Does Starting Your Own Business Seem a Bit Daunting?

No Looking Back

The idea of starting your own business can be daunting. Especially if you have never done it before. It can seem like the "risky" thing to do.

But millions of people around the world have started their own home based business, and haven't looked back. And more and more people are realising that it's the smart way to go, especially in today's economy.

Times have changed. The Internet is here, and it's not going away -- but job security is.

But fear not, because...

Change is the thing that brings massive opportunity!

And the only thing that may be stopping you from taking advantage of that change is your past conditioning. Let me explain...

The Way Of The Past

A hundred plus years ago, your ancestors were entrepreneurs, not employees. They owned their own businesses. They enjoyed their own freedom and did not concern themselves with this thing called "job security."

Then along came the Industrial Age and the need for employees skyrocketed. Large industrial concerns promoted the need for "educational reform" in order to create more employees for a rapidly expanding industry.

So in stepped the government and took over the task of mass education, and adopted the Prussian system. A system designed to produce soldiers and employees -- people who would follow orders and do what they are told.

You can see how beneficial this kind of system is to the corporate world today.

And the corporate world has lured people in by offering "job security." But these days it is becoming very apparent that job security is a thing of the past. Not only may your job not be there in a couple of years, but your employer may not be.

Why Does It Matter?

"So what's the big deal about job security?" you may ask. Well...

Firstly, it isn't there anymore.
And secondly and more importantly, it comes at the expense of something very precious -- your freedom.

The price of security is freedom. And over time, people have been unwittingly trading their freedom for security.

(If you are battling to relate to this concept, think about a maximum security prison. The people there have the highest security, but no freedom.)

Today millions of people are risking having very little freedom, and little security.

So, clinging to "job security" may be costing you dearly: The life you really want to live.

And putting on the façade of driving a nice car, living in a nice home, wearing nice clothing, and doing all the nice middle-class things (all provided by credit) is not cutting it. No amount of "looking good" is going to give you or me true peace of mind. That means...

It's time to focus and "mind your own business" instead of someone else's (your employer's and your banker's).

Just like your ancestors, choose the path of freedom. Live a life of self-autonomy. Because it's worth it.

The only thing that stops us is fear. Not lack of ability. And we only fear the unknown.

So, if you have fear about starting your own business, it's because of your conditioning (education). Think about it...

You have probably spent years in a "Prussian" school system. You were taught that you have to have all the right answers or else all hell will break loose.

That may be great within the corridors of "formal education," but it's doesn't reflect reality.

How We Learn

Remember learning to ride a bike? Did you first spend months learning all the theory so that when you first got on you were sure not to fall off? To "not make a mistake?" I doubt it.

What happened is, you got on. Fell off. Learnt and made corrections. Got on. Fell off. Learnt and made corrections... And so on, until you were riding around everywhere on your back wheel!

That is how we are designed to learn. It's natural. The "formal education" way is what's unnatural in learning how to thrive in life.

We have been so conditioned to fear making mistakes. To get all the answers right. No wonder this paralyses us unless we can somehow overcome all this conditioning. Therefore, let's not attach too much significance to the word "failure." I once read a good quote that went, "Failure is an event, not a person."

So, do you need all the right answers? Bill Gates didn't. He brought a product to market, that brought value to the market, and the market embraced it in a big way. And Microsoft Windows is still not "perfect."

Henry Ford said, "Thank God for my customers. They buy my products before they are perfected."

And yep, you too have value to add! So stop waiting to be perfect and worrying about "getting it all right" and just start offering it! Believe it or not, but there are people who will relate to you and want what you can offer them.

Just Start

Start that business. It you don't, who else will? That's what I did, in spite of being "educated" otherwise.

Entrepreneurs know that they don't have to know all the right answers. They just need to know where to find the answers when necessary. Even very successful entrepreneurs are always learning. For them there is no such thing as being "educated" (past-tense). It is an ongoing process.

All persons are hypnotised from infancy by the culture in which they grow up. The prime task of adult life is dehypnotisation, enlightenment. -- Willis Harman and Howard Rheingold

So go for it. Do something bigger and more meaningful with your life.

If you don't make a difference in the world, you will be more inclined to just complain about the problems in the world. And that has never helped anybody.

It has never been easier or cheaper to start a home based business. It can even be done part-time. All thanks to the Internet.

And being non-technical doesn't have to stop you either. Technology has brought with it its own solutions to its shortcomings. It doesn't matter if you're a Generation-Y or a Pre-baby-boomer.

With the advent of the Internet and Web 2.0, and all the coaching available out there for starting a successful home business, there is practically no risk.

The risk is in sitting there watching the "old economy" melt before your eyes.

And job security is part of that old economy.

Rather make your own security -- like your ancestors did.

Because you can...

Reference:
About the Author:
Tony Kennard is a work-at-home entrepreneur. He promotes the idea of financial freedom and self-autonomy through personal business ownership.He teaches Attraction Marketing as the best method to attract people to your business (traditional or MLM), and have it flourish.

Hiring your man Friday.

Hiring your man Friday.

This is what we call in the business “a good problem to have”. The hiring and on-boarding of professional talent is a classic growing pains-type of problem that is faced by every entrepreneur. 

From my work in Silicon Valley, I have observed that startups in any industry go through three distinct phases of organisational growth characterised by very different needs. Stage One is all about innovation — creating that “killer product”. In this stage the strategy focuses on speed to market and the emphasis is on creating a culture of innovation by hiring and nurturing creative talent and product development skills, in an organisation that is relatively unconstrained by formal structure and roles. 

Stage Two is all about market penetration — creating as broad a footprint as possible for the product. In this stage, the strategy focuses on building awareness and creating sales channels, and the emphasis shifts to building a sales culture by hiring market developers and salespersons, and getting more sophisticated in terms of measuring and rewarding sales performance. 

Stage Three marks the “graduation” from startup to a viable business. It is entered when the company realises that it is has grown so quickly that things are getting out of control, and there is a risk of frittering away the gains it has achieved to competition that will quickly smell success and move in, sometimes with deeper pockets. The focus of this stage of growth is profit extraction. The strategy focuses on balancing the competing demands of effectiveness and efficiency — bringing costs and quality under control while maximising revenue. The secret to success in this critical third stage is recognising and managing the interrelatedness of the 3Ps of successful growth — professionalising, introduction of process, and profit extraction. 

Professionals bring expertise and experience with having “been there, done that”. The introduction of process brings greater predictability that is critical for better coordination in a growing business, and greater control over cost and quality. Finally, the emerging emphasis on profitability marks the transition from a wistful startup to a viable commercial business. Many startups fail because their leaders don’t recognise that their organisation and mindset regarding how they are structured, how roles are defined, who they hire, how they are rewarded, etc., needs to consciously make the shift from one stage of growth to the other. 

The introduction of the 3Ps of growth into a startup is always a very difficult challenge. Startups are often fired by visionary even missionary zeal, and a sense of intimacy, of being like family. That is exactly what is needed for success in Stages 1 and 2, but could also become the biggest stumbling block to success in Stage 3. The hiring and introduction of professionals will often become the lightning rod for drawing criticism from employees who are used to a “just do it” way of operating and see the professional as the one who “doesn’t get it”. The trigger for this ire is almost always the introduction of process — which is the ugly “P-word” in the world of entrepreneurs — and the increasing emphasis on cost or bottom-line considerations. 

The writer asks the question about red flags he/she should look for in a resume when hiring senior staff for the first time in a startup. The fact that he/she recognises this is going to be a challenge is a good sign. So how should we go about it? 

Success of senior staff plays out in three acts spread out over a year or so. Act One is the hiring of the right person. The entrepreneur should look for fit in terms of attitude, experience, and expertise in that order of priority. Attitude in terms of willingness to work in an environment that may be more rough and tumble than orderly. Experience of having worked in unstructured and rapidly changing situations, introducing process and discipline into it and dealing with/overcoming resistance. And expertise in the relevant functional area. There is nothing wrong with hiring someone with a big company background to work in a startup as long as they meet the selection criteria. On the other hand, selecting someone whose resume suggests a gap or lack of fit in one of the three ingredients attitude, experience, or expertise, could be risky. 

It is important, however, for the entrepreneur to recognise that success will depend not only on good hiring, but also on Acts Two and Three — on-boarding and on-going support. By definition, every startup feels different and operates differently. Any new hire that comes into senior positions will be seen and treated as an “outsider”. It will be important to anticipate this reaction and pave the way for a smooth on-boarding of the new senior hire because startups cannot afford disruptive internal conflict. Within months, as the professional starts introducing the business processes that he was hired to implement, waves of resistance are likely. This too can be managed with sufficient forethought and planning. These actions are not just important, they are critical to ensure the startup moves past its growing pains to becoming a viable business. 

