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Overcoming the obstacle path in a new business

November 4, 2010

As surveys go, 50 per cent of most startups shut down in the first five years. They start out with little foresight and too much drive. Several entrepreneurs believe they will cross the many bridges of problems when they get there and sometimes this approach becomes a fatal one for the enterprise. This is probably the flip-side of their risk-taking trait. But while risk-taking is important, daredevilry isn’t: a fact many entrepreneurs learn only after getting burnt. Thus, what is more valuable in any new venture is your ability to manage risks.




The risks that unfold in a new venture are many and often unforeseen. Before you set out on your entrepreneurial journey, take a look at a few risks that you may encounter and some ways in which you can manage them.

  1. Finding good manpower: Every enterprise is primarily made up of its people. The force determines the strength. No matter how great an idea, business plan or strategy, all these are meaningless without a good lot of people, who can implement them. But often, startups are unable to compete with the salaries offered by big corporates. In order to avoid losing talented staff to the bigger fish, it becomes important to offer them a good equity package. This could also mean convincing them to work for the bigger picture and showing them the value of the enterprise in the long run.
  2. Funds going dry: What most entrepreneurs fail to gauge is the exact cash flow that will be required to see their startup through its early years of operations and growth. Most shy away from this harsh reality and only take notice when they are beginning to go down under. And while an entrepreneur may have succeeded in getting the first round of funding, it’s the funding for the second and third stages of growth that is crucial. Thus, it becomes important to have avenues of funding ready for such growth phases. Institutional funding, help from wealthy friends and family who can come in at the right times are some ways of ensuring a positive cash flow.
  3. Inability to delegate: Most entrepreneurs tend to feel that their vision will get diluted if it is shared by many. This, sometimes, makes them unable to delegate work to the right people and very often they land up doubling up in areas, which are not their core competences. Trying to control all aspects of the business is one of the surest ways of not scaling up. Hence, bringing in a good team, sharing your dream with them and empowering them thereafter, will not only ensure faster growth but also more harmony within the organization.
  4. Too much enthusiasm: Excess of anything is not a good thing. Very often entrepreneurs get excited over their first infusion of funds or the first big order that has been bagged. While excitement is good, it shouldn’t lead to taking foolhardy risks or making unrealistic expansion plans. Another probability is complacence that often results from a successful win. This could lower the startup’s receptivity to market trends or delay innovation in product development. Thus, the feeling of being a startup should never fade as it provides both humility and measured drive.
  5. Partner splits: Most startups are founded by partners and as is often seen, partnerships can go sour. While nothing can reduce the messiness of separations, what one can do is try to reduce doubt and ambiguity among employees and clients. Employees need to be honestly told about the real reasons of the split and clients need to be assured that standards of quality will not suffer as a result of the separation. Also, since the partner also brought his/her talent or expertise to the company, all efforts must be made to fill his/her gap quickly.
  6. When markets move on you: Markets are fickle and markets evolve. Moreover, every market reaches a saturation point beyond which you just cannot penetrate further. Also, a product or service that worked initially may soon get redundant. It is thus important to be in sync with the market and adapt quickly to its changing demands. Very often, entrepreneurs stick to doing what worked in the past, often leading to outdated business strategies and unexplored options and markets. Thus, it is important to constantly be on top of the market, track trends and make exits when needed. It is also essential that one is open and dynamic to exploring new markets.

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The Roller-coaster Ride of an Entrepreneur

October 25, 2010

This entrepreneurial journey comes with many high points and low ones; several rewards and even more challenges. All those on the road of entrepreneurship will realize that it is one with many trying moments and it really isn’t all that easy as envisioned. The hardships in any entrepreneurial venture vary in different ways. Some of them are listed below

1. Challenges within you: An entrepreneur goes through a range of emotions during the early years. One of the most common ones is fear: Fear of failure, fear of losing money, fear of rejection, fear of having to resume an employee status, etc. Another emotion that has to be dealt with is that of doubt. Till the moment of glory has arrived, several questions about doing the right thing and making the right decisions nag an entrepreneur. The pressure to succeed and not lose face to friends and family is another stressful element.

2. Challenges of developing a vision and an idea: One of the first challenges of all entrepreneurs is defining a clear vision for your product or service. As is often said, it’s all in the story and a very plausible one at that. As you grow, your competitive advantage will become more and more pronounced, and hence it’s important that both vision and service are aligned with it. Though the long-term benefits and positioning will constantly evolve, depending on client needs and market scenarios, the crux of the vision will continue.

