Hello Young Entrepreneur A. Senthivel pot

Hello Young Entrepreneur A. Senthivel (Co-author, “Life is Fundamentally Management”) Published by A. Senthivel at Smashwords Copyright 2013 A. Senthivel www.alignedliving.in Table of contents 1. Why this trouble 3 2. Is the universe conspiring against you! 6 3. Do we exercise choice? 8 4. What is the ideal way? 28 1. Why this trouble? 2 nd Aug 2012. The morning news troubled me. A leading travel agent had committed suicide, in his mature age of 50 plus, because of debts, as reported in newspapers! This is not the only one case of suicide but I have read several such instances in the newspaper of people having committed suicide because of their insoluble debt problems. The news kindled my thoughts. As an entrepreneur, I have also committed serious mistakes in managing my business and finances. Without mistakes, we cannot learn. But it is not always necessary that we learn only from our own mistakes. We can learn from others’ mistakes, too. There is one more way to avoid all mistakes completely – not do anything at all in life. I am sure you will agree that this will be the greatest mistake that one can commit in life – doing nothing! At small levels, where the company is run by one individual or by a small group of people, accountability to debts takes a personal colour whereas with huge corporate companies, it becomes a `formal’ thing when that company files for bankruptcy. In the case of big companies, everything is mutually agreed beforehand – right at the time of floating a company and asking people to subscribe for shares, it is clearly told that it is subject to risk, to the extent of even filing for bankruptcy when things go too bad! Here our focus is not on a relatively `few’ big business houses, but the focus is on the relatively large and very large segment of small entrepreneurs – who play in the range of one crore to about 50 crores of turnover a year. Not all of us enter business with an MBA. Nor do all MBAs display that practical sense which is needed to run a business successfully, at least for the few initial years, whatever be the business - a restaurant, or a hotel, or a manufacturing unit, or a software firm. Rashmi Bansal in her book, Stay Hungry, Stay Foolish, has beautifully described how different IIM graduates have struggled to reach the next higher level of practical wisdom. So, a degree is a help, but not a guarantee certificate against mistakes. One thing is sure – everyone enters the fray of business with a lot of desire and hope. These are the true ingredients with which, I am sure, most of the big-time business people would have also started their small beginnings! The desire to grow, the desire to make things happen, the desire to see the establishment of big office and factory set-ups, the desire to see a huge pay roll in one’s company, the desire to spread geographically across into other continents, the desire to enjoy those material benefits that become a possibility because of business – luxury homes, swanky cars, sophisticated gadgets – these endless desires remain the magma that erupts out in the form of motivation to individuals! Yes, for a person who has achieved reasonable amount of success in business life, all these may not be a driving force. These things are presumed to be the natural accompaniment in the life style of those people. But, for those people who have not tasted business success and the good things such a success can bring about, it remains the source of every day motivation! At this stage when one is engulfed in the fire of making things happen, one’s mind does not have the time to take a balanced look at how to run the business process. In fact, it is not only good but also desirable to have that fire burning in the belly. Otherwise, there is no impetus. Too much initial thinking might create a situation like the one Dr.Edward de Bono describes where a centipede lies paralysed because he started analysing which leg followed which other leg! So, to start with, getting catapulted in to the business world with all the fire and enthusiasm is all natural and desirable, too! What I have realized is that there are certain common sense guidelines which if one sticks to, from the beginning, then one may not enter the red zone of deep debts and irredeemable situations. I accept that business cannot always take the predictable route. One could be displaying the greatest wisdom, restraint, financial discipline and pre-emptive ways of functioning, but what about those external conditions and influences which are not in one’s control? A day’s strike by the truck owners can throw your calculations completely haywire when that crucial raw material you had been waiting for so anxiously gets delayed by 24 to 48 hours. Five of your crucial employees going on leave around the same time can cause a setback much disproportionate to the sum which goes as their salaries for those days. But again, beyond a point, you cannot push the employees. We need to respect their private situations also. There are `n’ number of small surprises that could slow down the everyday business pace and all this could be factored into your general approach to your business. Avoidance of avoidable mistakes takes the first priority. If the basic, avoidable mistakes are ignored and if someone takes a route which flies in the face of these basics then it paves way for the resultant, undesirable, and negative situation from which escape becomes impossible. My interest in writing this short book is to help the young and fresh entrepreneurs to take a balanced view of things and proceed in a manner which will help avoid unnecessary troubles resulting from gross mismanagement of business and finance. Deep troubles in business life can be avoided. Troubles, in my view, can be avoided to a great extent if we are wakeful to the realities on a daily basis. In many individuals’ life, business and personal life become inseparable in the sense the financial needs of the personal side of life do make inroads into the finances of the company. There is no right or wrong here. But the financial indiscipline corrodes into the vitals of the business and one day it leads to unmanageable pressure. The trouble in business life is largely self-made. With efforts, we can stay clear! 