Author Reference:

Rajan Srikanth 

President, Asia, 

Mercer Human Resource Consulting

Estimating Startup Costs.

Estimating Startup Costs

ONE OF the toughest things in starting a business is, well, figuring out what it’s going to cost you to start. It’s tough because startup costs are a moving target, easy to underestimate and almost always subject to change. Here are five rules that can help you start figuring the cost of starting.

Have a solid plan — then change it. Most business startup stories say that you have to have a business plan. And you do. But that’s not the beginning and end of figuring out your startup costs. Jeff Shuman, professor of management and director of entrepreneurial studies at Bentley College, says, “The conventional wisdom is that an entrepreneur sees an opportunity, comes up with a business plan to capitalise on it, determines the capital that needs to be raised, raises the capital and then applies it to building the business described in the business plan.”

There’s one major problem with that model, says Shuman: It all hinges on getting the business right the first time, and that doesn’t often happen. “In reality, it’s likely that some of your initial assumptions are pretty good and others aren’t going to be worth the paper they’re written on,” he says. Shuman and others say that figuring out your startup costs means regularly reviewing your assumptions and changing your initial business model.

Writing a business plan is good because it forces you to write down literally everything you are going to need to start your business — legal help, tax help, office supplies, equipment, postage, office space, employee salaries, insurance and so on. But that initial plan is likely to change repeatedly as you learn new things and incorporate them into the plan.

Be willing to pull back. It’s tempting to add up everything you need for the fullfledged business you imagine, and decide that that’s what you need to start out. But pulling back and looking for a smaller model can give you a way to get started while also preserving capital.

Shuman uses the example of someone who calculates that the total cost of starting a retail business in a local mall is going to work out to $150 a square foot. “You could start that way and write a business plan based on that amount,” he says. “But maybe you’d be better off putting a pushcart in the mall and testing what the demand is for your products at that location.

“This consumer testing reduces your initial startup costs. The result is that the initial cycle of your business is dedicated not so much to generating profits as to generating information. With this, you can fund your business on a cycle-by-cycle basis,” Shuman says. “When you go for the second cycle and for expanding your business, the numbers are now based not on focus groups or surveys but on real-world experience.”

Calculate prices, time correctly. Calculating your initial cash flow is part of figuring out your startup costs. It’s an area where businesses are sometimes less optimistic than they should be. “Small-business owners may under-price their product or service, thinking they have to come in at as low a price point as possible to compete,” says Barbara Bird, chair of the management department at Kogad School of Business at American University. “They don’t necessarily need to do that.”

Correctly estimate your startup time. Yes, when beginning a business, time can literally be money. Let’s say you’re going to have fixed costs such as a monthly lease. If you have to make improvements to a space before you can actually open for business, those fixed costs are going to be additional startup costs until you can actually open for business.

I’ve watched many entrepreneurs draw up a timeline for their ventures and get tripped up on the zoning, safety and inspection requirements imposed by local agencies. For that reason, I think one of the first places a prospective new business owner should go — even before approaching a lender or leasing agent — is to the local government planning or license department. Construction permits and inspections can push a startup’s prospective opening date back by months. If you fail to figure in the cost of this additional time, you could be short of working capital right out of the gate.

Be realistic about the cost of money. Many small-business owners self-finance their ventures by running up big balances on their personal credit cards. Others tap the equity in their homes. But self-financing isn’t a practical option for larger ventures.

Carnegie Mellon’s Emerson says that startups should figure in the cost of capital when determining initial expenses and cash flow. “The cost is usually based on what the interest would be that similar cash invested in something with similar risk would command on the market,” Emerson says. “It’s usually a figure that is a few percentage points or more above the prime rate.”

Adapted from Microsoft’s Small Business Center website.

The Giant Leap

It’s just the age for first love, first vote and first drive in father’s car. But it can also be the age for your first company.

NOT YET out of teens and already dreaming of being an entrepreneur? You have an idea to fix a problem and believe you can make money from it? It might have been unthinkable in the golden age of lathe machines and steam engines, but in the featherlight economy of internet and mobile phones, it is not just real, but an inviting precollege career option. Imagine Google being founded by a 60-year-old business patriarch! Both Larry Page and Sergei Brin were 25 when they started what would become synonymous with web searching, but the age of entry for startup businesses is coming down. More and more workable business ideas are coming out of campuses, often from abroad but occasionally from India too. Fearlessness, exploratory mindset and self-confidence — all ingredients of youth — are becoming business assets. Teenage startups offer a unique proposition; if you succeed, you make it big. If you fail, you are wiser by the experience that college education couldn’t have given. Never was time so ripe for the country to warm up to this interplay of youth and entrepreneurship.

But then, success stories are often hyped up and failures, larger in number, ignored. The road to entrepreneurial success is hard and unpredictable even for veterans, and can be quite daunting for a teenager. There are so many things that one must get right from the start, if the venture has to take a professional step forward. Here are a few tips that can show the light, but the journey is all yours.

Studies Or Business?

So, your parents have told you to finish college and do whatever you want only later. The good news is that internet has eased so many of the business functions that go into firing up a startup, that you can run the business in your spare time. When the Aggarwal brothers, Raghav and Abhinav, started exampapersonline.com, one was in college and the other in school. Peak season visits on their web site have touched 10,000 a month, but the business hasn’t affected their education. They plan to continue their study and qualify themselves better for business, but they also have plans for expanding the site and offer new services. With a bit of time management, it is possible to ride both the horses.

That said, big education is not essential for successful entrepreneurship. An MBA, for instance, is fancied by kids looking for a career in business, but business experts say you don‘t pick up the art of entrepreneurship from the degree itself. “MBA, by itself, imparts very few skills that are really valuable in a startup situation,” says Alok Mittal, a venture capitalist with Canaan Partners. “The uncertainty and non-linearity of startup businesses is something that most MBA courses shy away from. What it does provide is an allround theoretical view of how businesses function, but it’s not very difficult to pick that up in any case.” Want to hear what an IIM entrepreneurship professor has to say when asked if it is better to get an MBA before trying out a new business? “Certainly not. MBA makes students more risk averse,” observes Anil K Gupta of Indian Institute of Management, Ahmedabad.

Everyone Says It Won’t Work

The single biggest hurdle that young entrepreneurs report is that elders do not take them seriously, at least initially. Let us hope the grown-ups will grow out of this attitude as news spreads about more successes, but till then you have to learn to live with dismissive comments. Even friends can be sceptical. “People tend to have this natural tendency to want to put down an idea however good it is. We saw some of this from our peers and sometimes, they even throw you off track,” says 17-year-old Abhinav. But then, “If you are convinced, then that’s all that matters.”

Canaan’s Mittal likens entrepreneurship to new world exploration. “I would take an analogy of an explorer who has a vision which is seldom shared by others.” The traveller must have the courage to face unexpected obstacles and find his way around in an unknown land.

A deep knowledge of what you do, a professional attitude and focus on solving your customer’s problems will gain you recognition in due course.

Do I Need Prior Work Experience?

There are those who think it would be useful to have some work experience and others who feel such experience can actually make people timid. But hardly any expert suggests work as an essential qualification for entrepreneurship. “It is a myth that experience is a must for entrepreneurial success,” says R Satyanarayan, founder of Career Launcher, which is training 55,000 business school aspirants this year.

TechEnclave, an online discussion forum for computer hardware issues, enjoys the patronage of 20,000 users today. Its founders, Ajay Datta and Sumit Chaudhary, were teenagers going to engineering college and picked up some experience working informally for their friends’ web sites. “Work experience is not needed. If you just have a good idea, that’s it,” Mr Datta says. It is important to know the importance of business operations, finance, marketing and negotiation and these skills can be picked up while working for somebody else. It is a matter of personal choice whether one must work before starting up a business or just take the plunge. “If one has an entrepreneurial spirit, he/she will do it either ways,” says Manish Vij, co-founder of Quasa Media.

Do I Need A Partner Or A Mentor?

A partner who brings complementary skills, experience or money can be valuable, but of utmost importance is “alignment of objectives and high degree of trust in each other,” says Mr Mittal. A single leader startup might have its own value though. It would be easier to impart focus to the business and maintain the vision. But if you must get a partner, choose someone you know and respect, says Abhijeet Virmani, founder of Positron Advisory Services. The same thing goes for a mentor. Young people benefit immensely from mentors, who can shorten the learning curve and help in making decisions at crucial turning points. However, having a mentor is no alternative to the hard work required to make a business successful. “A mentor is not needed to solve a business problem as much as to solve a dilemma in the head,” says Mr Satyanarayan. The guide can help you decide if and when you need to raise money, hire people or form collaborations. You should not turn to the mentor for day-to-day problems.

