Make or Break.

That crucial first

WHAT happens in a year that makes it the make-or-break-period for a small business? People spend most of their start-up money. They don’t have as many orders as they need to pay their bills. And people don’t anticipate the expenses that come up. Also, most entrepreneurs need to build up their markets and loyalty, slowly. Maybe 1% of the people have an unbelievable product, but most have to build up their customer base and they end up running out of money before they get there.

The three key things that have to happen within the first year to ensure that a business doesn’t fail.

Get to know your product, get to know your market, and get good employees. You have to have good people to back you up, and you have to know your target market or you are wasting your time. If you have the wrong market, you have to keep testing to find out what that market is.

What is crucial for an entrepreneur to know when starting his or her business that might help it survive?

They should know what their goals are and what they want out of the business. Do they want to simply make a living? Do they want to end up being a big company like Google? Do they want to stay local or sell nationally? They have to have some goals to know what they are going to be and what they are going for.

What is that something, which often happens during that first year, that can overrun a business if it is not dealt with?

One of the easiest things is to get behind on direct taxes. And once you get behind, it starts to mushroom. The officials won’t come after you right away, but they will get you in due course. Another thing: You almost have to go into business thinking that you are not going to make a fortune initially. In the first year, you need to make a foundation first. And, in the beginning, you have more bills than you know what to do with.

Will an owner’s attitude affect the entire business. How so?

Sometimes owners go into a business thinking, “I’m king. I can do what I want.” It turns out to be the opposite. The people working for you pick up on that attitude, and if you are vague or indifferent with customers they will be, too, and your customers will not come back. It can ruin a whole business.

Some think losing a big account is the end . Is it really so?

First, you should never take an account that would ruin your company, if you were to lose it. You can lose an account for any number of reasons. A larger account has a lot of expenses. You need to think about what you would do, if you lose that account, so that your business will not go down. You can’t let it shut you down. You should have backup sources and not give that big account everything. That way they can’t take everything if you lose that account.

How should one deal with competition?

Know what your competition is doing. You can’t run a business and ignore it. If you are a retailer, shop your competitor’s store or send in mystery shoppers to see how they treat customers. Check their website to see what they are doing. They might be announcing something new, and you don’t want to be caught off guard. Hopefully, you have something that you are working on and it is better. That way you don’t have to get into a price war, because that’s when everyone loses. You need to be aware of your competitors or they will eventually pass you by.

Reference:
(Adapted from AOL’s small business website)

A guide to survive tough times..

In these globalised times, a US economic recession or a slowdown in the domestic economy could hit your business. A survival guide for the tough times.

CUT COSTS

Have a look at your business and figure out where you could save. If three employees are doing the job of one, you may need to make job cuts. Additionally, if you have two product lines and one is successful while the other one isn’t, consider selling off that division. When times are tough, it’s best to focus on core markets and spend money in those areas, not in areas that haven’t been more profitable.

RATCHET DOWN INVENTORY

The last thing you’ll want to do is get stuck with shelves of needless inventory. For a better idea of what you’ll need as the year progresses, keep an eye on leading consumer indicators. Also, establish inventory targets and ensure the sales and purchasing personnel are talking.

MAINTAIN PRICES

You may be tempted to slash prices to attract buyers from a recession-hit country. That could be a mistake. Sure, you’ll sell products but you’ll also cut your profit margins and likely to dilute your brand in the process. Plus, if customers decide to buy again from you in the future they may expect similar discounts.

RESERVE DISCOUNTS

Since you don’t want to dilute your brand’s value and you especially don’t want to start competing on price, tread lightly when it comes to offering discounts. Be sure to reserve them only for current, repeat customers.

FOCUS ON SERVICE

While expanding may open up avenues for growth, many small-business owners should focus on their existing customers and clients for a boost in revenue. Focusing on service is one of the best ways to add value without costing money.

INVEST IN EMPLOYEES

When the going gets tough, the employees you have will be your productivity all-stars. Make boosting productivity — within reason, of course, — a focal point. For those that rise to the top, be sure to reward them accordingly. You don’t want to lose your most productive people at this time.

FREE UP CASH FLOW

Be sure to free up your business’s cash flow by asking suppliers to extend payments dates. Also, if you have old debts, call them in. Having a good amount of cash on hand, especially in light of the credit crunch, will help you do everything from making payments to employees and vendors to spending on marketing campaigns, which may grow future business.

