Journey of a Serial Entrepreneur

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How to get from where you are to where you want to be

Squash and strategy

“All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.” Sun Tzu

I started playing squash around a year ago with a lot of enthusiasm. Like all sports, on the surface it looked like a simple game. Four walls, two players one ball; first person to miss the ball loses the point and the game is played up to 11. I was like, how hard can this game actually be. So I started off with a coach who taught me the basic rules, how to hold the racket and basic squash etiquette. That took around 3-4 lessons and by the end of the 4th session I was like “Bring it on”. However, he told me at this point that there was a lot more to learn regarding the game and it would take at least another 3-4 months till I got some basic strategy pat down such as serving, placement, running and steps.

That didn’t sit well with me so I told him that I would learn along the way and we should just start playing games and he could monitor my progress. He told me this wasn’t advisable but in the end agreed and we started playing. I noticed another guy who had started at the same time as me and who was getting regular coaching . I made a mental note that I would play him in a couple of months to test how well our two different routes had turned out. Fast forward to 3 months later, my coach told me that I had made good progress and was getting better. So I asked him to set up a match with the other regular. It was setup shortly thereafter and we decided to play a best of three. I sort of crushed him in the first game 11-5 and remember thinking this was going to be a cinch. Sadly I ran out of gas in the middle of the second game and lost the remaining two matches.

With my ego fairly bruised I spoke to my coach and he pin pointed the areas where I was handicapped. My opponent had learnt his steps correctly which directly impacted stamina as you use less energy to move around the court correctly, he had also learnt how to use less power in his shots to get the same impact I was getting, using the greater force I was generating. It was apparent I had a lot of catching up to do and a year into training I am still unlearning all the bad habits that I picked up earlier on.

This holds a very clear analogy to startup businesses. We start off thinking we have got the next best idea after google and begin to pursue it without getting the groundwork settled. We start with a vague or no business plan and without a clear short term or long term strategy. We face competition in our sphere very soon and others appear to be moving faster, more effectively and efficiently as compared to us and we wonder why. Its all about strategizing and getting those foundation blocks right. Don’t just push yourself to get into the game as fast as you can, take a step back and get a better idea of where you want to go and how. Plan diligently and follow it with perseverance. There is no short cut to success.

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Sales and relationships

“Pretend that every single person you meet has a sign around his or her neck that says, ”Make me feel important.” Not only will you succeed in sales, you will succeed in life.” Mary Kay Ash

A couple of days ago on my way to a meeting I was stopped at a traffic light junction when a disabled man came to my car window, he was selling car cleaners . I didn’t need any, so he passed me by after asking. Moments later another disabled man who was selling the same came up to me. This was a man who has been selling similar merchandise at this traffic junction for the last 15 years and over the course of time he has sold many members of my family who pass this traffic crossing daily. He came up to my window,greeted me and condoled my grandmother’s passing away 2 months ago. The fact that he knew caught me totally off guard. He followed with casual chit chat regarding the health of the rest of my family and never once during this 5 minute exchange once mentioned whether I wanted to buy anything. You have to realize that we were at a traffic light crossing and were in a time sensitive situation. However, at the last moment, he casually asked whether I needed anything, I obliged and bought a fair share. Later on during my drive to the clients I began to think about what had just happened.

Sales is a very personal process, you are always more comfortable buying from or through individuals whom you trust or have a relationship with. Here was this man who had spent a large part of his life building a meaningful relationship with passer byes at traffic light junction . This continuous interaction on a relatively regular but short time frame basis had enabled him to build a relationship through which he could sell irrespective of whether you needed it or not. It wasn’t solely because he was handicapped otherwise I would have bought from the other vendors who attempted to sell me the same. It was only because of our relationship.

If you are running your own company or working at one where sales falls in your job scope I do believe the key to success is relationship building. I know it may sound somewhat cliched but just how many of your clients do you really know well. Truthfully, I need to do a lot more work in this area and this minor incident just showed me how strong a proposition you can build once you develop a meaningful relationship with your clients.

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Life and Business

“A business that makes nothing but money is a poor kind of business.” Henry Ford

Over the course of last week I have come across some interesting incidents which I documented in personal off topic posts. This week I decided I would share 5 of them so that we could all get a different perspective as compared to the traditional views on business and entrepreneurship I have taken in the past.