2. Is the universe conspiring against you? All of us live by beliefs. Some of us believe in luck, some in the helping hand of God, some in sheer hard work, some in the well-wishes of parents, some in the auspicious red or blue stone that they are wearing on their ring finger, and some in the positivity of their spouses, and so on. A belief in the positive entails a belief in the corresponding negative side also. While it is healthy to allow some positive beliefs to serve as encouraging factors, we should be cautious against negative beliefs ruining our life. With all due respect for people’s beliefs, I feel like saying this that God only helps those who help themselves. Negative beliefs become more energised especially when someone gets into trouble that is too deep to be solved immediately. A person starts entertaining the feeling that some negative force is definitely working against him simply because of the immensity of the problem. But he may not realize the fact that the trouble had been brewing for quite some time about which he had been ignorant. Wrong expenditure patterns, or for that matter un-audited expenditure habits, have a way of snow-balling silently. And they don’t bother a person until the trouble becomes sizeable enough to put a spoke in the smooth business operations. The point is that although other factors could affect the way we do our business or the way we go about our spending, an awareness of the happenings inside our business can go a long way in ensuring the business does not derail. So, I would suggest an attitude of realism which does not bring in too much of beliefs in the business process. A scientific kind of attitude will make sure we play the game of business within the healthy outer limits so that we never have to worry about big troubles. There are `n’ number of success stories in the business world where companies have seen centuries of successful operation. There is Bosch which has done business successfully for the last 125 years. There is Boeing which has spanned a century of progressive growth. There is Ford marching through times victoriously ever since mankind opened a page for automobile history! One of the documented success stories is that of South West Airlines – they boast, deservedly, of more than three decades of profitable business, in spite of spells of bad times for the aviation industry. The first pair of slippers I wore was from Bata. It has been and is ubiquitous even today. There is no need to add to the list because everyone knows at least a dozen successful companies, small and big! So successful business is a norm! Nobody is ever conspiring against any of us to prevent us from becoming successful in business! An interesting statement which I read long years ago still lingers in my memory – `what man can do, man can do!’ But wisdom lies in giving some time to think about the specific ways that successful businesses have adopted! My father was a truck cleaner when he started his life. Then he worked as a tourist bus driver. After a few years of service, he wanted to become an entrepreneur by owning a truck. Seeing my father’s loyalty and extra- ordinary hard work, the owner of the bus company helped him in many ways to buy a truck. He bought a truck and it was running successfully for a few years. This motivated him to buy a bigger, 10-wheeler truck that had just been introduced in the market by Ashok Leyland. (Till then, 6-wheel truck with a permissible payload of 10 tons was the norm). He sold the current truck and bought this 10-wheeler. This gave him an euphoria that generally changed the way he spent money. He became a little lavish in his own style and started monetarily supporting quite a few of his own kith and kin. When money is drained from the business, naturally it will start creating pressure situations – no money to buy tyres, no money for diesel, etc. My father could not see the fact that the way he was spending had to do with the pressure situations. He used to blame the company that sold this truck. They used a picture of a large truck carrying another truck on its back when they released this vehicle in to the market – what they meant was that earlier a truck used to carry a maximum of 10 tons of permissible load and now one truck can carry the load of two trucks put together. Although the truck was sold on this promise that it can carry twice as much the regular 6-wheeler truck, my father faced problems when the truck crossed over to the other states in India. In the home state, they allowed 20 tons but in neighbouring states they had a different rule – they allowed only 14 tons. This brought the revenue drastically down for my father. I accept that if the truck had been allowed to carry 20 tons across states, my father would have made more revenue per trip. Here I have a point to make. Yes, there was that discrepancy in the load capacity permitted by different states. But, that alone was not directly responsible for the financial pressures my father faced. It was one of the factors. My father never could possibly think that it was he who was responsible for the financial pressures – the way he took money away from his business, the way he spent money on his friends, kith and kin! In short, he spent more than what he earned! So, from my own experience of what happened in my family, I am sure that external factors do not conspire against us. It is our own ignorance, over- confidence and unthinking ways that cause a lot of trouble to us! 3. DO WE EXERCISE CHOICE? Here, we will look at why we tend to behave the way we have as applicable in our business lives. The basic assumption here is that we are the architect of our own destiny, in terms of success in business life. Situations could be conducive or adverse. We are not going to talk about them. We are going to talk about how we are going to run our brains on a day to day basis. All great men and women of business must have started their life one day as a baby, and then they became a toddler, and then an adult and so on. The basic theory of human