Is now the right time to start a new business?

What???

Start a business during a recession?

I must be out of my mind.

Well maybe..but heres my logic.

If you have a good business plan and can afford to take the plunge, now is a great time to start. The recession is not going to last forever (these things are cyclical).

So if you do start your new business now and build it well, by the time the recession ends you will be ready for take off.

Look at the flip side of starting a business in “good times”. By the time you are ready for “take off”, the market will have tanked again.

Make sense??

What the hell happened?

I ran into an old friend Ramesh today. He was an avid reader of my other blog at Bangalore Blues. However something he said got me thinking.
“Bangalore Blues is good timepass he said, but I really liked the one you were writing on your experiences as an entrepreneur” he said “You really should restart”.
So here it is..after two years of hibernation, I am going to be updating this blog fairly regularly. Sorry for the absence.
But I have more stories…

Manage your IP well

One afternoon I was talking to a friend of mine about our Business Processes, Training Processes, and some of the technology that we had developed to help us in our business.

Suddenly he piped up ” I hope you are putting a value to all this. This is your intellectual property”.

That got me thinking. As a startup you dont think about these things. Yet you are unconsiously building up knowledge as you go along. Its this knowledge that helps you do things better the next time, give your customer a better service, or help you do your work faster. That if you think about it, is your Intellectual Property.

Some tips:

1. Document the things that you do however trivial it might seem. These could be quality processes, sample work, customer feedbacks.

2. Keep all the documentation in an easily accessable place. More importantly use it.

3. Listen to your co-workers and employees. Sometimes the best ideas come from them.

Your business is special, so is your knowledge.

Bank with the Best

One of the things I have realized during my 3+ years of entrepreneurship is that you should not be fooled by glitz and glamour. In most cases (exceptions excluded), the glitz is meant to hide all the flaws underneath.

Nothing highlights this fact than the banking industry today. My best experiences have been with our Nationalized Banks. Granted there could be a few starting problems. But once you establish your credibility, the service levels are unmatched by anyone.

At my company we bank with Bank of India. Three years ago, they were the only Bank willing to give a small BPO company a break by giving us a loan for equipment and working capital facilities. During those three years, they have bailed us out of some tricky financial situations when payments from customers came in late and cash flows were tight.

What really impresses me about them was the human touch to their service right from the Bank Manager upto their Zonal office. Compare the same with some of the more market savvy International Banks and their computerized call centers.

I still remember Infosys CEO Nandan Nilikeni was the chief guest at a function last year to commemorate Bank of India’s 100th year. In his own words, the only people who gave Infy the time of day when they were growing were these very Nationalized Banks.

Give me a Nationalized Bank anytime.

As a small business you stand a better chance of success there.

Cross posted on BizzBuzz

The End Game

Though things NEVER happen as planned in business, it is good to at least have an “end game” in mind.

The question to ask yourself is “Why am I doing this?”. Your answer will give you the end game you are looking for and allows you to plan better.

Typical “End Games” can be:

1. I want to build a company, sell it and retire.

2. I want to build a company that will succeed like Infosys and linger for generations.

3. I want to build a business that will give me enough money to lead a comfortable life.

It can be anything… but you need one.

Without this you will be like a rudderless ship.

Alive and Kicking

This blog has been dormant for a while now. Not because of lack of interest but because of some major things that were going on with my business that had me worried about our people and the direction we were headed in.

I am happy to say that we have come out of the mist and things are looking so bright that I am ordering new sunglasses.

Over the last 4 months we were literally on a rollercoaster ride. I will over the next several months blog it.

In the meantime, please take time to read this wonderful post on Information Architects Japan’sweb site.  It gives a true picture of what small businesses are faced with today. I had written a post along similar lines some time ago but this article is much better.

I love the term “Tire Kicker” that they use. To quote them, a “Tire Kicker” is:

Tire-kickers are those people that go check out cars whenever they can. They act as if they want to buy the car and ask for special deductions and conditions and they take 20 test-drives just to “change their mind” in the end. The true reason why they don’t buy is: They don’t have the dough

Partners and Partnerships

Too often businesses are started and partnerships are established verbally. “We’ll work out details later” is the common phrase used. Bad idea !!