3. Challenges with your time and energy: Initially, one is trying to cope with many things: meeting client expectations, being on the top of things, outperforming, over-promising and even over-delivering. Not to mention, one is constantly at the receiving end of truckloads of information about the new business, about running it and promoting it. What starts out as a learning journey sometimes becomes extremely overwhelming. Thus, what is important is to continuously sieve the good from the bad. Going the extra mile, often a temptation, can soon lead to a burnout. Hence, it’s very essential to know when to say no.

4. Challenges with employees: Attracting and retaining talent is one of the primary concerns of most businesses. You may have barely managed to train a particular employee when he gives you his resignation or is taken away by a competitor for a better salary. Similarly, there is no real fool-proof way of determining their credentials. In India, particularly, a lot can be manipulated and changed to suit people’s needs like fake certificates and degrees. To cushion yourself from such problems, it often becomes necessary to see that some employees are multi-taskers who can fill in for others. Another alternative is outsourcing for some of the bigger projects so that the business doesn’t suffer.

5. Challenges from competition: While several view competition as healthy, the demands of it can sometimes be too much to handle. This is especially reflected in pricing. Within the same industry, you will find several smaller companies who offer the same service for a pittance and often take away a well-established client. Moreover, with the global market now open to all, anyone can bid at cheaper rates. This can be extremely disillusioning in the beginning, but once you realize that there is place for everyone, such anxieties are short-lived.
6. Challenges of finding good clients: One of the most important challenges of entrepreneurship is not just to find clientele, but finding “good clientele”. Unrealistic demanding clients, dissatisfied with everything and paying low rates can be very disturbing and unsettling. In the start, one may not want to say no to taking on problematic clients, but once you get more confident of your enterprise, you will realize who to take on and who not to and eventually develop a good working relationship with the good ones.

7. Challenges with payments: Pending payments are always an issue when you are an entrepreneur. And sometimes, no matter how often you have reminded your clients about long overdue bills, the money takes forever to come in. And while the clients’ payments are still to come in, your own are constantly increasing on salaries, overhead expenses, vendor payments and research for new projects. Thus, to absorb all these unforeseen expenses, it is essential to ensure a positive cash flow.

8. Challenges of raising funds: In the first years, raising funds is one of the most crucial factors. Should it be sourced from friends and family, should there be an angel investor or should you invest your own capital, are some questions that have to be tackled at the early stages of your venture. Capital is again needed when your venture is headed for expansion. Putting together a sound business plan, backed with the conviction of your product story, are the first steps of garnering funds for your venture.

9. Challenges of forming the right team: Bringing the right people on board and finding the right vendors is another challenge of entrepreneurship. What is important is to network a lot and ask around for any information that you may need. It is also good to keep brainstorming with partners and employees on ways to grow your business. Moreover, getting the right people together will complement your own strengths and weaknesses. An important factor is sharing your vision and passion with all those who work for you. This will help them deliver better.

10. Challenges while tiding trends: Changing trends can be quite unnerving, but it is something you must be prepared for. As an entrepreneur, it becomes important to foresee what others can’t and for this, one must constantly stay abreast of trends and lucrative opportunities. Many profitable businesses have gone under because of the inability to ride the next trend wave. Seasoned entrepreneurs know how to befriend trends and use them to their advantage. Thus, anticipating and adapting to changing trends is an important mantra for survival.

The entrepreneurial journey is definitely not a smooth-sailing one. The bumps and bends are many, but once you get used to it and learn the ropes, you are sure to enjoy it, especially if you are a true entrepreneur at heart.

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The Entrepreneurial Instinct

October 18, 2010

India has long been called a nation of entrepreneurs. Entrepreneurship is seen in every street of the country. From roadside vendors to the nearby kirana stores to the women who run boutiques from home, we see businesses that have soared heights with absolutely zero investments at times. And while small scale entrepreneurs are in abundance, the big success stories, to name a few, are Dhirubhai Ambani, the Tatas, Lakshmi Mittal and more recently, Narayana Murthy. In fact, it is often said that entrepreneurship runs in Indian genes.

But did any of these people really have a business plan when they started? Did they look for angel investors/venture capitalists, did they have clearly defined business plans or did they just follow their dream and let the rest take shape? While every entrepreneur follows his/her own formula, listed below are a few pointers that could serve you well when embarking on your entrepreneurial journey.

1. Be passionate: No matter what business you start and which industry you enter, if there is no passion, it will soon get reflected in your enterprise. While you may start many businesses, purely because they make good business sense and because you want to ride a particular trend wave, what will truly stay the test of time is the one where your heart is.

2. Provide value: Find out how you add value to your customers. Is it a special service that sets you apart or a unique product that you have created? Understand what you are selling and why and what gives it its USP.

3. Do research: It helps to create a test market before you launch. Getting a feel of how people respond to the idea, service or product before investing in it full throttle helps you mitigate the risk and gives you a more realistic picture of your scalability.