If Something Goes Wrong?

Two hours of sleep should improve your head, says Mr Satyanarayan. All businesses, big and small, hit low points. The ability to remain calm and make logical decisions during such a phase is critical. “I remind myself that this is a hole that I need to climb out of and I sleep it off. Never make a decision at the top most or bottom most of your game.” Early troubles can actually teach an entrepreneur valuable lessons in business. Exampapersonline, run by Aggarwal brothers, saw a slump in student visits to their site immediately after the annual examinations. They say this forced them to think of ways to spread out the traffic to the whole of the year. They have come up with new ideas to keep the site relevant for periods far from exams. They are now planning to launch internship listings, campus reporting and project work forums.

My Idea Needs A Lot Of Money

An expensive idea can still be a great one to pursue if it can provide commensurate returns, says Mr Mittal. “As a first-time entrepreneur, understanding how to phase the capital raising process is a key. Progressively, as you establish the opportunity better and address the risks in the business, you can raise more capital and fund expansion.” Services based businesses that leverage the power of technology and Internet can be started at a fraction of the cost of manufacturing businesses. Mr Satyanarayan says, “True entrepreneurship is about making sure that a business model is mortally dependent on capital.” So, here goes. Entrepreneurship is like a game of chess. The starting move defines your position, the middle game shows your grit and staying power and the end game determines your fate. It takes both a bit of daring and bit of careful approach to make the winning move.

Article Resource:
Author: Jacob Cherian is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

Scrap yard to Success....

Jitendra Singh with son Lokendra

STEPPING STONES FROM SCRAP YARD TO SUCCESS

This serial entrepreneur went through a roller-coaster ride in a career spanning three-and-a-half decades and learnt some survival lessons on the way

STEEL ingots, magnets, flowers and film-making — these disparate interests hardly hold a connection for most of us. But for Jitendra Singh, they mark the turning points of a long entrepreneurial journey that began in the early 1970s and continues to this day. In these years, Mr Singh says, he tasted success and failure in good measure and each experience left him with rich experience and lessons in business leadership.

It all started on a tour to Japan in 1968. Young Jitendra had gone there along with his father, whose metal scrap business had a few customers in the land of the rising sun. A nationwide strike had given this engineering student an impromptu vacation and he used that to stay and learn his first lessons in business from Japanese workmen.

“There was a cluster of furnaces in Japan’s Kansai region (known as a steel hub). India’s steel industry had never seen that kind of growth. I realised that there was space in India to set up similar facilities, especially when we were just developing and I predicted huge demand for steel,” says Mr Singh. He found a willing venture capitalist in his father and the family applied for government licences to make steel ingots in the country.

Indian Steel Corporation (ISC), the Singh family’s new firm, obtained three licences and by 1973, had set up two plants at Kolkata and Mumbai, each with 12 tonne arc furnaces. Industrial units making small steel items were the customers and soon, the business started gaining ground. Demand was growing and Mr Singh decided it was time to scale up capacities.

The first hurdle came in the form of high interest rates. The proposal was not only turned down by many banks, but the high cost of borrowing made it unaffordable for the family to take loans for expansion. But Mr Singh had resolved to expand capacity five times and looked for options.

“That’s the second thing that one should do to cement a new business; expand. Unlike now, it was tough to raise money back then. Assistance from banks was hard to come by, so we thought of going for a public offering,” says Mr Singh. Inspired by the highly successful IPO from Reliance and Dhirubhai Ambani’s daring vision, Jitendra Singh went to the capital markets to raise Rs 1 crore.

The IPO brought in the money, the expansion was completed and the steel ingots business found a growing market. Revenues increased consistently for a decade. But Mr Singh got a severe jolt, when his father died in 1982. He took help from his uncles and managed the company, though ownership issues and a family split would ensue later.

In 1985, ISC got into engineering. In the metal scrap business, the company used heavy magnets that would aggregate the material and release them into a waiting furnace. Many engineering, capital goods and steel units had similar needs and Jitendra decided to start manufacturing industrial magnets.

“We have been repairing our own magnets, which weigh anything between 5 to 10 tonne. We had collaboration with a UK company. With the manufacturing sector growing in the country, we sensed an opportunity in the business,” says Mr Singh. The initiative clicked. Within a couple of years, revenue reached as high as Rs 75 crore (Rs 300 crore at today’s prices, says Mr Singh).

Thus, Mr Singh had established a reputation for getting into businesses where he had no prior experience and learning on the job. “As an entrepreneur, one needs to keep diversifying so that all the revenues are not dependent on one business,” the veteran explains.

In 1992, his uncles also passed away and the business was split. He and his brothers got the Mumbai side of the business, with operations in Khopoli and Bhandup near the metropolis. However, this meant a sudden drop in revenues. “We adapted,” Mr Singh recalls. ISC tapped the demand for magnets across the subcontinent. A Bangladesh office and a factory in Malaysia were soon opened. This move helped stabilise revenues, but Mr Singh felt more diversification was needed to overcome the hard times.

That is when the fragrance of flowers attracted him. Mr Singh set up an export-oriented floriculture unit in the mid 1990s. “We set up a joint venture with an Israeli company. It was not that difficult to get into the business in India and we saw a high demand for flowers in the export market. But within a short time, high duty rates imposed by the EU made the business non-viable and we closed shop,” says Mr Singh.

More bad news was in store. Beginning 1997, the global steel industry entered one of its worst phases. Steel prices fell and the Asian financial crisis made bank loans hard to come by. “We somehow continued operations till 2003, but had to shut shop after that. We didn’t have the financial support to go for backward and forward integration, which could have saved the business,” says Mr Singh. Revenues had shrunk to new lows and the business had to be reinvented.

“Now, we wanted to get into businesses where margins are better to withstand any recession,” says Mr Singh. But he was now joined by his son Lokendra, who not only understood the family business but was clued into opportunities emerging in modern times. “In our ingots business, the difference between production and selling costs was slim. So the margins were low. A recession would wipe out the profits at one go,” says Lokendra. The father-son duo zeroed in on three sectors for diversification; media, pharmaceuticals and food & hospitality.

The first piece of good news came from the flowers business. A changing lifestyle and rising middle class incomes made India a hot, growing market for flowers. Jitendra was quick to revive his floriculture business. The Khopoli unit, which had filled with the grating noise of metal scraps business for decades, was now handling tender flowers.

At that time, a movie-maker friend visited Singh’s unit in Bhandup and happened to see the backyard warehouse where metal parts had been stored. He asked for the space for a few days, so that he could film parts of his film there. Mr Singh agreed. At the shooting, film star Raj Babbar, who had also known the Singhs previously, remarked the warehouse was an ideal place for a regular studio. It did not take much to get the serial entrepreneur making plans for a new venture; an investment of Rs 3lakh for a rental studio for films and television soaps.

“We had a lot of empty space at our Bhandup-based facility. Earlier this year, we set up the 8,000 sq ft studio. Within two months, we have been reporting 100% occupancy,” he says. He wants to add another 5,000 sq ft to the facility soon.

Among other plans, he is eyeing project engineering, building on his magnets business. “Today, we have 80% share in India’s magnets market,” claims Mr Singh. At Rs 30 crore, the company might be far removed from its days of glory, but Mr Singh is hopeful. “The steel industry is in for a long-term boom...I don’t have any turnover targets. I only hope to go step-by-step, learn from every step you take, forward or backward.”

These days, Mr Singh often takes visitors to show off his star-studded ex-warehouse floor, where a movie or a TV soap is being shot. And he refuses to draw curtains down on his entrepreneurial dreams that have sustained his long journey from a scrap yard.

Article Resource:
Author: Prince Mathews Thomas is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

Don’t fire them, fire them up!!

Don’t fire them, fire them up!

Startup Hiring Checklist

RECRUITING IS MARKETING

More often than not, the best employees are the ones that find you, not the ones you go out and look for. The problem a lot of startups have is, how do I get more people to find me? Simple — think of it as a marketing exercise. Just as you would explain the product features to a potential customer, explain to a candidate what it's like to work for you (in real language, no HR platitudes thanks), what you look for in people and then make sure people find out about it. You can even post a Web page on life at your company. It's a small investment to make but an effective tool in getting a vast audience to read about the work experience under your roof.

TRUST YOUR TEAM

You’ve hired smart people already right? You think your team is the best on the planet. So put them in front of candidates! Don’t hide them in a back room. Too many people have their HR people do most of the interviewing. Let the candidates get to know the people they'll be working with, if they join your company.