Life is a fascinating journey and every morning I get up and look forward to the new challenges that I will have to face and learn from through the course of the day. You need to keep that perspective if you want to live your life fully. I keep telling everyone that life is too short for us to take things for granted. I often hear some of my investment banker friends telling me that they look forward to the time when they can actually stop doing what they are doing and start living. I could empathize with that view a couple of years ago but now it seems not to be the most optimal way to live life. I realize many people have responsibilities and valid reasons for sometimes sacrificing certain things early on in life to enjoy life afterwards. Just make sure that whatever you do it is something you feel deeply passionate about and you wake up in the morning looking forward to the day. You are one of the lucky ones if that is the case.

The same applies for business when you are selecting or working on ideas make sure your value and belief systems are correctly aligned with what it is that you are working on. Money is a valid driver but it shouldn’t be the only one. You must have other drivers which force you to push yourself harder and further. You have to choose to do something which you truly believe in and let it take its course. My last couple of posts talked about losing balance in your life in the early stages with startup ventures, make sure the sacrifice you are making is worth it. It should really be more than just money. Also if you are going to have an imbalance temporarily in your life make sure you have as few responsibilities as possible. When you have a life partner, children or a girlfriend/boyfriend your actions have a direct impact on someone else’s life. That is why I advocate getting into business as early as possible because you have a lot less to lose.

I look forward to a lot more comments and feedback during this week’s blog as the topics are a lot more abstract. A lot of us have very different perspectives on the topics which are going to be written about and I would really like to hear from as many people as possible.

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5 steps to follow when doing business with family or friends

It is an immutable law in business that words are words, explanations are explanations, promises are promises but only performance is reality. Harold S. Geneen

Getting into business is like all other major decisions you have to make in life. Like all complicated decisions there are factors which tend to have a more pronounced impact on the decision. Going into business with friends and family is one of those factors. In my experience these tend to be a lot trickier than standard business agreements because they come with their own baggage. Over the years I have been adviced and have learned how to deal effectively with the issues that arise when you go into such a business venture. I hope this will be of some help to you if you are planning on getting into business as well. If there are any other factors which you think should be included in this list please let me know.

  • Business Plan Development: Never fall into the trap of getting started with ‘just’ a business idea. Sure you have a greater level of trust with your business partner but that does not mean you would exclude putting down on paper what it is that you plan on achieving through this business. The process of putting down on paper what your idea is, clarifies it, identifies key areas which you need to work on and possible pitfalls you may face. This is a step which needs to be taken before you start any venture. To read more about business plan development please click here.
  • Commitment Levels: With a business plan in place you will now be able to judge with greater certainty how much money, time and effort is going to be required by the business. You need to put down clear parameters at this stage as to what each partner is supposed to do. This level of commitment needs to be clarified from the start or you will have an unbalanced partnership which leads to a multitude of problems further down the line. To read more about how to set commitment levels please click here.
  • Candor: Establish a culture where candour needs to be an integral part of the venture. The worst thing you can do for yourself and your business would be to keep all the things you want to say to yourself. This will lead to frustration, under performance and morale issues which can jeopardize the success of the business. A culture where you can be open, state your opinions and be comfortable will help you form a considerable competitive advantage and will enable your company to make difficult decisions with a lot more ease. To read more about candor please click here.
  • Noise Levels: When you set to do business with friends/family you need to keep external noise levels under strict controls. Noise levels refers to the interference in the business by members of your family or friends. When we divulge too much information outside the core group it ultimately comes back to the core group in a completely changed form. This could lead to several problems between partners, frustrate the team and affect the overall morale. To learn more about how to keep noise levels at your company please click here.
  • Equity Splits: This is an issue which is at the core of most problems which are faced by all companies but more so in businesses where friends and family are involved. We tend to be a lot more generous just because a business partner is a cousin, friend or relative. You need to correctly assess what the partners contribution will be and then use a simple model to figure out how much the partners stake is actually worth. To read more about the formula to calculate a fair equity split please click here.

Doing business is tough, especially when it involves family and friends. These couple of steps should provide a basis for a solid framework which would help you work through problems in a structured and fair manner. These steps should be taken as a frame of reference and can be adjusted for your actual scenario. If you require any advice or feedback please let me know and I will do my best to see if I could be of any assistance.

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Equity Splits

“Lets all split it equally”. There are many people who agree with this and quite a few who don’t. I am with the latter group. I have been part and am still part of ventures where equity has been split equally from the word go. If there is one reason why this is done so widely it is, ‘lets not ruffle any feathers’. The other train of thought is that since the company is only an idea right , lets see how it develops. I used to think that way too, until some of the companies I was with got reasonably big or some partners became way too complacent. Thats when I realized this doesn’t work.