4. Stay focused: It always helps to be clearly defined and not give in to the temptation of doing too many things and being everything to everyone. While a lot of people may want to be end-to-end solutions providers, it may help to carve your niche and specialize in what you do. Very often, in business, saying no is more important than saying yes.

5. Start small: Maintain low operating costs, try not to be too high-tech initially, staying understaffed and outsourcing if needed, are a few ways to keep costs down and run efficiently. In short, cut the frills and keep it simple.

6. Ensure a steady cash flow: Most enterprises die out soon because of a shortage of funding. Before starting out, estimate an initial upfront capital requirement and ensure that the money flows, even while profits are sleeping. In the early days, one can focus on short-term projects with quick payment terms rather than blocking one’s funds and time on long-term projects.

7. Build a network: From service providers to public relations and even social media marketing, if there is anything that continues to work for companies, it is good networking. Not only do you pass the word around but also build a good database. However, once the relationship has started, be sure to maintain it with all the respect and attention that any relationship demands.

8. Embrace change: In a fast-changing scenario, where markets and customers are equally fickle, what works is your nimble-footedness, while running a business. Staying abreast of industry trends is thus important. Be quick to adopt new technology or change the end purpose of your product and service if need be. Re-branding, product redesign and packaging are other small ways of making changes in the look and feel of your enterprise.

9. Think new markets: The world is literally your oyster nowadays. The local-global boundaries have blurred and entering new markets has never been easier. There is nothing like a global presence to help you scale up your business. Locally as well, be adventurous enough to move from a tested market to an unexplored one.

10. Keep the faith: Sheer faith and patience see you a long way as an entrepreneur. Waiting to get your first big order, waiting for the right investor and even waiting to launch that revolutionary product — as an entrepreneur, the wait can sometimes seem eternal. At such times, the only thing that helps is your great belief and faith in your product and in yourself.

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How to manage more with less money

September 28, 2010

A key ingredient to business success is access to adequate capital. However, for new ventures, it is not always easy to get access to bank loans or some kind of equity investment. Hence one has to work with limited personal capital that one might have kept aside for the business venture.  How then, does one stretch one’s limited resources, till the business becomes self-sustaining and attains a stage where one can get access to external funding?

Here are some simple, yet effective techniques to make the rupee  go that extra mile:

  1. Plan for today, not for day-after-tomorrow: The way a start-up needs to look at the future should be different from the way a mid-size company would look at it. As a start-up, while making capital investments in office space, infrastructure etc., plan basically to fully take care of your first year’s needs (as per your business plan) with some room for second year’s growth. Don’t over invest in building large capacities, in the process risking your cash flow and not having enough liquidity on hand should a need arise.
  2. Hire multi-taskers: A start-up requires team members who can do more than one thing. Can the person who manages the accounts also manage the reception? Can the HR person also do admin and if the accountant is absent do some data entry too? Can the marketing manager also double up as a purchase manager when it comes to negotiations? While hiring someone, specifically understand what other job roles can he undertake, should some be absent in the team or if there is a sudden short-term manpower requirement in that department.
  3. Focus on cash flow first and then on profit: Cash flow is like oxygen. However profitable your business may be, if you are not generating enough cash to take care of paying your bills, sooner or later you will get choked. If someone offers you a project which will give you Rs 50,000 profit but payment after 3 months and another person wants the same job done such that it gives you profit of Rs 40,000 but immediate payment, go for the second. Lack of adequate cash flow will give you sleepless nights, eventually draining out all your energy.
  4. Forget style, focus on substance: An office without carpets, a chair that does not rotate, a laptop which is less than state-of-art: all this is absolutely acceptable for a start-up. Identify clearly your key business drivers and invest resources in the same. Put money into good plant and machinery, hiring relevant talent and on-sales promotion. Don’t cut corners on things which will eventually get your success.
  5. Marketing at a low cost: Find intelligent ways of low-cost marketing. Instead of a lot of mass-communication strategies, try to look at word-to-mouth publicity, focused marketing (trade shows, direct mailers) or using referrals. Of course what should be your marketing strategy will finally be a function of your business. But think more in terms of sales rather than in terms of marketing in the early days of business. If you are investing in some marketing, set a target in terms of what sales it should give you and focus on meeting the sales targets.
  6. Less fixed, more variable: Try to keep fixed costs and overheads minimum and see if most of the costs can become variable. Eg, if you have to hire a marketing consultant, pay him a small fixed fee but a larger fee based on sales achieved.
  7. Keep close watch on cash flows: Watch your cash flow like a hawk. A daily/weekly cash flow review is must. Adequate oxygen supply will allow to run a longer race!

Click here to learn the art of managing business efficiently

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Is Entrepreneurship for Everyone?