YOU DON’T WIN WITH MONEY

Many entrepreneurs think that the simple way to hire a good team is to throw money at the problem. In choosing a place to work, people look at the company, the role, the people, the environment and the money. Pretty much in that order, but it's important to keep the balance among all the variables. As long as the money is competitive (and this is key), the other factors should decide the final outcome. Money doesn’t win people over, money prevents you from losing them. It gets you in the game. People value their time and while you might be able to ‘buy it’ with an outrageous salary, that’s a temporary measure. They’ll eventually realise that doing a boring job 10 hours a day for huge dollars isn’t the way they want to spend their life. It's not a way to build a company, it’s a short-term band aid strategy. You don’t win people with a lot of money and I’d say you don’t want to. People who chose a job purely on the larger salary are probably people you don’t want on your team anyway. That said, the corollary here is that you can definitely lose people with money. If you're not paying what the market is or your firm just pays really low salaries, people will go elsewhere. It's all about balance.

MAKE SPACE FOR SMART PEOPLE

Sometimes people come along who don’t fit into any existing role. You can consider hiring really smart people, even if you don’t have a defined role for them. At the same time, don’t be afraid to redirect a candidate if you feel they’re interviewing for the wrong job. If you have a roadmap for your company’s progress, you would have created titles and jobs that you would require in the next two or three years. Many smart people will fit into these roles, current or future, but others create the job profile for themselves. Have the flexibility to include both groups in your team.

TO HIRE OR NOT TO HIRE

The hire-or-don’t-hire decision is critical. Why is this decision so important? The damage a wrong choice can do to morale, to your product, to your company should never be overstated. It’s a little like poker, the most important and hardest skill to learn is when to fold a hand not when to bet. Not hiring a few good people is far better in the long term than hiring a few bad ones. Err on the side of caution.

NO KEYWORD HIRING

This mostly applies to software developers, but the principle is important for all. Don’t hire based on keywords in a resume. Too many companies look for “JMS”, “EJB 3” and “J2EE” and assume someone is a good developer. Look for people who are good at learning new technologies, rather than stacking up acronyms.

Shopping for Success - Mergers and Acquisitions

Shopping for Success

Mergers and acquisitions are all the rage in corporate India. But are such deals good only for the big boys or can startups and small companies too take the plunge?

Education and training firm Career Launcher made its first acquisition in the seventh year of its existence. For a small company that had begun with one offering, the buyout brought diversification, de-risked revenues and overseas customers. In the six years after that, the firm has made three more acquisitions, the latest one in the United States. IIM-Calcutta alumnus R Satya Narayanan, who founded Career Launcher, says acquisitions are a key driver of growth for the company.

He, and other successful small companies, have demonstrated that mergers and acquisitions are not just for the Tatas and Birlas. Even startups, not just those who have already tasted success but even the greenhorns, can buy and manage the integration of outside businesses. But, M&A deals are a risky affair with low potential for success even in the case of multi-billion dollar companies and why should startups venture into them? And if one must, how and when does an entrepreneur decide to go in for acquisition?

IT CAN GET YOU STARTED

When pharmaceutical industry employee K Hari Babu was considering starting on his own in the mid-1990s, he noticed a number of sick drug units in Hyderabad city. Far from discouraging him from his entrepreneurial aspirations, the sorry state of these units only made him sense a rare opportunity. He could spend the time, money and effort to build his own drug factory or buy one of those units cheap and start from day one. He took the latter option and more than a decade later, his venture, Anu Laboratories, has blossomed into a profitable company with Rs 200 crore in annual revenues and exporting to some of the world’s best known drug makers.

But then, why did he choose to acquire to start? “When you are walking on the road and need a car, you don’t sit and build one yourself. You just hire a cab and take the best way out,” says Mr Haribabu. He points out that pharmaceutical industry is one of those sectors that involve a lengthy regulatory approval process for a greenfield project. An acquisition in such industry can make the entry quick and trouble-free.

Laura Parkins, executive director of National Entrepreneurship Network, lists hotels and high-end financial analytics businesses as attractive for early acquisitions by startups. It is difficult to get the land and approvals to build hotels and restaurants and it is easier to buy out. “It is difficult to find skilled people. Hence acquisition is best here and you inherit an already set HR base,” she says.

IT CAN GIVE YOU SCALE

Education service businesses typically start in one city with one offering. Some coach candidates for civil service exams, other train them for MBA entrance tests and still others for courses abroad. Most of these centres remain that way, but those who grow do so by setting up their presence in several cities and expanding the range of training they provide. To achieve scale and breadth, acquisitions can come in handy. On the other hand, setting up coaching centres in each city and letting them grow on their own could be a time-consuming process.

“When you are in your growth stage... when you are near 80% capacity utilisation, that should be the time you start giving acquisitions a serious thought,” Mr Hari Babu says. So many small companies grow up to a point and fail to grow further. They can choose to remain that way — a mom and pop shop — or they can break that barrier with an acquisition.

HAVE CASH, WILL BUY

Whether rookie entrepreneur or a growing company, startup acquisitions have to be made with own cash, typically. In India, banks are not allowed to lend to domestic M&A deals, going by the socialist principle that it is their job to lend for asset creation not transfer. While they lend vigorously for cross-border acquisition deals by large companies, lenders vanish before the word loan can be uttered when it comes to acquisition by an entrepreneur. Giving away stock to the owners of the business being bought can be considered, but it can dilute the startup founder’s control. So, pumping in hard cash is really the hassle-free way to acquire. If there is not much money in hand, going for acquisitions would be one hell-of-a-risk any way.

Small company heads and first generation entrepreneurs don’t have experience in the foggy world of corporate valuations and risk paying too much for a target business, says a Mumbai-based investment banker. For this and other reasons, they must rope in professional help to decide an acquisition strategy and specific deals. One thumb rule, in all cases, is the cashflows of the acquired company should be able to finance the buyout cost over time, a banker said.

BUY AND KEEP TALENT

For a small company, domain knowledge and leadership skills are the biggest assets. In any acquisition, employees of the acquired firm can lose morale and look to change jobs. In a startup scenario, the feeling of uncertainty is even more intense. An acquisition would be meaningless if the target firm’s key personnel were to leave within a few days. So, the acquirer must find ways to bind the best workers to the company at least for some time.

Take the case of Globsyn Technologies, which acquired the promoter stake in Mumbai-based Synergy Log-in Systems. Globsyn was a small firm in education and training and the buyout brought it banking software expertise. It made strategic sense and all looked rosy. But soon after the acquisition, two senior overseas employees left the company taking their contracts with them. “I had to start building the company again from scratch,” recollects Globsyn chairman Bikram Dasgupta. “Some of the existing customers were also very upset with the firm and were thinking of taking their contracts elsewhere. The business had been neglected and nobody was servicing them. I had to convince them to stay on,” he said. Today, Synergy has survived and is making profits, but it has not been an easy bite to chew for Dasgupta.

IT’S A TWO-WAY STREET

Just like it can make sense for some companies to acquire, it could be good for others to be acquired. Smart entrepreneurs don’t cling to their pet startups that can flourish better under somebody else’s care. They sell out and look for alternatives.

“Acquisitions are more about the mindset, and entrepreneurs have to be open to the idea of M&As being bi-direction if they are thinking abut achieving scale through this means,” Manak Singh, executive director at The Indus Entrepreneurs, says.

Buying or selling, a transaction has to fit in with the strategy and vision of the business. Cultural integration is an issue even in small groups of people. Most acquisitions fail because two different sets of employees don’t see eye to eye on what they want to achieve together. For a large company, a failed acquisition may be a mere headache, but for a startup, it will be cancer. So, unless the small business leader is absolutely confident of the strategic purpose and the firm’s ability to digest a buyout, the effort to acquire should not be made. There are always options such as strategic alliances to achieve some of the growth needs, experts say.

The success story of the world’s largest software company, Microsoft Corporation, started really with the acquisition of DOS, the Disk Operating System, in 1981 for a mere $50,000. Though the company paid Seattle Computer Products another $1 million later to settle a dispute, the whole thing was a jolly good investment for the company. Who knows, the next killer acquisition may be yours and the opportunity may just be round the corner.

Article Resource:
Author: Ritwik Donde (With inputs from N Shivapriya) is the cheif editor in the Economic Times and the article appeared in one of their successful columns in "Start-ups".

Mergers and Acquisitions

The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity.

Distinction between Mergers and Acquisitions

Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things.

When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded.In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". Both companies' stocks are surrendered and new company stock is issued in its place.

In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal as a merger, deal makers and top managers try to make the takeover more palatable.

5 common Mindblocks against Entrepreneurship.

Mind Over Matter.

5 common mindblocks against Entrepreneurship.