Since we are creating a culture of being candid I think it should start from the word go. When looking at splitting equity there are a couple of factors to consider when doing the split:

1. Money to be invested

2. Time to be invested

3. Experience of the partner

So lets take an example:

Three partners are setting up a consultancy. The business requires substantial experience and industry knowledge as well as a large amount of time commitment. Looking at all the factors, they come to the conclusion that each factor should get a certain weightage; Money (18%) Time (48%) Experience (34%). All partners decide that they should split the investment money equally. Time wise the split would be 50/30/20 and experience wise it would be 55/25/20.

Thus you would get:

Partner A ( 6% + 24% + 18.8%) = 48.6%

Partner B ( 6% +14.5% + 8.5%) = 29%

Partner C ( 6% + 9.6% + 6.8%) = 22.4%

Allocating weightage to each of the factors can be mutually decided by all partners to be set equally or using a range of values. I feel this brings more fairness into an equity split and puts pressure on those individuals with greater shares, to deliver more to the team.

There are many permutations which could be added to bring a greater level of equality among the shareholding when time is being spent equally by the partners.

This model should provide a starting point to bring more objectivity into the equity splitting process. If you have any questions please let me know.

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Noise Levels

“Go placidly amid the noise and haste, and remember what peace there may be in silence. As far as possible, without surrender, be on good terms with all persons.” Max Erhman

When I refer to noise I am referring to the level of direct or indirect involvement of people from outside the core team. In my experience noise level reach unacceptable levels especially in family/friend businesses, when you share information regarding progress, performance and difficulties you are facing with your immediate circle. It starts with you sharing with your wife, girl friend, mother, father or other, how person X is just not pulling their weight in the team thereby causing problems. This then turns into the game, telephone , the next person who hears about it will get a distorted version and it continues to become worse. The problem now is, that if it is a family business or close friends, this news is going to get around and things then tend to get ugly between you and partner X.

The same also holds true if you are going through a dry patch and facing some cyclical difficulties with your business. Over the years I have incorporated a much higher level of candor in the organizations I work with, to keep the level of noise to the bare minimum. This factor needs to be controlled very tightly to insure the livelihood of the team as a whole. All partners especially if they are closely related should keep strict controls on what is to be shared outside of the core group. It is has dramatically relieved stressed levels and has made everyone more comfortable with talking things out among each other.

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Candor

“All faults may be forgiven of him who has perfect candor.” Walt Whitman

Working with friends and family, I have learned first hand, that if a culture for candor has not been established from the word go a lot of things will be left unsaid. When objectives are not clear and results not delivered a team gets frustrated. When you are frustrated there are many things which need to be said but because of the close connection with your partners get left unsaid. I now find this unacceptable and before getting into any new venture I make it clear that we have to create a culture for candor and honesty right from the start. This is undoubtedly often uncomfortable, but it is easier than leaving things unsaid, which is a sure way to doom a partnership .

Being brutally candid is difficult, and often goes against what a lot of us grew up believing. The fact of the matter is that being part of a startup is not the easiest job in the world. Being candid allows your true opinion out on the table. More active participation in discussions is possible in such an environment. When partners discuss ideas in an open and candid manner you are developing a key competitive advantage against larger more conventional organizations. Make candor part of your business today no matter which stage you are in, to see the dramatic effect it can have.

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Commitment Levels

“There’s a difference between interest and commitment. When you’re interested in doing something, you do it only when circumstance permit. When you’re committed to something, you accept no excuses, only results.” Anonymous

Once your business plan is done you should have outlined just how much work is going to be involved in it. This is when you need to get everyones commitment levels locked in. This is advice I would really liked to have got for a couple of my initial ventures. It is really easy for everyone to over commit initially when things are new, exciting and full of prospect. The fact of the matter is, that being part of a startup is hard. Trust me on that one.

There is no space for excuses, lethargy or complacency at a serious startup. If you require balance or clearly defined work, home and friends time, a startup may not be the best place for you. I think this point has to be driven in really well at the beginning, especially if you are going into business with friends and family. The reason for this is that later on it is much harder to tell someone off when they are not contributing enough or their productivity levels are not at par.