behaviour is that we tend to behave the way we are conditioned to behave! Conditioned way is simply a programmed way. Monkey see, monkey do is the basis of our learning! If the mother winks, we will also wink. If the father whistles, we will also try to whistle. If the father speaks in a raised voice, we also copy the father, and so on. This is something known to all of us. But what is not known to us is in what major behavioural ways we each is scripted in! Someone could be scripted in over-spending, someone else could be scripted in impolite behaviour and yet another could be scripted in taking vengeance. When I say scripting, please note it is a strong word. If I say you are scripted in over-spending, the tendency on your part to spend compulsively will even push you to the extent of borrowing and spending, unmindful of the consequences! Your scripting could easily become the determining factor of your destiny. So, it is advisable to develop self-awareness right from the beginning of your work life. We will look at some of the detrimental scripting and how we can change our ways, in practical everyday situations. Scripting 1: We can rotate money When I started my travel company and when I first collected a sum of Rs.20,000/- from a client, I felt great. I felt instantly successful. My business was working on the model of earning 10-15% commission on the sum collected from the customers. All the money that I collected from the customer was not mine! I knew this intellectually. But I did not know this emotionally. This means I ended up spending the entire Rs.20,000/- to fulfil my personal (family)needs. And I knew that by the time I had to make payment to the supplier against this collection, I would have collected some money from further customers! I got this scripting from my father. But I did not realize at that time that I had this deep-rooted scripting in me! It took several years of financial hardship to open my eyes to this reality. The point is that if you are scripted in rotating money, you will be literally blind-folded to other reasonable ways! Your scripting dominates you absolutely! Some of you might ask if it is not a wise way to rotate money as it is paves way for meeting our financial needs without having to borrow additionally towards working capital or even to fulfil personal needs. Yes, it does. Rotation of money definitely helps. The insidious danger is that it becomes a habit. The promise of tomorrow’s business (which is yet to take place) becomes the basis for today’s spending! And the spending goes on increasing as and when money is lying in the bank account. I am not saying that people spend the money in rotation only to fulfil their personal needs. On more than one occasion, people have been seen choosing to invest in real estate and even as a capital for starting a fresh business with the rotation money. Again, this is not wrong. But the whole thing becomes unmanageable when we lose track of what we are doing. Times are changing. The internet has brought about unbelievable quick possibilities in terms of money transfer. Those days, we used to depend on drawing a demand draft if we wanted to send out-station payments. A cheque used to take an unusually long time to get cleared. Hence, people used to accumulate reasonably big sums and then make lump sum payments. Now, those of you who are scripted in rotating money, you can cultivate a new habit of paying the suppliers or vendors immediately after collecting money from the customer. First of all, this habit of paying immediately to the supplier or vendor will help in immense ways in building a credibility track record! Secondly, this practice of paying off immediately will not leave much of others’ money in the bank account and hence the possibility of your withdrawing that money is ruled out! And slowly you will cultivate a habit of living on your profits, and only profits. This is very, very important. This obviates the need for any kind of sleepless nights due to payment pressures. See, the theory of business is that you offer some service or product for a price, make profit out of the difference between the cost and the selling price, then live out of the profit. I don’t think any healthy definition of business would include this that you can make a living or make your investments out of rotating the creditors’ money. If you feel a sort of reluctance to this idea of paying off the vendor immediately, it could be due to your wrong scripting or you could be comparing yourself with others. Supposing one of your friends is seen living comfortably by using the creditors’ money, then you will also start thinking, `why not?’. It is at this moment that we need to exercise extra- ordinary caution and courage to practice what we believe is the best way. We do not have to copy others’ model and there is no point in getting carried away by the external appearances. A person, who buys luxury cars or houses prematurely, might pull off for some time. But it will catch up with him. If there is steady flow of ever-growing business and profit, he may get away. But any lean periods will expose the true situation! It might be difficult in the initial stages to practice this paying off immediately. But it will create a life-time habit in you! This means for a life-time, the trouble on this score is eliminated! Another thing is that your business will run in full strength and vigour if financial problems are absent. Every day morning if you wake up with a worry as to how you are going to clear your cheques today, then 90% of your energy is already consumed by this worry! No great energy will be left for you to put in your business activities. So, it makes sense to ensure that finance is managed properly. For this to happen, you need to delay your gratification! If your impulses push you to the car showroom every time a new model is introduced, then it is time to rethink your ways. It is in your own selfish interest to delay buying things that you value most because premature purchases will catch up with you in the form of every day pressures! Sometimes, what you bought pre-maturely may have to be sold pre-maturely, too, in order to solve the