TO EVEN those with a strong urge to start their own business, it seems ludicrous to give up a job in a comfortable atmosphere, with full benefits and generous bonuses. The fact is, it’s still a job — and you still wonder, every day, what it’d be like to work for yourself, not someone else. The following are the five common mental hurdles you must leap over to realise your dream.

You don’t have a lot of money in the bank

That’s a very good reason to shy away from quitting your job, isn’t it? But that just means you need to get a financial plan together. Consult with a financial planner who can help you map out personal and business finance goals. Some local colleges and community centres even offer workshops and classes on financial planning, usually at a minimal cost, so take advantage of them.

Someone mentions the words “business plan” to you, and you stare blankly

A business plan is not the be-all, end-all of starting a business. But it’s pretty important. Some think they don’t need a business plan if they aren’t planning on seeking financing from outside sources. But even if no one but you ever sees your business plan, it’s still important. It helps you put your goals in focus and create a written plan of action for your business. It’s almost like a detailed to-do list. Plus, you never know where your business will take you. You might get started and find out you need more money than you thought, and that’s where that handy business plan comes in.

You don’t know anything about bookkeeping

Go ahead and admit it—it’s very freeing. Admitting you don’t know everything will only make you successful later, because it means you’ll have the courage to ask for help. Get all the advice and mentoring you can at this stage. There’s no shame in consulting with an accountant, an attorney, a long-time veteran in the field, and so on.

You’re not sure you have the dedication it takes to stick with it

There’s a simple way to solve this problem: Don’t start a business doing something you don’t like. If you hate getting up early, starting a coffee shop or a bakery is not for you. If you get impatient around children, don’t start a child-care centre or anything else kid-related. You have to love what you’re doing when you start a business, or you will not stick with it. It's no different than working in a job you hate.

You’re afraid of selling

That’s a big one, because if you’re an entrepreneur, you’re also a salesperson—that is, unless you figure out a way to bring a top-notch salesperson onto your team from the get-go. Chances are, you don’t have the money for that yet, so perhaps a better alternative is to psych yourself up to sell. If you believe in your product or service, you’ll find the confidence to sell it.

Now quit stalling, and get to work. You’ve got a business to start.

Reference:
(Adapted from Microsoft’s Small Business Centre website)

Keeping the Flock Together.

Keeping the flock together

Our company started in a modest way in December 2005 in Pune. We manufacture industrial valves and accessories for automation. The company was started by me and a US company as a 50:50 joint venture, with the objective of supplying our products to the US company. Our revenue for 2006-2007 was 10 crore, 90% of which was from exports. We made a loss of Rs 20 lakh.

Our revenue targets for the year to March 2008 is Rs 18 crore (Rs 12 crore in exports and the balance from domestic sales). All the current key functional heads and me have worked together in the previous company and they all decided to throw in their lot with me by joining me at the same salaries. Meanwhile, salaries in our industry has almost doubled over the last two years. I need to decide whether to hike salaries of my present team to match the industry levels.

I need your advice on how to match the current short-term goals of profits versus long-term goals of developing the company’s human resource assets. My long-term goals are to reach Rs 50 crore revenues by 2010. My salary bill was Rs 70 lakh, when revenue reached Rs 10 crore. It would rise to Rs 1.6 crore at a revenue of Rs 18 crore, if I increase salaries in line with market trends and hire more staff. Should I focus on building the team now or try to meet the short-term objective of profitability?

Wow! Yours is a successful startup! Congratulations on passing so many milestones in such a short time. You went from zero to Rs 10 crore in a little over a year and are looking to grow to Rs 18 crore in year 2 — that is spectacular growth. You are diversifying your client base from 90% exports to 66% exports and 33% domestic — that is a wise decision at a time when the US economy is showing signs of flagging! You have managed to keep your senior team together so far — and it was an important thing to do in the start-up stage because it lets you worry about the right things — your product, your markets.

One of the most important skills for a successful entrepreneur to learn is how to sift through the many questions that arise and make sure you are asking and answering the right ones. It appears that you believe the heart of the issue is whether you should focus on trying to keep/build your team or try to meet short-term profit objectives. I submit to you that this is not the right question for you to be asking at this stage of your growth, though you clearly have to address the situation you describe.

RAJAN SRIKANTH President, Asia, Mercer Human Resource Consulting

I have in this column described a “stages of growth” model for startups. Stage One is all about innovation and creating/establishing that killer product. Stage Two is all about market penetration and creating a broad footprint. Stage Three marks the graduation from a startup to a viable business and is characterised by what I call the 3Ps — professionalising, introduction of process, and profit extraction. The needs of managing a startup through each of these stages differ. The challenge is that the entrepreneur tries to manage with an approach, or operate with a organisation that may be right for one stage, when the business circumstances suggest he or she should be in another stage.

I believe your company has just entered Stage Two. You are looking to diversify your markets and gain a strong domestic footprint. The primary goal for a successful startup at this stage is to firmly establish itself in all of its target markets and create reliable and rapidly growing revenue streams. Profit, while it is nice to have, is rarely the best thing to focus on in a Stage Two company. So, I would first suggest that you take the consideration of shortterm profitability off the table — if you can afford to do so, of course. Besides, for a one-year old company to have only made a 2% loss on a turnover of Rs 10 crore suggests that you may already be running a very tight ship. The relevant question then becomes whether you are not spending enough to support your spectacular growth, and on what you could/should be spending more.

Which brings us to the second part of your question — about keeping/building your team and whether you should pay them more or risk losing them. Here too, I think the question to ask is different. The key to success in a Stage Two startup is typically building a sales culture by hiring market developers and salespersons, and getting more sophisticated in terms of measuring and rewarding sales performance. The first question I would ask then is how your current team measures up against your business need for quickly growing a domestic market for your product and possibly exploring other export markets; where there are critical gaps to fill, and where there are key players in key positions that must be retained. The second question I would then ask for each of these “must hire” or “must retain” positions/players is what it will take to attract or retain them. Our research shows that while compensation plays an important role, it rarely is the reason people either stay or leave a company. Opportunities for career advancement and development is an important driver in attracting and retaining talent. Clearly, it appears that your team moved with you from the previous company not because you gave them great raises, but because they saw a terrific opportunity for career advancement. Now, that does not mean you can continue to pay less when the competitors have doubled compensation, but it does mean that you should practice what I would call “HR for the unit of one”. What I mean by that is you should seek to understand for each of your key players — what really makes them tick, who would require an increase in salary to stay, who can be inspired to even higher levels by adding a variable pay component contingent on performance, who would pledge their loyalty in exchange for a challenging assignment in a new market/role or being given an opportunity to learn new skills, and who would become part of the solution rather than a part of the problem if you invited them into your decision making.

There are no easy answers to the situation you fa ce, but I hope I have been able to point you the right questions to ask. In seeking answers to these questions, I have no doubt you will not only lay the foundation for your continued spectacular success, but also develop a deeper understanding of what makes startups and the people who work in them really tick.

Article Resource:
The article appeared in The Economic Times, Mumbai in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

11 tips to grow beyond the start-up phase.

11 tips to grow beyond the start-up phase

HIRE PEOPLE WHO ARE BETTER AT THE JOB THAN YOU ARE

It’s a fact that companies are built by people, and the best people build the best and most profitable companies. Put simply, great employees may cost you 20 to 30% more in wages, but they can be twice as productive as mediocre employees. Invest in good people.

PLACE HIGH URGENCY IN EVERYTHING YOU DO

Always do everything you can today. Too many people treat their businesses as 9-to-5 jobs. Never put something off until tomorrow if you can do it right now.

GET CUSTOMERS COMING BACK

The road to profitability is through repeat business. Too few business owners set themselves up for long-term success. Your business grows when you add regular new customers on top of existing regular customers. Think of it this way: What if every customer you ever got stayed for life? How many regular buyers would you have?

MAKE DECISIONS QUICKLY

New companies don’t have the time or resources to stand still. General H Norman Schwarzkopf once said, “When placed in command, take charge.” It’s better to make a decision and move than to stand still.

DELIVER MORE THAN YOU PROMISE

If you tell a customer it’ll be three days, deliver in two. If you think it’ll be two hours, say three hours and surprise them. This is the best form of marketing ever.

PRICE YOURSELF FOR PROFIT

Don’t ever be the cheapest. You’re the little guy; you don’t have economies of scale. Big companies can make up in volume what they lack in margin. You can’t.

NEVER SPEND A RUPEE YOU DON’T HAVE TO

You don’t need a new desk, you need a cheap desk. Too many new business owners go and buy the best stuff because they think image is important. Listen, when you get profitable, you can have a big mahogany desk. Right now, just get a desk.