RENEGOTIATE CONTRACTS

If a contract, a lease or other obligation will soon be up for renewal, try to negotiate lower prices. At this point, you may be able to also make cuts. Take up a reality check of your expenses.

LOOK TO EXPAND

If you’re doing well for yourself, look for weaknesses and instability in your competitors. If they’ve been having trouble, you may be in a good position to pick up their businesses at bargain-basement prices. Their losses may be your gain.

Reference:
(Adapted from AOL’s small business website)

Success Tips for Entrepreneurs

Success - Tips for Entrepreneurs

1. Understand that you as an Entrepreneur is responsible for everything that happens in your business. You cannot delegate that responsibility.

2. The attitude of the Entrepreneur is reflected in the employees working in the business. If you don't like the attitude you see in your employees – look in the mirror.

3. Personal growth and business growth are not the same but they are closely related. When you stop growing as a person you stop growing your business.

4. Know that you don't know everything. It is not possible. When you come to that realization, investing in trusted advisors makes so much sense and it becomes an easy decision.

5. Life is short. Enjoy what you do and others will see that and be attracted to you. It is fun to work with and be around someone who is positive and excited about what they do. If you don't like what you do, find something else to do.

6. Give others credit for their contribution to your success. Everyone loves to be a part of something bigger than them selves and to be recognized for their contribution to the overall success of the organization.

7. Know that your success is tied directly to how well you motivate, manage, inspire, sell and encourage people. Your success, especially as you grow your business comes through the performance of others.

8. If you can't measure it how do you know it works? Measure everything.

9. You must understand how the business you are creating will help you create the life you want. There can be no misunderstanding. True success lies in creating a business that is consistent with and supports the life you want to create.

10. Develop a passion for your work and have fun!

15 Steps to Fulfilling Your Wildest Dreams

According to Bill Gates there are 3 keys to success in any new venture.

1. Being in the right place at the right time. (You could well be already there ).
2. Have a vision of where the industry / business you’re working in is going.
3. Taking Massive and Immediate Action. (It is time to act).

“The future belongs to those who believe in the quality of their dreams” Was it Johann Wolfgang Von Goethe, the famous German poet and philosopher who said those words?

Here are my 15 steps to fulfilling my wildest dreams.

1. Know Yourself :

Know and accept your weaknesses and faults (we all have them), but even more so your strengths, abilities and gifts. Build on your strengths and try to minimize or improve on your weaknesses. An honest, objective analysis of yourself is the first step in preparing you for success and realizing your dreams. Celebrate you for just being you, a unique creation.

Aim for mental clarity about what you most want out of life. Think about it and write it down. If it’s happiness, what do you mean by happiness a sense of belonging recognition, independence, love, money or security? If you don’t know where you are and where you want to go with your life, how will you ever get there? Aim at nothing and your sure to hit it.

2. Get Passionate :

Don’t apologize for getting passionate. What excites you the most? If you are not enthusiastic and excited about what you’re doing, your path in life, you’ll never get others to share your dreams. Once you find your passion, you will have found your POWER, MEANING and PURPOSE in life.

3. Surround Yourself With Positive Passion :

Always be aware. Negative people will poison your dream faster than anything else. Motto “If you can’t be positive, shut up” Try and stay positive … even in the face of negativity.

4. Accept From The Start That You Won’t Please Everyone :

You’re going to be misunderstood, misquoted, hurt some feelings, perhaps even lose some friends (for the first time being) Motto “What other people think of me is none of my business” Repeat this statement to yourself, especially when you doubt or feel discouraged.

5. Always Be Yourself :

To thine own self be true.(Shakespeare’s “Hamlet” act 1.3) This is supremely important, no matter what the world may think of you. The masses are conditioned to mediocrity and other people’s success can make them not feel inferior for their own insignificant little lives. Accept yourself. Learn from others – but don’t be intimidated by them, or pretend to be someone you’re not, because…“We are most effective when we’re being ourselves”

6. Don’t Be Scared Of Making Mistakes :

The only real mistake is one from which you learn nothing. Motto “For better to try Something and fail, than try nothing and succeed”.

7.Accept That It Will Never Be Easy :

Realizing your dream, may be the hardest, most uphill thing you’ll ever do A truth "You can’t coast uphill”. The key ingredient in success is never giving up. Keep on keeping on with your quest. It has been said that “success is 99%, made top of failures.”