Maybe I am a little harder on this fact as compared to others. Having been in partnerships where your partners don’t perform is irritating. At the same time no clear commitments were set early on so you can’t say anything as well. Tackling this problem right from the start you should:

1. Set up areas a partner is responsible for.

2. Set clear goals and milestones to be achieved.

3. Set clear time requirements which need to be dedicated.

4. Set performance reviews on a regular basis to appraise performance.

When you have a system in place where everyone is accountable for certain actions you create an environment which is result oriented. If your division isn’t hitting its goals or milestones the responsibility falls on you.

Make sure everyone signs up for as much as they can handle. Don’t say stuff like I will handle Sales & Marketing for the company. Tell everyone what your plans are for the division, how they will executed, what is required from the rest of the team and how much time you are going to dedicate to the division. Now you have a clear and measurable commitment.

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Business Plan Development

“Without goals, and plans to reach them, you are like a ship that has set sail with no destination.” Fitzhugh Dodson

Everyone talks about it and knows about them, yet I know so many businesses among friends, which just started over a cup of coffee when they thought they had that ‘Aha’ moment. Don’t get me wrong I am all for the level of enthusiasm which is so infectious at the beginning that it lifts the spirits of the team to stratospheric levels. However, you need to harness all that energy in a focused manner. That focus is best brought about when you actually sit down and identify the idea in a structured manner through a business plan. A good business plan helps you plan your product/service in great detail . The key sections that you need to pay attention to when developing one are:

  • Market Need & Potential: What is the need that you are wanting to fill? How big is the market that you are going to operate in? Are there a lot of players currently in the space that you are about to enter? At what rate is your target market growing? Are you limited geographically? Use this section to identify the market need that you are wanting to cater to and the size of the market.
  • Product/Service: In this section you break down the product/service that you are going to be offering into components if possible. You have to identify the key benefits that it is going to provide to the market. What are it’s features or unique components? How is it going to be rolled out? What are future developments that you want to incorporate into the product/service. Does your product have any sustainable competitive advantages? Is it protected by any patents or copyrights? By clearly defining your offering you will get a better idea of just how scalable it is and what its unique functionalities or features are.
  • Marketing Strategy: In this section you will break down how you are going to market your product/service. Outlining specific strategies and mediums will enable you to gauge how long and how much it is going to cost to get your product to market. This is a section where a lot of brainstorming needs to be done to make sure your approach will be unique if there are current competitors in the market. It should also focus on your value proposition and the most effective way of getting it across to your target market.
  • Operational Strategy: Product development, marketing, logistics, human resources, technology all need to be managed. Use this section to outline how you are going to go about achieving your objectives. All partners should look at this section to see how and where they can contribute. Once decided, a process flow can be developed to ensure that things work out in a smooth and efficient manner.
  • Financial: If you are pitching your plan to a VC or an angel this is the section where you will need to add detailed financial forecasts for the next 5 years. This will help you gauge facts like your pre-money valuation, ROI, IRR and other key indicators which investors are looking for. However if you are using this as a guide for yourself I would stick to simpler financial documents where you identify your expenses, forecasted revenues and a simple balance sheet so you get a clearer picture of how much it is actually going to cost you to setup and run the business.

Once done you will have a document which puts on paper what was just another ‘idea’. The whole process of putting it on paper helps to look at the idea from all angles and forces you to look deeper into it than the initial concept. It is also the initial project in which to see how your partners work, discuss concepts and contribute.

So next time you think you have the next big idea, put it down on paper before going full steam ahead into the unknown.

*I will have a dedicated week to business plan development in the coming weeks to provide greater insights on all the aspects of a good business plan.

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Friends and Business

“A friendship founded on business is better than a business founded on friendship.” Anonymous

I firmly believe that partnering is one of the most effective ways of scaling your business. It is natural therefore to look within your network of friends/family and acquaintances to find potential partners. This is a strategy I have used, and even though a lot of people think that mixing friends/family and business is a bad idea, my experience has proved otherwise . Over the last couple of businesses I have been involved in, I have found that setting clear ground rules before starting a venture has been integral to their success.

One of the mistakes a lot of businesses are beset with when starting out with friends/family stem from there being so much left unsaid at the start. This is due to the fact that a mutual understanding is ‘thought’ to exist. The fact of the matter is, that unfortunately when money enters the picture a lot of these ‘understandings’ fall by the way side. Everyone wants to make money and start a successful business. The truth of the matter is that registering a business and starting one with no set plan is easy, making your business a success requires diligence, perseverance and structure.

Over the course of this week I will share with you certain ground rules to set when starting a venture or partnership. These rules have helped me tremendously in tempering expectations, getting ground realities realized and fostering an environment which promotes candour and honesty.

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