SET A BIG VISION

Start Small, Finish Big should be the title of your book. Don’t aim to be the best dog trainer in your city — aim to be the best in the country. Remember, building a business is a 10-year plan, not a one-year plan.

MARKETING IS MATH

Don’t ever let an advertising sales representative teach you anything about marketing. They will say dumb things like, “Half your advertising works and half doesn’t — and you’ll never know which half.” Rubbish. If an ad that costs Rs 100 gets you Rs 100 back in profit, it’s a good ad. One other tip: Image advertising doesn’t make sense when you’re not yet profitable.

LEARN TO SELL

There’s nothing worse than a business owner who isn’t willing to sell — or even learn to sell. No company makes money unless someone sells something, and you can’t just rely on people you hire to do the selling for you. If you want to grow a profitable business, you’ve got to learn sales yourself.

IT’S SIMPLER THAN YOU THINK

Before most people even go into business, they work it up to be far more complex than it really is. Business is very simple: Sell at a profit and keep at it. Overcomplicating the process won’t help anyone. If your business seems too complex, it probably is — so make it simple and watch yourself succeed.

Reference:
(Adapted from entrepreneur.com)

Health and care for all.

Health and care for all

THAT India’s primary healthcare is in dire straits is well known. While the affluent sections are being overwhelmed with the choice of superspeciality service, there is a widely held belief that there is no money to be made in providing healthcare to the bottom of the pyramid. Some entrepreneurs are challenging this as a myth and trying to improve the health of healthcare in India.

Ziqitza Health Care Services, the company behind the 1298 emergency ambulance service in Mumbai, has shown the way that it is viable to provide services at a subsidy or for free. Anyone can avail of their dial-in ambulance service, and the company has made it clear that ability to pay will not be a defining factor for using the services.

It was a few years ago that five individuals decided to junk their corporate careers to start the company. Shaffi Mather, Manish Sacheti, Ravi Krishna, Naresh Jain and subsequently Shweta Mangal came together in 2002 to begin Ziqitza.

The first four knew each other from their studies in the US in the mid-90s. Says Mr Sacheti: “We had all decided that we should go back to India and do something in healthcare.” Shaffi Mather and Manish Sacheti met during their MBA at University of Pittsburgh’s Katz School of Business, and quit their respective jobs with Reliance Industries and The Aditya Birla Group. Naresh Jain, who graduated with an MBA from University of Maryland, College Park left GE Plastics and along with Ravi Krishna formed the core team.

The statistics they found were startling. Just 6% of all people in India have access to ambulances with emergency services, which meant that there were several individuals that perhaps lost their lives just en route to hospitals. The point was further driven home when Shaffi Mather’s brother nearly lost his life as a result of poor medical services. Says Mr Sacheti: “Having come from the US and observed the way the health care system works there, we definitely felt that we could do something in India.”

They swung into action by 2003. Shaffi Mather, the CEO of Ziqitza, had worked with the London Ambulance Service as part of a threemonth training at LSE. This proved to be handy as Ziqitza and London Ambulance Service entered into a tie-up in India for paramedic training. Mr Sacheti says: “They even offered us an ambulance, but we refused.”

They then studied the ambulance service in Hong Kong and a subscriptionbased service in South America, but junked the latter because it wouldn’t work in a system where people just couldn’t afford to pay. Finally, they decided to settle down on a ‘sliding scale’ model of payment. In effect, people that could pay would be charged higher, while those that couldn’t were subsidised. But all callers would be able to use the 1298 service regardless. The five-member management team decided to divide the calls into two categories, cardiac calls and basic calls. Says Mr Sacheti, “The cardiac calls require medical intervention. So an ambulance for a cardiac call requires a doctor, a ward boy and medical equipment.” The basic calls won’t require the bells and whistles that a cardiac ambulance requires.

Although their initial studies suggested that the service would be profitable at Rs 5,000 per call, Ziqitza priced its services at Rs 1,500 for a cardiac call and Rs 750 for a basic call for the first 20 km. Mr Sacheti says: “We have discovered that it’s a sustainable business model even at this price.” In a sense, the ambulances break-even, but the company has got four sponsors, Tata AIG, HP, SBI and Playwin that keep the corporate office running. Curiously, it’s been the more affluent bunch that haggles with the ambulance operators when it comes to payment, whereas several lower-income patients from areas like Dharavi have paid up to Rs 1,000 without any hesitation.

The 1298 service was formally launched in 2005 in Mumbai by the Maharashtra chief minister Vilasrao Deshmukh. Ziqitza scaled up their ambulances from one to ten, and established a network of another 10 ambulances and omnis. As Mr Sacheti says: “We needed to have an ambulance for anyone that wanted the service and we can’t refuse calls. So we need to have other ambulances that will take up the load.” But Ziqitza makes it a point not to outsource the cardiac calls. On average, the service gets nearly 40-50 calls a day. But the service suffered some initial pangs. According to Mr Sacheti, “We would let the doctor decide whether the patient should be subsidised or not, but we found that the doctors were actually overcharging the patients and keeping the difference.” Now, all calls are screened. If they’re from the government or BMC hospitals, the fee is immediately waived off or cut.

Recently, Acumen, a not-for-profit equity fund, invested $1.5 million in Ziqitza to aid its expansion from 10 to 70 cardiac ambulances in Mumbai alone. The 1298 service will make its debut in Kerala as well by December. Mr Sacheti says that merely providing the service won’t be enough, it has to be world-class. Hence, the next target — get the patient to the hospital within seven-nine minutes of the call.

That would, perhaps, be the Formula One of emergency healthcare.

Article Resource:
Author: Irshad Daftari is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

Building A Core Team.

START-UPS NEED TO WAKE UP TO THE IMPORTANCE OF BUILDING A CORE TEAM

It’s the quality and performance of the top few executives that decide the success of any new business, says S Srinivasan

FOUR months ago, Bangalore-based optical networking company, Tejas Networks, staged a coup of sorts by roping in 46-yearold Rangnath Salgame as its president. Mr Salgame had made his name by developing a $1 billion business in India for global networking giant Cisco. Technology industry veterans were surprised to see him move to a company with revenues of less than $100 million.

Mr Salgame had then said he was surrendering to his entrepreneurial impulse and the temptation to build a product company out of India. Tejas was lauded for getting a visionary leader for its core team. The next news, many expected to hear from the small company, was how it had crossed another revenue milestone.

But, the news that came out of Bangalore was different and stunned the industry. Mr Salgame suddenly quit Tejas under conditions that neither he nor the company explained. His profile was removed from the company website and Mr Salgame was tight-lipped. A job that was negotiated over a year crumbled in just 16 weeks. Was it a clash of vision, a clash of personalities or a systemic defect at Tejas? But one thing was clear: the core team that Tejas was putting together failed to stick together.

The incident highlighted how difficult it is even for a company, with a solid grounding, to build and keep a core team. For a startup, the difference between success and failure is primarily the result of the quality of its few top champions and their collective endeavour. But entrepreneurs often grapple with issues within this small group and lose much energy that could otherwise be spent on building the business.

“Some entrepreneurs think they need to know and do everything. This is wrong,” says business mentor Saurabh Srivastava, who has proven his team-building skills at a number of technology companies and also in the founding of software trade body, Nasscom. He says it is not practical for a business executive to have all the skills and strengths required to take a start-up to success. A small team with common beliefs is a key necessity.

Founders must evaluate their strengths and weaknesses objectively before deciding to build a core team, he says. This exercise will expose the gaps that must be filled and the areas that must be reinforced. MS Pillai, founder of Sadhana Centre for Management and Leadership Development, says that many great businesses have failed for want of a cohesive top team. “You may be anybody. But without collaboration, without mutual dependence within a small group of people with complementary strengths, it is extremely difficult for you to achieve lasting success,” he adds.

A human resource expert, who specialises in senior executive search, said one-man shows may be good enough to achieve the proof-of-concept in a business, but a core team, often with skills brought from outside, is necessary for the firm to move to the next level. “As an entrepreneur, you may be the initiator of business. But it is not the rule that you must be the leader too. The leader can be another person in your team,” explains founder chairman of Executive Recruiters Association and Sampoorna Computer People managing director Satish Doshi.

Many first-time business dreamers start with the support of family and friends. It is a natural choice for those who start operating out of their homes. This strategy has both positives and negatives, experts say. The founder can use a family member, who will fill up a talent gap and communication will be easy between them, but personal relationships and professional co-existence can weigh heavily against each other, they say. So, what are the golden rules of core-team building?

FINALISE MEMBERSHIP

Entrepreneurs must draw up a list of the most crucial skills necessary for the business and assign job positions to them, experts say. For instance, writers and creative talent may be crucial for a content company, but back-end process management may be the one crucial aspect for a travel agency. So, having a clear list of priority skills is the first step. The talent mix must be individually intensive and collectively exhaustive.