September 22, 2010

Is entrepreneurship for everyone? The answer to this question is both yes and no. Sure, anyone can be an entrepreneur. But then there are certain important prerequisites that one should be able to fulfill, so as to ensure that your journey into entrepreneurship culminates into a success.

So, what are these prerequisites?

  • Risk-taking ability : First and foremost, you should be mentally prepared to take risks. When you start a new venture, there is no guarantee of success. Initial plans can take longer to fructify than expected. And not every venture succeeds. Thus, if your mind is focused on getting a definite monthly income under all circumstances, then entrepreneurship is perhaps not for you.
  • Initial finances: A new venture, whether big or small, will demand investment of capital. You will need to invest money for setting up plant and machinery, office and computers, meeting the initial expenses, etc. till the venture reaches a break even. Also, during this period, you need to be sure that if you have a family or  other personal financial commitments, they are adequately provided for. While there are possibilities of a bank loan or equity-based funding options, you will need access to some capital to get you off the ground.

  • Passion: However good your planning, however brilliant your idea, however sound your business plan, you will come across tons and tons of challenges in getting the venture off the ground and making it successful. One is able to navigate these challenges and overcome these humps, only if one has a lot of passion. One really needs to believe in oneself and have a strong sense of conviction about their plans.

Be sure to meet these prerequisites. They will assist in your journey on the road to entrepreneurship.

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CAN ENTREPRENEURSHIP BE TAUGHT??

September 10, 2010

“Entrepreneurs are born, not made. It’s in the DNA – or mostly, it isn’t. You cant acquire passion (for entrepreneurship, that is) in the classroom”. These comments reflect a large chunk of global opinion on this topic. Add the formidable ‘business community’ factor and you have a pretty water-tight case against the motion in India..

Traditionally, we have believed that “business is in the blood” of the marwaris, chettiars, banias…hence the continued stranglehold of families in business (and now in politics). The (exclusive ) eco-system of  breakfast-to-dinner business education, family funds, access to service providers ( CAs for instance) and  regulators (a ‘must’ for old economy industries), incubation within the family business  and  mentoring by elders,  enabled members of the business community to  pursue  opportunity and take  risk for  venture creation.

However, evolution (the world is flat, emergence of the new economy), passage of time and significantly, the breakdown of barriers– mindset and access —have brought about increasing keenness for entrepreneurship among all Indians. The phenomenon of stand alone or first generation entrepreneurs is indisputable testimony to the fact that in India today, both community and ‘brahmin’ originated entrepreneurs are feasible.  Sustaining this phenomenon is the emergence of an inclusive eco-system, more similar to that prevalent in the developed world.

This breakthrough in thought and action has shown that entrepreneurs can be made too (note the reality of ‘too’). Leading to the inevitable inference that they can be ‘made better’.  This is where entrepreneurship education comes in substituting for on-site education in family businesses.

What do you teach in entrepreneurship?

Entrepreneurship education is based on the core premise laid down by guru Howard Stevenson; the Sarofim-Rock Professor of Entrepreneurship at Harvard Business School, that entrepreneurship is the pursuit of opportunity beyond the resources you currently control. Stemming from this understanding, the required knowledge, skills and attitude for creating a sustainable venture need to be taught. Starting with creating the belief within students that they can become entrepreneurs, that entrepreneurship is far more of perspiration, mental and experimental, than of inspiration. How should an entrepreneur recognize and assess opportunity for profitable growth, how does (s)he pursue the opportunity in stages and  manage risk through sharing  resources and responsibilities. Forecasting cash flows and identifying sources of funds– introduction to venture capital, angel investors, strategic investors and other means of support. How to manage relationships since an entrepreneur has to co-ordinate and control resources as (s)he doesn’t own most of them, specially money.

Faculty can go beyond teaching to play matchmaker for budding entrepreneurs seeking management teams, advisors and investors. And in the words of a participant of the Start Your Business Program offered by S P Jain Institute of Management and Research (SPJIMR), the faculty “opened my eyes to the idea that I can be bigger than a local coaching class. I can create a national venture for enabling employability of under-graduates in Tier 2 and Tier 3 cities.”

It also happens that some students discover that they cannot stomach the ambiguity and risk involved in starting and running a venture- better early than late..

Educational institutions and faculty have traditionally regarded starting a business as a waste of students’ time and talent. However, growing familiarity with entrepreneurs (thanks to the evangelizing efforts of NEN, TiE and to the network effect), has led students to understand  that being an entrepreneur is as  much a personality characteristic as it is a learnable  skill-set.

The  learning can be either at the school of hard knocks or in the classroom, building an understanding of the venture creation process and by acquiring  tools and techniques to improve the probability of success.

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