8. Stay Humble (no matter how successful you may be :

Don’t ever think you’ve made it and arrived – there’s always a lot ahead, more to do, higher mountains to climb. Motto “The greatest way to do our thing has yet to be discovered.”

9. Don’t Underestimate Yourself :

There is incredible power in yourself ( in the form of the unique human mind), but far more so in the forces of the Universe. Make them work for you by living your life in harmony with these natural forces. Like positive energy attracts like.

Enough “spiritual” thoughts” Back to the “real world” and you. Avoid developing an inferiority complex. (Who am I, a nothing?). Don’t be filled with feelings of self-pity (nobody likes me), or think “I can’t do it). These thoughts will steal your dreams.

10. Have Fun :

Nothing is ever as bad as it seems --- don’t get too solemn, or serious or too downcast when things go wrong (as they surely will from time to time). Take a leaf from Thomas Edison’s book. “I never did a day’s work in my entire life, it was all FUN” Laugh at life’s funny moments…. And there are plenty of them.”The secret of happiness is not in doing what one likes, but in liking what one does.

J.M. Barrie

11. Develop The Will To Live :

There will be plenty of times when you’ll face the death of your dream. When failures, disappointments and criticisms come you need the will and faith to keep going. Remember, We learn far more from our failures than our successes, because failures show us what doesn’t work. So, failure is just one step closer to ultimate success. Often the difference between failure and success, is trying just one more time, picking yourself up off the canvas after being knocked down time and again.

12. Develop The Will To Help And Serve Others :

Success on its own (i.e. for its own sake) will pollute and corrupt you --- it’s a dead end street unless you have meaning in your life. The years of struggle breed fortitude and character. The gold may be an inch away from the scam, where your fellow miners have given up. You need to succeed for a reason, a purpose, a cause that’s bigger than you and IF (a very big if) you’ve fulfilled all the above requirements.

By the time you finish reading this you will realise its just 12 steps and not 15…

Money Matters

Making the Right Pitch for Capital

Many financing efforts fail because of avoidable mistakes that are made in pitching potential lenders, structuring the agreement or managing the money once the deal is done.

HALF-BAKED BUSINESS PLANS

There’s nothing worse than going into a money meeting unprepared. If you haven’t put the time and energy into writing a full-blown business plan complete with elements, such as a cogent description, financial projections and a competitive market analysis, the people with the cash won’t put the time into evaluating your proposal.

FOCUSING TOO MUCH ON THE IDEA AND TOO LITTLE ON THE MANAGEMENT

It’s not enough to convince potential backers that you’ve invented the next must-have gadget or can’t-miss clothing store concept. You also need a team that can generate the revenues to repay a bank loan or provide an exit strategy for a VC or angel investor. Many business novices ignore the second part of the equation; that can doom their money quest.

Remember, the greatest racehorse in the world still needs a great jockey to a win the race. The same principle applies in business. Showing that you have recruited a top-notch salesperson, a skilled marketer, an accountant with start-up experience, other key personnel, and even outside experts like an attorney or business coach who can supply professional guidance is essential to finding a funding source.

NOT ASKING FOR ENOUGH MONEY

Starting out with too little money is one of the causes for start-up collapses. That’s often because entrepreneurs, who are wet behind the ears, don’t realise that they should calculate their borrowing needs based on their worst-case scenario instead of their best-case forecast. An old accounting axiom says that everything will take twice as long and cost twice as much as you expect. While that may be an exaggeration, new business owners are frequently too optimistic about how soon they will begin to fill their cash pipeline and how fast the money will flow. If you’re underfunded, you won’t have a cushion to tide over in the event of slow initial sales.

HAVING TOO MANY LENDERS OR INVESTORS

One of the hazards of securing financing from multiple sources is managing too many relationships and expectations. It takes time away from your core business. These not-so-silent partners may have conflicting interests or demands and the consequences can be devastating.

FAILING TO GET ALL THE PROPER LEGAL AGREEMENTS

This is arguably more important than a prenuptial agreement for a couple with significant individual assets. Every lender or investor eventually will need his money back, and a legal document covering everything from the terms to the timing can avoid the kind of acrimony just described.

POOR CASH FLOW MANAGEMENT

Too many new business owners burn through their seed money too quickly and fail to reach cash flow-positive status in a timely manner. Some causal factors, like late product deliveries and economic downturns may be beyond one’s control, but the executive team is clearly at fault for others, such as unnecessary spending and overly optimistic expense/income forecasts. Financial sponsors don’t take kindly to that sort of mismanagement. And if they turn off the tap, all your hard work may go down the drain.