financial problem. Let your neighbour or your cousin buy whatever he wants! Just because he bought a luxury car, you should not also jump into it! What if you find that you are already into rotating the company’s funds? What if rotating money is already a habit with you? If that is the case, it is high time you sat by yourself for some time and asked yourself if you would like to continue with the current style or slowly change the way! You can enter into a contract with your supplies and vendors that from now on you will pay them immediately and that the old outstanding would be cleared in a phased manner. Old habits die hard! This is a potent saying. So, it is better to start your business with healthy habits! Scripting 2: We can take a loan! What is currently impossible may become possible immediately due to the possibility offered by loans! Loan is a boon as well as a bane! It is what we make out of it! For an aspiring person who does not have funds, one whole lifetime might become stifled if loans were not available to him at all! So, for a person who wants to make things happen, loan is the best friend. But, for a person who is addicted to taking loans against every business or personal need, loan becomes an enemy! Loans have a definite quid pro quo. They facilitate certain things and take a big price out of you. Most of us are overwhelmed by the pleasant fact that someone or some institution is ready to offer that huge sum which can fulfil our today’s need. We emotionally enjoy the wish becoming a possibility. If a car costs 20 lakhs, and if you were to wait to accumulate that money from your profits, it might take a considerable number of years whereas the possibility of loan makes it happen today! So, loan is God-like, so to say! See, the human mind is a habit-building mechanism. If you take one loan and fulfil one need, the mind will extend the logic and make you think of taking one more loan and fulfil one more need. Is it wrong? No. But, the mind will push you to the brim, and one day you will wake up to the reality that you have about 16 loans running in parallel! If the earning capacity also grows with every passing month, then it is absolutely fine. But when the growth curve is moving gently up, your loans should also be kept proportionate to the repayment capacity. Otherwise, what will happen is that all the meagre or good profit that you earn will be eaten away by the interest part! So, in the context of running a business, what is the right perspective on loans? We need to calculate the profits that can be earned over and above the repayment-instalments and only if it is worth it, we should go for the loan. Any given time, profitable business should be no.1 priority. When business is not profitable loans will become curses. The loans must enable us to set up a new business or expand existing business and thus should pave way for profit making, if not immediately at least over a period of time. If the profit making is spread over too long a period, then the interest will nullify the advantages of the loan! Ultimately, you should not consume the loan money, only the business should consume the loan money. Loan should not become today’s happiness and tomorrow’s misery. Loan is definitely needed in the initial stages. But, somewhere you should draw a line and follow, ideally, the Infosys route of running a debt-free company! I am not talking about any right or wrong here. Wouldn’t you love it if you were running a company that is debt-free and is profitable year after year? Now check your scripting. If you have a tendency to think of loans against every business or personal need, then it is time you sat down to think of healthier ways. I am sure you would also love to be loan-free but at the same time have plenty of surplus money. Let us work towards that ideal. One day it will become a reality if we steadily work towards it! There might be some tax benefits against loan repayments. I am not disputing that. My whole intention is to help you look at your own habitual ways from a distance as if you were a third person observing the situation. You should not become a victim to pre-scripted programs! Simply because your father had the habit of taking loans, you also need not become a victim to that habit! If you need a loan, and if you are fully convinced of the wisdom of paying interest on that loan and if you are convinced it is worthwhile, then you can go ahead. But, my cautions need not make you fear loans, either. You know what loans can do to you, and how much you need to pay back and after knowing all this clearly, if you still want, you can go for it! Scripting 3: I am very lenient with people, you know! In running a business, the most challenging aspect is managing your people! People are all not the same! They all come with different basic dispositions! Each one is scripted in different ways. Some are scripted in working hard, some are scripted in working extended hours, some time to time, some are scripted in looking only at their own benefits, some are scripted in practicing win-win, some are scripted in not caring for reporting on time, some work for money, some treat their work as enjoyment, some people have no problems reporting to seniors and some don’t like being questioned, and so on! You might find someone extremely talented but very emotional and difficult to deal with. Some people will never understand your urgency and will only follow their [...]... who are your potential customers If you don’t read and update yourself, the business opportunity is already reserved for those who read it! There are trade-specific exhibitions and events beings organized in every city Exposing ourselves to these events expand our mind and help us get net-worked to enterprising people! Chapter 4 What is the ideal way? We have so far covered some of the potentially harmful . successfully, at least for the few initial years, whatever be the business - a restaurant, or a hotel, or a manufacturing unit, or a software firm. Rashmi Bansal. must have started their life one day as a baby, and then they became a toddler, and then an adult and so on. The basic theory of human behaviour is that