Minding the business

Ever since the relaxation in company act introduced with the features like relaxation in paid up capital, selection of directors and the clause of having a registered office. It gave boost to many new ventures and prepared a road map for many start-ups, however many ventures did not survived very long and some of entrepreneur took this opportunity to form shell companies to dodge the government and converting their ill earned money into white.

However, if we forbid about the intention and objective of incorporation of a company alone, even then most of the organization even after spending many years in the market finding it really difficult to survive. I have gone through several websites and organizations to find the reason of it. And I found it really interesting to share with you a sneak peak of their business venture and learning associated with it. Despite the fact that this write up is still in updating state and many more points to be added into it, I would really appreciate the effort of people to contribute in it.

1.       Incorporation is easy: - Unlike many other people I used to have a view that incorporation of a business is easy. And if you believe on hearsay, it is usually believe that you can earn great money through business instead working for someone and making him rich. And somehow it seems logical too when you have a little sense of company act. When the paid up capital was bifurcated into two parts and instead of Rs, 1, 00,000 only Rs.50, 000 was required to incorporate any business entity it became very easy to run a show. Moreover, thanks to venture capitalist and NBFC’s like Mutthoot group for fanning this trend of being your own boss.  But despite the fact that capital can be managed easily, it is really vague to believe that every venture will be successful and if not at least it could meet the break-even. The real problem begins with the allocation of funds, managing operational cost, calculating the break even and most importantly the ideology of the company.

2.       Ambiguity in the mission and vision: - One might or might not have observed it very closely but many of the business ventures don’t have even a clear vision and mission statement. The sole objective of the proprietors is confined to earn profit only. Adding to this they have sheer idea of what business they are into. Supposedly if someone is dealing with a company of highly managed professionals, the company might face much difficulty handling/dealing with unprofessional person. Similarly a company’s vision and mission statement reflects its growth and visionary attitude of the founder. Just for the sake of writing anything by the name of vision and mission raises a big question mark in the future of the company.

3.       Updation is sidelined: - Every now and then when we introduce our self we tend to offer exchange our business card with each other. The same way your business model works, physically you might not be present everywhere but virtually you are, through your website, blogs, social networking etc. And it is my personal observation that an updated version of your professional point of contact can be very useful tool to generate business. Many businesses don’t survive very long despite having a great product line is because the same message is not conveyed to the customer/buyers. They might look for a product detail on your website but you keep on busy pushing the inventories through distributors and retails. I remember a case when a big confectionary manufactured introduced a new variant in the market. People found it good and in no time it marked its presence in the market. One day all of sudden the entire product got vanished from the market. When people started demanding the same product, the shopkeepers had no clue as what has happened. Similarly no explanation was given by the manufacturer as well. I believe that either they want to create an artificial scarcity or they ill fated with some manufacturing or distribution mishap. The scarcity prevailed almost a week in between a new manufacturer introduced the similar variant with some value addition. And till the time the former manufacturer re-enters into the market, it was too late.

The moral of this case is very simple; you have to understand what business you are into. And despite the fact of being a brand you cannot fiddle with the supply in a very competitive market especially in FMCG.

4.       Getting rid of Behemoth product line: - Are you aware of the fact that in 2018 TATA Motor produced only one NANO car. I remember a case when Mr. TATA once discussing with a journalist that a car can be produced even in one lakh. And it was a general statement that Mr. TATA has given but the news journalist published it as TATA will produce a car in one lakh only. It is a basic heuristic that you should end up product line which is not generating profit to you. Instead one should always come up with new products and services that can not only secure company’s future but ensure its success.

5.       Being a solution provider: - it takes years to earn name and create a brand but it takes only a little be forbidden for good. Remember Hindustan motors, Nokia, Yahoo, Doordarshan etc, they failed because they failed to be updated and serving the customer diligently. Cable TV replaced doordarshan and no longer will Cable TV be replaced by either Netflix or Amazon. Despite being named as idiot box cable TV failed to offer refreshing and novelty content to its viewers as a reason it opened up a new market for Netflix and Amazon. Similarly yahoo despite being considered as cyber spy having a reach of huge meta data failed to understand what its competitor Google were doing and in no time is was gone out of the market.

6.       Planning for future avenues: - Few companies only concern with the current need of the organization only. They don’t see the future prospect of its resources; one might not be looking for short term solution but a long term association with you. It is you who has to decide how you best utilize the skill, knowledge and aptitude of an employee for your organization. I remember a case, when a guy, Faisal from small sub urban of Uttar Pradesh came to Delhi to learn animation. And because of his hard luck he could hardly manage to earn good. Despite the fact he did not give up and started his own comic strip on Social media as Garbage bin. Today he has more than 1 million followers on social network but he did not stop here and sooner going to start merchandising his comic character Guddu. During demonetization (notebandi) various start ups come up with the business model like hire my chotu and finding cash near you which could not last very long. They projected only current avenues and could not anticipate any future for their business.