Reference:
(Adapted from entrepreneur.com)

8 strategies of Wise Negotiators

LET’S look at the most profound yet subtle strategies for wise negotiating…as practised at the top.

PICK YOUR BATTLES CAREFULLY

CEOs who sell and negotiate successfully know that sometimes even the most valiant fight may not be worth the potential loss it entails. They know it’s up to them to assign value to the campaign they decide to take on or decline — not outside forces like sales vice-presidents or prospective customers. In other words, good CEOs are more likely to ‘walk’ when they sense there will be no alternative to a bad deal. They don’t negotiate a deal just to say they’ve negotiated something.

LEAVE NO LOOSE ENDS

Once they take on a negotiating project — or any project, for that matter, — CEOs ensure everything on the ‘hot list’
gets taken care of. They can’t afford to leave any loose ends at a negotiating session, and they commit to following through on all their commitments. You’ll want to do the same.

KNOW WHEN TO ASK, NOT JUST WHAT TO ASK FOR

Successful CEOs know that you can’t reap what you don’t sow. Their actions always seem to be in accordance with the ‘ebb and flow’. They get involved early in important deals, they know when to wait, and they know when to push. This trait comes in handy at negotiating sessions.

DON’T TAKE SHORTCUTS

CEOs have certain values that they just won’t compromise. That’s not to say they are stubborn, but they do know how, when and where to draw a boundary. Ill-advised departures from guiding principles can carry huge costs, the most important of which are non-monetary: lower self-worth, lower esteem, damaged reputation and damaged self-image, to name just a few.

TURN ENVY INTO ENERGY

Successful CEOs are happy with what they have and who they are. That doesn’t mean that they don’t want to grow and prosper. They just know the importance of being happy with what is taking place in here and now. That may not seem like a trait for successful negotiations, but it is. Envy saps energy and poisons relationships; admiration of another’s positive traits and accomplishments is a supreme compliment that helps you focus on what you need to improve in your life, your business, your relationships, your finances — and your negotiating posture.

AVOID OTHER PERSON’S PROBLEM(S)

This is a great (and simple) ‘negotiating tactic’ that many CEOs mention. This tactic is all about not inheriting someone’s unresolved problem as your own. If one had a dollar for every time one heard “We don’t have that amount of money in our budget,” or “We don’t have a budget,” or “Your price is too high,” or “I don’t have the authority,” or “We can’t move forward right now,” or “We need this by no later than next Monday,” one would be a millionaire. Look at all these typical responses again, and one will see that each is an attempt to put the buyer’s issues onto the seller’s list of problems.

Instead of fighting the problem, putting it off until ‘later on’ in the negotiations or throwing a new one into the mix, what would happen if one approached the problem from the standpoint of finding a solution — of acting as a consultant with the responsibility of finding an outcome that makes both sides happy?

DO CEOS SWAGGER?

To think, sell and negotiate like a CEO, you must understand that more than anyone in an organisation, the CEO has the ultimate walk-away power. The power to walk away is the most profound negotiating tactic that a CEO will use. He/she basically says “I am totally willing to pass on this opportunity.” There is a big difference in that thinking Vs “I am going to get the price as low as I can before I buy.” Walk-away power takes the opportunity past the point of no return. The winning party will convince the other party that they can and will walk away from the relationship (buy or sell). Keep in mind that the goal here is not to actually ‘walk’; the goal is to get the other party to do whatever the ‘walking’ party wants them to do.

ASK FOR THE STARS

Asking for more than is expected (moving beyond expectations) is a great trait of CEOs. You’ll be able to see this one coming if you’re a salesperson because you’re already conditioned to the “do whatever it takes to get the sale” mentality. CEOs know this, too. Therefore, be prepared, and you may even want to use this yourself when you’re on the ‘seller’s’ side of the table. By doing so, you’ll be modelling an important CEO negotiating trait.

Top 10 tips to save money for your start-up

Before you turn to the bank for a loan, think about creative ways to finance your entrepreneurial venture without raising start-up capital from external sources.

Here are 10 top tips:

Start small:

Even if you have a grand vision for your business, concentrate on generating short-term revenue to get enough cash to fund the long-term business idea.

Focus on sales:

Get on the phone and start cold calling. Go for quick wins — contracts that bring in cash and will lead to other sales. Generating cash flow is the immediate goal in order to start building your business.