SET INSPIRING GOALS

Any business idea has to be larger-than-life and even slightly unrealistic, says Mr Doshi. If a business idea was easily achievable, why would anybody want to do it? A core team comes together when there is a larger purpose they all want to serve together. A lack of this inspiration will make it impossible to attract outside talent and may eventually lead to the company straying into unimportance.

SHARE AUTHORITY AND OWNERSHIP

If an entrepreneur builds a core team and then decides to keep all the strings in his palms, his colleagues will feel under-used and lose their connection with the company’s vision. The attitude to keep all the profits and all the power to oneself has destroyed many business aspirants. “The question is simple. Do you want to have full control over a small pie or part-control of a larger pie, where that part is significantly larger than the small pie?” asks Mr Doshi.

HAVE A CLEAR LEADER

Many entrepreneurs assume they are the leader for their business. Experts say this need not be the case. The best entrepreneur hires people better than him or her and lets them direct the journey. This would lead to a situation where there could be multiple leaders within the team. The issue must be quickly resolved and one person assigned the task of leading the core team.

SET CLEAR RULES OF ENGAGEMENT

Great teams fail to deliver when they start quarrelling over a decision here or a plan there. Mr Doshi feels before the team starts its first discussion, the ground rules must be set on how the members are going to work together. It must be made clear that all criticisms and suggestions are welcome and none would be taken personally. Mr Pillai says there have been start-ups, where family members got together with good intention, but suffered a fracture in their relationships due to workplace stress. Complaints about some member not contributing enough or another taking advantage of the business abound in such enterprises, he says.

ACHIEVE ENTREPRENEUR-PROFESSIONAL MIX

All core teams have to start with high entrepreneurial focus, taking calculated risks and being flexible to move fast. But as the business begins to grow, there is an immediate need to put systems and processes in place. Professional managers free the entrepreneur’s time so that he can focus on the long-term strategy. Businesses often go haywire when they fail to bring in the discipline of professional management, Mr Pillai says. “A professional in a start-up team must be the personification of an entrepreneur himself. The professional need not have a Harvard-qualification, but must have passion to create something new.”

BE REALISTIC

When hiring an outsider, it is important to understate the benefits of being in your team, because over-promising will lead to failure and frustration, experts say. Mr Doshi says it is a good idea to leave a positive surprise, such as a better title, company-paid house or a training programme, open and unsaid at the beginning. People will like them that much better if they earn it for their performance.

Even after all this, it is possible that a core member could leave. It is a contingency that a start-up must learn to tackle, but the larger question the entrepreneur must address is whether it was because there’s something wrong with the business. “If the dream had been sold and the partner dropped everything to join you but still left midway, then something may be going drastically wrong. You must ask yourself if you are being fair as a leader. Are you tolerating competing agendas? Are you not able to give direction? Are you not able to resolve conflict?” says Mr Doshi.

Article Resource:
Author: Srinivasan S. is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

A Doctor’s Journey from Pain to entrepreneurship.

A doctor’s journey from pain to entrepreneurship

Dr Patil Uses Acupuncture To Cure His Migraine And Set Up A Flourishing Business

IT WAS 1966 and 26-year Ratnakant Patil had to leave his examination hall. A severe headache made his final-year MBBS exam at the Kasturba Medical College in Mangalore a nightmare. He had a severe migraine attack and was vomiting. His sympathetic professors, who had been treating him over the previous few years, let him wait out this bout at the back of the hall. When he felt better a few hours later, they let him finish his paper in an empty hall.

Little did they realise that a couple of decades later, this experience would push Dr Patil to start his own business of curing people, just with a set of pins and needles.

Stress had kick-started the migraine, and for a while, the young Patil thought it was incurable. He had never met a doctor who could help him. Then, he decided to help himself. “Allopathy has no cure for these migraines. They can only give you pain killers,” says Dr Patil, who today heads a busy acupuncture clinic in Bangalore specialising in cures for pains and aches.


In the early seventies, while working in Denmark as a gynaecologist, he began to read about the benefits of acupuncture. He didn’t really believe in the benefits of some pinsand-needles therapy. However, all this changed when he and his fellow doctors at the Copenhagen City Hospital began to lose patients to the Swedish and Norwegian hospitals, which offered acupuncture. He went up to the hospital administration and suggested that they allow him to study the technique and bring these skills to the hospital to help retain patients.

Today, the soft-spoken doctor admits that his primary reason was to find a cure for his own affliction. Since he opened his own clinic in 1982, he has had the satisfaction of helping several victims of migraine, among other chronic aches and pains. He does acupuncture for pain management and practices from Kampo Clinic on Cunningham Road, in Bangalore. The word ‘kampo’ means ‘healing’ in Japanese.

He first worked from a rented room from the same location. As soon as he opened his doors, he says he saw an immediate surge of patients, who wanted to benefit from this ancient Chinese treatment.

“All these people had read about acupuncture and were readily willing to try it out,” he says. He used to treat 10 to 15 patients a day and charged them a fee of Rs 50 per sitting. Soon, he had to build his own clinic and hike the fee to up to Rs 75 per sitting. Interestingly, the cost of the treatment was Rs 100 until 2003. In the past five years, his fee has climbed five-fold and he still doesn’t treat more than 15 patients a day.

Over the years, Dr Patil has added to the services that he offers. These include multiple-Chinese needle treatment, the Japanese single-needle Royodarku method and Depo-acupuncture, where a needle stays in the patient for three days. He has combined these with modern machinery to offer sono-puncture-ultra sonic sound waves.

His latest addition came two years ago in the form of his Sonotron machine. This machine emits radio frequency waves and is described as a “totally non-invasive alternative medical therapy for patients with chronic and acute pain in their joints, and other soft tissues, without needing to use drugs.”

Article Resource:
Author: Jacob Cherian is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

Beginning Of A New Financial Year.

IT’S THAT TIME OF THE YEAR TO PAUSE & MARCH ON

Start-Ups Need To Realise The Potential The Beginning Of A New Financial Year Brings And Gear Up To Tap It.

THE passing of March is the death of weariness and the birth of April the start of hope all over the world. Centuries ago, Geoffrey Chaucer opened his Canterbury Tales expressing his love for the sweet showers of April and the drought of March that pierce to the roots. For businesses, it is the end of the financial year, time to close old books and open new ones. It is when one squares off pending transactions, be they receipts or payments, evaluates performance, takes stock of inventory, realigns talent pools and makes strategic corrections. While big corporations have evolved time-tested models to take advantage of the changing of the fiscal baton, first-time entrepreneurs often tend to overlook the opportunity that March-April present to renew themselves.

Running a start-up from her basement in Bangalore, Rashmi, the 26-year-old founder of Rage Chocolatier, is one such entrepreneur. Her company, which is run by an eight-member team, is about to see its first year-end. She, like almost every entrepreneur that ET spoke to, was not fully prepared for the event. Fortunately for her, she had the mentorship of her father to guide her through her first year. “What we did was simple. All the bills we paid were put in one file and all the sales receipts were put in another. Now we are gathering them and running them through Tally, an accounting software. We have just got a CA to look into it, but I’ve realised that I need to hire a permanent CA to look into this all year round.” Keeping track of stocks and money is a full-time job by itself.

Keeping your tax record updated is important, not only to be taken seriously by potential business partners, but also to keep regulatory headaches away. The IIMA team that founded Ten-ADay has also just hired a CA. The Mumbai-based company is also set to see its first financial year draw to a close. The company produces preparation material for the Common Admission Test. The company is looking at collecting income and professional taxes from its employees as it hasn’t been done yet, says co-founder Vishal Prabhukhanolkar.

Calling in the CA only at the year-end seems to be a common practice. This is usually because of oversight. Apart from this, a start-up that’s strapped for cash is working on a lean team. The team is usually just meant to focus on the company’s offerings. But unless systems are put in place for corporate governance early on, things might just get unwieldy when the business grows to the mature phase.

Ideally, start-ups need to focus on governance from day one and not just at the year-end. This includes keeping the books in order. “A system of governance does not generate revenue and, therefore, people don’t focus on it. Putting everything on paper is essential as it will give you credibility. This is a year-long process,” says Bharati Jacob of Seedfund. She has invested in a couple of start-ups and says she noticed that at the nascent stages, the focus tends to be on here-and-now and not on long-term things like orderly books.

Not all first-time entrepreneurs are looking at last minute book-keeping. “On the accounting front, there isn’t much to do if you’ve kept your accounts in order since day one,” says Sriram Vaidyanathan. He and his partner run a coffee shop that seems to cater to the techie crowd in Bangalore. They are about to see their first year-end as well. For his coffee shop, BrewHaHa, he says this time of the year is good to review and refine their offerings.

