Promoters need to be very innovative today, to make profits
The best way to decide which field your Startup should be in, is to simply think “The solution which I am bringing – Does it profoundly affect the way of life of people? If my solution goes out of the market, how would it then impact them?”. Companies like Uber, AirBnB, Apple and closer home, Baba Ramdev’s Patanjali have been products of such breakthrough thinking.
What if the Startup is a Dot com? I would still say go by the above theorem, be it creating a market place or being an online aggregator or finding a technology solution which dramatically solves and improves existing way things are getting done. However, if it is a product startup, I would strongly suggest having a long tail offline presence, since Dot com is not an end-service but a business in itself.
For companies into Exports from India, I would like to offer some insight basis my own experience – Get complete background check of the overseas customer from ECGC, avail LC insurance from it and also take Shipping insurance with help of the Logistics company.
Countries like China, South Korea and Vietnam are importing raw materials from India and focusing on superior features to create Brands – better finish, superior packaging and so on. Indian manufacturing and Made in India brands, on account of factors discussed in my previous articles, is work in progress (WIP).
Entrepreneur’s today, need to be very innovative to make profits, but scalability is not a challenge in India. Old SME families are, though, motivating their children to be MNC salaried – This is because competition and instability has increased with concurrent reduction in margins. But our country is full of first generation entrepreneurs and will continue to be so given that end demand and consumption is so huge, presenting myriad opportunities.
The worst part about doing a products or service business in India is the long credit period coupled with uncertainty and long gestation period in case you have to take a legal recourse. Buyers in India, take a fixed stand that they will take products without any upfront payment and only release the money after the products are sold by them. Although the usual signed credit period is 45 days, but in most cases, especially with MSME’s, there is no written understanding. This credit period stretches to 60, even 90 days. Hence, the Working capital requirement and concurrent risk shifts to the manufacturer. This is in contrast to Western markets or China, where sellers take LC’s (Letters of Credit) or BG’s (Bank Guarantee’s) apart from cash advance.
The macro economic environment does impact Startups but it would be wise to look at the Micros – A promoter’s choices, execution and decision-making plays a huge role. His capability of forming quality teams and keeping them motivated simultaneously with a resource crunch is a big factor in any Startup’s success.
If bootstrapping your way to business growth is possible, then every Entrepreneur should take that route. Venture Capital and Private Equity firms, mostly take control by having seats on the Board of Directors and then press the Management to go all out for exponential growth. This results in short-sighted, cash burning decisions and as many promoters found out, it is not late that the floor goes out of the whole business plan. One should take outside money only if the expansion plan is clearly proven and cash infusion could enable the business reach well-defined growth and efficiency parameters within a set timeline. That said, it is a boon to be stupid and courageous, rather than logical and meek if you are into the Startup game!
Some of my articles explained these issues in greater detail, see below:
More in next Part, next week