Concentrate on networking:

Don’t waste money on expensive advertising which can be a hit or a miss. Concentrate on networking and building up contacts, as word of mouth is the most effective form of promotion.

Keep overheads to a minimum:

Work from home if you can and borrow or lease rather than buy expensive equipment. It’s easy to get carried away resourcing a new business, but only buy what you really need to get the job done.

Choose wisely:

Open a company bank account that offers free business banking for start-ups for at least the first 12-18 months. Internet banking makes it easier to keep a close eye on transactions.

Control debt:

Utilise a 0% credit card for essential expenditure, — but be careful to keep debt under control and either pay it off or transfer to another 0% card well before the interest rate goes up.

Invoice your clients in stages:

50% at the half-way point and 50% on completion. Make sure you have clear payment terms in the contract and on the invoice.

Retain cash in the business:

Take as little out yourself as possible. This might mean going without a holiday or you may need to start your business whilst still in part-time employment to cover your bills.

Try business bartering:

Offer your design services in exchange for goods and services you need. This saves you spending cash and can be a good way to develop relations with a new client base.

Put time into PR:

Think of an unusual hook and write a press release or article. Conduct a survey about a topical or controversial issue with your potential customers. Publish the results as a story to attract free publicity for your business.

Brand building’s key to LONG-TERM SUCCESS

Becoming An Entrepreneur Is Nice, But Building A Brand Is Quite Special.

How Early Should Start-Ups Seek To Build Brands.

BRAND building started on day one for Riyaaz Amlani’s new venture six years ago. His Mocha coffee shop chain wanted to differentiate itself from others, which Amlani thought had followed the Starbucks template faithfully. He spent several weeks planning nuances such as the quantity of the dessert scoop and the mix ‘n’ match of furniture. He designed the whole project with a belief that a coffee shop is not a restaurant, but a place for socialising. All this got early visitors talking about how different the experience was. And Mocha had got its brand baptism.

On the other hand, Internet portal Sulekha.com didn’t begin a brand-building exercise until this year, though it had started as early as 2001. The company focused on developing a critical mass of users and let growth come from word-of-mouth. Unlike the flashy dotcoms that rose and fell during the bubble, Sulekha conserved cash for operations.

Start-up companies often grapple with the dilemma — whether to build a brand or not? While a strong brand equity can bring enormous value to the company, it also requires a large commitment of capital and management energy early on. Many businessmen wonder if they aren’t too small to attempt brand building or whether they can afford it.

Experts say new businesses should start planning for brand building as early as possible. For some, it might start at the pre-product stage, while some others would have to wait till they establish the core attributes of their product or service offerings. But, failure to build a brand and to start investing in it at the right time can bleed the company of much of its potential, experts say.

“A company should start building its brand, stagewise, as soon as it has validated its core,” says Harshal Shah of Reliance Technology Ventures. He says this ‘core’ comprises the team’s values, experiences and capabilities. For instance, when Steve Jobs started Apple in the mid-1970s, the computer industry was dominated by stuffed shirt veterans dealing in complex mainframes. Those who saw Jobs roaming about his office barefoot and in frayed jeans would have suspected he was going to convert the mighty computer into a gadget for everyone. And that’s exactly what he did. Today, the Apple brand enjoys a cult following as it stands for innovation and fun.

A strong brand is a profitable asset. People pay far beyond the manufacturing costs and nominal profit margins for products they recognise, trust and enjoy consuming. For an early stage company, it helps in defining the product to both potential customers and its own employees. It tells buyers that this company is investing for the long term, it will be around tomorrow and it will repeat the performance. Internally, it tells the team members that the entrepreneur stands for certain values which must be reflected in every action that they undertake.

Products without a clear brand definition eventually lose their direction, recognition and value. They will turn into commodities that will be bought from the cheapest vendor without a quality promise.

The identity of a brand flows from the organisational culture, experts say. It is the essence of the attributes of the offering, that will be consistently performed every time a customer experiences it. It is not mere advertising, nor even just marketing, but a clear recall in the consumer’s mind of all that a product or a service stands for. “Any moron can put an ad in the paper. Communication is the easy part. The process of communicating and then delivering on a promise builds the brand,” says Sanjay Anandaram of Jumpstartfund, who is also a visiting faculty at INSEAD.

