success
In 2018 we have become number 13 in terms of revenue by ski cards of 200 alpine resorts in Norway with 2,5 mill Euro. The next scale-up step is to utilise the summer season. We started a mountain cart slope in July 2018 and a climbing park with zip-lines starts in August 2018. With accommodation, restaurants, and all year activities, we develop a possible market in a much larger region, and can also organise customers from abroad. And so far there are no external investors involved.
Lessons learned in this process are many. One was that to find suitable employees in a rural area did not work. So close to half of the employees comes from abroad. Another was that dependency on collaborating companies had a high risk. And then not at least, that marked needed to be developed in parallel with the functionality of the resort to provide a basis for the now ongoing scale-up ◼️