Veteran entrepreneur and founder of Ferns ‘N’ Petals, Vikas Gutgutia, recalls the days he set sail with his venture 12 years ago. He says he neglected simple things like collecting bills during the venture’s initial years. This made book-keeping difficult. “When you start a business and success is coming your way, it is very easy to lose sight of keeping accounts. Two to three years down the line you begin to see that you need to pay as much attention to the accounts as the business itself.” Things have come a long way since this company started out with just Rs 5,000. Today, a consultant ensures transparency in its Rs 60-crore business.

National Entrepreneurship Network (NEN) executive director Laura Parkin says, “This time of the year is a really good time to pull out the weeds, as it is usually the time for year-end financials. It’s a good habit to have an end-of-year meeting to review performance. You can look at your key-performance indicators and resources based on this cycle.” NEN helps facilitate entrepreneurial-related programmes in over 200 education institutions across the country. Key performance indicators for the organisation are active members, activity levels and dropout feedback.

During the past three months Mohit Dubey, the founder of CarWale, looks at whether his company has met the milestones that he set 12 months ago. He then goes to his clients to check whether they have any left-over budget that could be utilised. This is his first yearend as well. With the Budget speech around the corner he has his ears peeled for auto-related recommendations from the finance minister.

Experts say March is the time that entrepreneurs must take a step back from their business and look at the overall form and structure of their organisation. The business must be a clean financial entity, getting payments on time, paying out its own liabilities on time and developing a system to do this throughout the year. Tax evasion may be appealing in the short-run, but can keep a company from growing into a major force over the long term. Spending a few extra bucks on organising the financials will pay over time, they say.

Next, it is also the time to reward top performers and weed out the bottom of the pile. Companies must evolve objective systems for performance appraisals so that when a two-person team becomes a 200-people company, the management does not lose sight of who is doing what and how well.

It is also a chance to work out new tactics. Tax rates may change, taking away one benefit but bringing in another. The government may announce schemes to support economic activity and a start-up must lie in waiting for business opportunity in them. This period is more like the periodic servicing that a car might undergo, when jerky parts are fine-tuned and essential systems topped up. The onward journey can be that much smoother.

Article Resource:
Author: Jacob Cherian is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".

Start-ups Seek an Enabling Environment.

START-UPS SEEK AN ENABLING ENVIRONMENT

What does the forthcoming Union Budget mean to an entrepreneur and how do this year’s wishlists look like.

FOR long, union finance ministers have been presenting budgets to stimulate government revenue flow or exports or consumption or revival of sick industries. But increasingly, they face one more priority. It is no longer enough to announce a few concessions, rejig taxes and leave the rest to god and a compliant citizenry. The primary objective of a modern day budget is not just to balance state revenues and expenditure, but to nurture an ecosystem for economic activity. It is natural that entrepreneurs expect the budget to ease conditions for business, so they can go ahead and give expression to their ideas. This year, finance minister P Chidambaram’s budget will be keenly watched for what stimulus it provides to entrepreneurship. The ecosystem for entrepreneurs has always been challenging in India and should ideally have improved with economic growth and increasing interest among the salaried class to start on their own. A lot of bottlenecks have been removed over time, but the basic complaints remain. Difficulties in raising capital, tax burden, inability to tackle currency fluctuations, wage costs, lack of impetus to research and a framework that favours big business.

For instance, selective tax benefits are a contentious issue when the government puts out a positive list of eligible industries, business mentor Pravin Gandhi, who is also the president of The Indus Entrepreneurs (TiE), Mumbai says. “There is a lot left to interpretation, which eventually leads to complexities, discussions and even litigation,” he says. Small businesses are often unable to benefit from such concessions if their business idea strays from the strict definitions of what qualifies. “A negative list makes a lot more sense than a positive list. Sector specific allocations should not be encouraged,” Mr Gandhi suggests. Also, when these tax benefits expire, it might hurt the new, smaller players more than the large, established ones and actually work as an entry barrier.

But industry experts say an entrepreneur, while looking to benefit from budget proposals or trying to protect one’s business from a new clause, should not fashion the business model around concessions. Many small businesses stop growing after a point, either because the entrepreneur becomes too comfortable with the concessions available only to small players or is afraid of the enhanced risks growth will bring. At the end of the day, entrepreneurs must follow what they want to do on their own and not depend on government’s crutches.

One crucial limiting factor is the lack of tax compliance. Some early stage businesses may believe in saving the money that otherwise would go to the income tax department and indulge in a range of practices to conceal revenues. This not only exposes them to penal action by authorities, but also rules out the potential for partnerships and participation in bigger business opportunities, because mature organisations will not do business with tax evaders. The government has been investing heavily in technology to improve tax policing and remaining on fringes is not going to be possible much longer, in any case. There are a few things that the government can do to reward tax-compliant start-ups in various sectors, experts say.

A lot is said about innovation, and finance ministers have set aside varying amounts to foster research in the country. But, the country remains a research-poor economy, where the potential for volume multiplication is often the driving factor for investment. The government, industry and venture capital houses all work separately, pursuing their own logic and there is little to show on the ground.

For instance, in the pharmaceutical sector, entrepreneur-driven ventures are not even recognised by the Department of Science and Technology. “The department should have a scheme to support these start-ups,” says Indian Pharmaceutical Alliance (IPA) secretary general DG Shah. The funding needs of such units are typically small and the government should be able to give them as grants, of course taking precautions to ensure it goes only to serious ventures. “An institute should be set up, which can evaluate the process, vet the applications and make grants accordingly. These steps are essential to be a player in the knowledge economy,” says Mr Shah. But, “when it comes to providing support, the government develops cold feet,” he adds. It is imperative that these startups are given a free hand along with easy access to funds.

India’s drug firms have gone overwhelmingly the way of generic drugs. They are more interested in making cheap copies of drugs whose patents have expired. While mastering reverse engineering, even the largest of them have not come out with an entirely new drug that the likes of Pfizer and Sanofi-Aventis are able to churn out. The government must push-start research in pharma sector to attract ambitious entrepreneurs, say experts. “If this was to happen Indian pharma research will grow manifold in no time,” says Novalead Pharma CEO Supreet Deshpande.

Venture capital funds typically avoid business ideas that have a long gestation period and highly research-oriented ventures are often a casualty to that approach. “Venture capital funds in the pharmaceutical sector are few and far in between,” adds Mr Deshpande. It makes sense for a venture capitalist to invest in an outsourcing firm, which generates cash registers quickly rather, than in a pharmaceutical research company, which will start seeing cash flow after 10 years. “This is the period when we need assistance. Tax sops are popular instruments, but they are not required for discovery research to flourish,” says Mr Deshpande.

For some years now, new-age entrepreneurs may have spoken as if starting up has to do only with internet, mobile technology and the typical online stuff. But, for economic growth to be wellrounded, a spurt in small business activity in the manufacturing sector is crucial. “The key issue here is that a large part of capital goods are coming from other countries. That means huge imports,” says Sarita Nagpal, deputy director general of the Confederation of Indian Industry (CII). The chamber has presented a voluminous, clause-by-clause memorandum of pre-budget recommendations to the finance minister, suggesting ways to ease customs duty and currency burden on the capital goods front. Also, “there is a significant need for a technology opportunity fund, which can play a role in developing the competency of these small units and which can finally augment capacity of the big players in the industry,” says Ms Nagpal.

Industry bodies have also been making the usual noise about extending tax holidays, providing interest rate subsidies and protecting exchange rates, but it is in the improvement of infrastructure and enabling conditions that an entrepreneur must base his or her strategy on. A new business is born to thrive in a competitive landscape, not a cocooned one.

That means, there will invariably be budget measures that a small business owner must accept and learn to adjust to. All is not lost for the export sector if the tax benefits are taken away, say industry veterans. In any case, plain services are increasingly becoming pointless and products are becoming cheaper by the day. And customers are demanding fresh value and innovation. This would call for entirely new products and services designed for the global market. For example, in the pharmaceutical sector, Deshpande’s Novalead is already showing that sound business models can be built around pure research. The company has shunned the undifferentiated generics business and has charted its own course in drug discovery. The same model could work in a variety of other industries.

The budget is at best a boost to business and at worst, just a bend in the corner to circumvent. As General Electric founder Jack Welch once said, “You’re either the best at what you do, or you don’t do it for very long.”

Article Resource:
Author: Ashish Kumar Mishra is the Chief Editor in the The Economic Times, Mumbai and the article appeared in one of their successful columns on Entrepreneurship/Start-ups called "Starship Enterprise".