But when does the core get validated? Shah says it typically is about a month from the starting day, but can vary depending upon the resources available and the opportunity at hand. For travel portal Yatra.com, which started selling to consumers before tapping business customers, the validation happened even before it started, he says. “When Yatra came to us for funding, we looked at a lot of other companies to understand the space. We found that these other companies didn’t have experience in the travel business. (But Yatra’s founders) came out of the travel industry and therefore had the domain experience and customer knowledge.”

With some companies, the first big customer win can propel a company into the branded league. Further customer wins become easier as a satisfied first buyer will provide the testimony. For WiMAX equipment supplier Telsima, such an opportunity came in the form of Reliance Communications. Shah says Telsima experienced its Big Bang moment with such a top name becoming its customer and there has no looking back since then.

The key to brand building is promising exactly what the business can deliver and delivering exactly what it has promised. Every time. From employee behaviour in front of customers to the words chosen for advertisement copy, every interaction that a company undertakes with the target audience defines, embellishes or destroys the brand. “Every interaction also gives an indicator. If a company promises to deliver on the next day and if they don’t, it is an immediate indicator,” says Baazee.com founder Avnish Bajaj, who has now turned a venture capitalist with Matrix Partners.

So, it is a good idea for a start-up to make sure that its product works well and is ready for brand-building. “You do not want to start brand building and then if your product doesn’t work, you will lose your customer and s/he won’t come back,” Praveen Gandhi of Seedfund cautions.

Once an early-stage company decides to invest in brand-building, the first step would be to define its own genome and go about imprinting it on its products. R Ramaraj, who steered Internet company Sify in the early days of access business, says: “Our core was to encourage an innovative environment.” Having taken this decision, the company went about encouraging that culture within the organisation. “After all, we were one of the first Internet companies. We had to be innovative as there weren’t enough role models.“ Today, Sify is not only a large access company, but a complete content and telecom services provider.

In Santa Cruz, a Mumbai suburb, sits a little company that has no fixed work timings. People play computer games when they want to and the company gives an X-box 360 to their most successful business partners. During their quarterly off-site gatherings, they spend half the day playing football and basketball. This is a gaming company and their theme is “Play together”. Quentin Staes Polet, co-founder and CEO of Kreeda Games, says ‘playing’ is part of Kreeda’s core and the brand values flow from it.

Quite often, entrepreneurs fail to recognise such intrinsic values that will help a company win against competition and provide a lasting value to customers. “The lack of value creation is because people don’t know what to focus on,” brand consultant Ramesh Jude Thomas says. In other words, value creation is the eventual goal. Those who don’t see this and claim to focus just on growth are wasting their time.
The next step, of course, is to ‘live’ the values that a newborn brand claims to represent and communicate to the audience that the same results can be expected in all the transactions. Promod Haque of Norwest Venture Partners gives an example: “One of our portfolio companies based in San Antonio is called Rack Space. They provide web hosting services. The management of this company calls their customer support “fanatical support”. Here, the brand of the company and the company culture are intertwined. It is drilled into their employees that they will provide fanatical support.”

Infosys Technologies, the oft-cited example for entrepreneurship, enjoys arguably the best brand name among Indian software services providers. One of the chief attributes of its brand was its ability to bridge the cultural gap between the East and West. Early on, it focused on training its employees to understand the finer points of Western culture and conduct themselves accordingly while working on customers’ sites. This, eventually, has got it better billing rates than other Indian companies.

Longevity and profits in the long term are a good reason for early brand building.

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".

A Perfect Balance...

Entrepreneurs running seasonal businesses have to be always on the lookout for ways to keep revenues coming in during the lean period.

WITH Christmas celebrated, New Year ushered in, partying done and shopping wound up, the spacious shop floor of David and Co in south Mumbai wears a calmer look once again. This past month has been back-breakingly busy for its owner, Felix Dias, who sells Christmas ornaments and trinkets to scores of families that have bought from him for generations. But with one more profitable season behind it, Dias’ enterprise has now transformed itself into a wedding card business. It’ll remain that way until it’s time again for candles, carols and the call of Christ.

Entrepreneurs, who run seasonal businesses, are among the most adventurous of their lot, having to constantly figure out ways to keep revenues coming in when it is no longer the peak period for their ware. Dias has been doing it since 1953 and so have a number of others dealing in flowers, winter clothing, school uniforms, umbrellas, tour packages, psephology and an endless variety of other stuff. They have evolved innovative solutions to smooth out the volatility of their seasonal businesses and make money all through the year.