While no one might want to cheat you, its a well known fact that shares in a company become more valuable as time passes especially if the business is successful. Suddenly issues like “What’s his value?”, “My contribution is greater” start to come up. I have seen so many companies that start out in right earnest and then get into these issues to such an extent that the business goes for a toss. Fortunately I have been lucky in this regard.

So here are some guidelines:

1. Establish shareholding at the very beginning. Holding patterns, Divestment, Exit etc.
2. Clear guidelines on roles and responsibilities.
3. Get an auditor that everyone is comfortable with.
4. Make sure that you have a comfortable working relationship with your fellow founders especially the ones who are involved on a day to day basis with the company.
5. Be professional. Don’t let personal likes and dislikes affect your decisions. Call a spade a spade.
6. Be clear on who handles finances. This issue will cause a LOT of heartburn if its not handled properly.
7. Teamwork is crucial in the initial stages. Don’t take major decisions unilaterally (if you are the only founder, then consult an advisor)
8. Be open to bring in new blood even if it means giving up some equity. Remember 100% of zero is still zero. I’d rather have a smaller piece of a bigger pie.

Of Business and Businessmen

They come in many forms and I have seen them all. Wanting to give you business, wanting to partner with you, wanting to help you scale new heights.

The main thing to remember here is to remember that THERE IS NO FREE MEAL. If something is too good to be true, then IT IS too good to be true.

As a small business you are always looking for business opportunities. However you need to stop and analyze carefully before you jump in. Even if it means delaying your decision. The fist instinct is trust every opportunity that comes your way. Don’t do it. Qualify any lead that comes in and do a credit check. You cannot afford long payment cycles as a startup.

Here is how to identify fraudsters:

1. If someone is looking for any advance payment to give you business. Then there is NO business. If there was business, they would not be asking for an advance. This is a common scam thats employed.

2. If people talk big numbers without proof (you’ll make a million bucks in 3 months), then they are frauds.

3. Anyone looking for minimum amount of paperwork is generally not completely above board. Normally all legit operators have good solid paperwork.

4. If they give you an Non-Discolsure that looks like its been cut and pasted (and its easy to see that), show them the door. Don’t sign any agreement that has verbiage that will prevent you from continuing your business. Have a lawyer whet each one. I know it costs money but its worthwhile in the long run.

Look at any opportunity with a long term view. No shortcuts.

Employees are the key to success

I love my people.

The greatest achievement that we can be proud of in the last 3 years are our employees. Each one of them… Without them we would be nothing.

Each of our managers have grown with the company. They started here and they have resisted offers by competitors to move even if it meant hikes in salaries.

Key is to keep the workplace enjoyable, keep your commitments to your employees and be transparent with them. They appreciate that and reward you with loyalty and productivity.

That is not to say people have not left. We have had our share of attrition. However we have never had an employee leave on bad terms. I always expect they’ll be back.

Employees. They can make or break a company.

Venture Capital. Don’t bet on it.

One of the great questions that you will face as a first time startup is how to finance your operations. Choices are Self Funding, Friends, Family, Banks, Highway Robberies and then the Venture Capitalists in that order.

Don’t count on VC money to come to you in the beginning unless you have a track record (of previously raising and spending it). I read an interesting Business Week Online article (The Art of Doing it Yourself). Talks about how small businesses shouldn’t count on VC money and how VC money comes when you least need it.

I sat through an INSEAD presentation last week that stated that over 90% of startups are funded by the founder. This was followed by Family and Friends.

So when we started the business we were told, “Build a good team, Build Customers. Funding will follow. Trust us”. So we did just that. Stated with a motley crew of 8 people and built it way up to 100. Went out an got some customers as well . Oh yeah and revenue (Monthly Recurring Revenue). It took us 2 years to do this. Along the way we even finalized bank financing (we were later told that this was quite an achievement).

We then looked to a VC for funding and were told that we were asking for very little. So much for that.

The USA is the ONLY country where there is an ecosystem of VCs for startups. Most of the VC funds there are run by people who have been entrepreneurs in their past lives. In countries like India most VC funds are run by people who have a finance or a banking background and are very very very risk averse.

The best bet for someone starting out is some amount of self funding and a customer who is willing to bet on you by giving you business. I know it’s easier said than done but its possible and easier to do this that raising money from a VC.