7.       Understanding of business model:- In a tech savvy generation it is really difficult to bear the pain of loosing your valuable clients and market but in reality the entrepreneurs do not know what there actual business is? And how it works? Let me share you one interesting story of Mc Donald. Once C.E.O. of Mc Donald Ray Kroc visited a university. Students were very excited and willing to know the success story of it. One of the student asked Ray as how they became so successful. Before answering this question Ray asked a question with the students. “What business I am into?”  Everyone laughed and one student said, “Ray, who does not know that you are into fast food business. Selling burgers.” Ray smiled and said, “Wrong. We are actually into franchisee business and it is not the burger that we sell but we keep trying finding places where it can be sold unlike usual sale.”

Many a time, we see the success of any venture in terms of their products, services or the delivery model that they use. But in practicality it is the basic understanding of a business of how it runs. Many business models fail because they misinterpret it. A business model should be as simple as it could be translated into reality similarly it should also be as complicated as it should disguise as how it functions.

Another classic example can be coke and Pepsi. Coke entered into Indian market in 1956 but due to not abiding the Indian foreign exchange act it has to back up. It took nearly 17 years to make a come back to India. Meanwhile, Pepsi came to India. Pepsi was always far ahead of coke in global market. And it was really difficult for coke to beat the Pepsi and become no.1. Coke was basically into franchisee driven model where as Pepsi decided to go for a capital intensive approach of manufacturing the soft drink bottles. It took no time to coke to realize that they are far behind Pepsi when their soft drink supply started hampering due to non availability of bottles. Undoubtedly, coke has gained no.1 position in beverage industry but this case is a classic example of how a good strategy leads to the success of a business.   

8.       Competency mapping is necessary: - How often a company or an individual alone do this practice. Frankly speaking seldom any small company uses the managerial tools believing that concepts are good to be confined text books only. And when things go wrong they start worrying of what has gone wrong. In fact competency mapping helps to look for new avenues and opportunities for an entrepreneur.

There was a time (probably before 90s) when gold was relatively cheaper than the currency. Some enthusiastic people considered it a big opportunity in the hope that in future gold prices will go up and they will earn huge money. Even today gold is considered as safest investment and forgets about occasions when gold prices are up every now and then we see that the monetary value of gold in higher than any alternative investment. And then there came a time when some restrictions were imposed on gold import. As a result there was a short fall of gold in Indian market created, value of hard currency went up and loan against gold scheme was introduced in South India by some private players. However no government scheme or agency took this issue seriously. Again some money maker found it good opportunity to mortgage their gold and get hard currency. Those NBFC’s (Non Banking financial corporations-like Muthoot) started believing that they will earn huge profit through this business model. As I have already mentioned that there were no regulating body to control and vigil such business practices. And then there came a time when the value of paper currency became more than gold. It was a alarming signal for those NBFC’s who lend money in lieu of gold. When they start recovering the money from borrower, they simply refused to pay. The government had to take a step forward to save such a business model and to prevent any anarchy in the country. Government introduced certain stringent rules for NBFC’s and saved their business. Later on Government itself introduced gold monetization scheme to bring it into practice and loan to those who are really needy.

Competency mapping in not only for the benefit of a company alone but it also pave the road for their future success. We need to understand what our competitor is doing, what is their strategy and we need to plan accordingly. Undoubtedly, money is earned through hard effort but one has to ensure that it should be happening in recurring manner.

9.       Profit maximization versus Wealth creation: - Lot many companies are confused about what should they focus upon? And very often they choose the first option which is basically wrong. Profit can be earned through wealth but otherwise is not very true. Similarly profit might slump in any financial year but wealth will always appreciate. Let’s take an example, you are working in a company and you have made a good saving and willing to purchase a house. On one hand it seems very logical and practical too that you are fed up paying the rent and want to own a house. But on the other it will not be good investment decision because it is not paying you up till you to let it or sale it. Another best thing what you can do is, instead of buying a house and paying hefty installment every month you can own a property which can pay you off in recurring manner. Remember, wealth does not mean any movable or non moveable asset but an asset that pays you off. You have to learn about a basic concept of money; don’t work for money let the money work for you.   

10.   Asset versus Liability: - Are your employee assts or liabilities? Many a time businessmen take this otherwise. They consider their business as one man show. But they forget that employees are like cog in the wheels. A machine can run well until it is fine tuned. But many a time employer seldom delegates the ownership or responsibility to their employees.  They have an illogical doubt of what will happen if despite being years training someone leaves the organization? But they undermine the reason as why an employee leaves a job. Job satisfaction is the key factor that drives an employee to work hard and give their 100%. Moreover, it’s a paradoxical situation, employers don’t trust their employee, do not delegate the authority yet they expect their employees to remain loyal with no job satisfaction. Usually these kind of behavioral practices are very common in small set-ups. The best example can be Steve Jobs, the founder of Apple.