The first trick, of course, is to encourage people to buy products during the off-season by promoting new uses and giving heavy discounts. Almost all businesses witness some seasonality and examples abound of companies offering new value propositions to attract customers. Mr Diaz promotes his decorative ware among students in the late months of a college year, for use in special days celebrated by them at campuses. Thus, he is able to reposition his product in the off-season.

Just consider why is January the best time to buy umbrellas? Because you don’t need it right then and the shopkeeper desperately wants to clear his stock. The best brands are available at attractive prices and even given away as gifts for heavy purchases at bigger stores.

It is also a good idea to develop a portfolio of related businesses that will keep the business running through the year. When the season for one ends, that for another could start. Farmers have been following this strategy for ages. They rotate crops using the same land, which otherwise would lie vacant during the off-season for their main crop. Of course, they ensure that the rotation doesn’t hurt soil quality.

The same thing goes for entrepreneurs. Dias’ wedding card business is the counter-weight for his Christmas-related offerings, not requiring completely different skill sets or business model. “The wedding card business is what keeps our business going on in the off-season,” he says.

MANAGE CASH FLOWS

Cash flow is the oxygen for any business. Expenses are certain to happen everyday but not sales. So, it is crucial to keep a leash on the balance between them in a business that fluctuates with the season. Madhav Oza’s Bluestar Travels has a very strict credit control policy which helps him keep his costs down and thus make most of the peak season throughout the year. Set up in 1987, Bluestar is one of the largest ticketing consolidation businesses in Mumbai. “It is very important to budget out your expenditure at the outset of the high season. And keep a strict policy on payments (to be received) for your services. Else, your cash flow goes haywire for the entire year,” Oza warns.

Another policy followed by some is to employ only those many workers that can justify current demand. “If practical, employ workers on a seasonal rather than permanent basis,” says Vikaas Gutgutia of Ferns and Petals (F’N’P), whose business in flowers swings in tandem with weddings and festivals season. Temporary workers are themselves trying to manage their skills that have a seasonal demand. So, they might be engaged in other trades during off-season, but be readily available when demand picks up. However, this model is not without its drawbacks. “The downside, of course, is that you may not be able to attract the quality of employees that you want,” Mr Gutgutia says.

In fact, Mr Oza of Bluestar is totally against employing workers only for the season. “By the time you complete training your temporary staff, the peak season is past you. Also, it always helps to have 7-10% more people than you need, for demand in a travel industry is high during holiday season. It takes care of absenteeism,” Mr Oza says.

ROTATE YOUR MARKET

A key strategy of successful seasonal businesses is to rotate the markets. Business season, just like the climate, can vary every few hundred kilometres. Mr Gutgutia’s flower business doesn’t remain idle when peak demand ebbs at its home base in Delhi. “When it is off-season in Delhi, we look at places like Hyderabad and Mumbai, where the season is just starting, in this way, we look to hedge out the seasonal factor in the business,” he says. Weddings and festivals are the main reason people buy flowers in large quantities. But in a country as varied as India, no one custom is uniform across the country. Mr Gutgutia exploits the wedding cycles of various parts and minimises volatility in his income. So, while flowers is a seasonal business in any given location, the mobility and wide reach of F’N’P makes it a perennial business for the company.
Others have tapped the corporate and student sectors to tide over temporary dips in demand. “Thanks to the corporate sector orders, a business such as ours, which used to see a 40-50% dip during the off-season, now only shows a 15% dip,” says Mr Oza.

CUSTOMER CONTACT

The major risk in seasonal business is losing touch with buyers during the slack season. While it is important to maintain the company’s staff and operations all the time, “it is equally important to keep in contact with one’s customers as well,” says Mr Gutgutia. “Some people who run seasonal companies act as if their customers actually vapourise during the off-season. Just because they’re not in your store or in your town, it doesn’t mean they’ve ceased to exist,” he says. He advises young entrepreneurs to send e-mails or newsletters to customers, exchange pleasantries or inform them about new items. The effort needed for marketing during the peak season may be that much easier.

USE SLACK TIME WELL

The off-season is not just about selling. It is also about preparing for the peak season. Gutgutia says a company can build up inventory, planning ahead for forthcoming demand. Entrepreneurs can also step up research and development, product innovation and training. Gutgutia, in his early days, often spent the slow period studying foreign bred flowers that could be imported. “This is one way of better preparing yourself for the next season,” he adds.

Article Resource:
Ritwik Donde 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".