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Look before you leap

Do you look before you leap?

Ashish had a good ten years in Dubai in a well-paying job when his wife wanted to get back to India as the kids were growing up. He had a healthy bank balance of over Rs.100 Lakhs. Still, in his mid-forties, Ashish decided to try his hand at entrepreneurship. He thought he would set up a retail store dealing in high-end stationery items. He had seen many such shops in Dubai and felt India just didn’t have the quality and range. He felt he could set up such a store, source the products from China and Taiwan, and start his life as an entrepreneur.

Ashish invested 25 Lakhs of his own and borrowed 50 Lakhs from a bank, putting his house as collateral. The amount was spent in setting up a shop in a prime location and stocking it with good quality stationery items. He tied up with some leading brands for supply. He was excited, his wife was supportive, his parents and in-laws were worried.

At the end of 3 years, Ashish had aged by 10 years. His average sale per month was around 10 Lakhs with a gross margin of around 20% (2 Lakhs per month). His monthly loan repayment was 1 L, his monthly expenses for staff and electricity were over 0.5 L per month. He was barely able to make Rs.40,000/- on a good month. To meet home expenses, he had to draw from savings which were fast depleting. Then Corona happened and his sales dipped to 2 L per month. The bank was after him for loan repayment. When he defaulted three months the bank manager, who he thought was his friend, started talking of stringent action.

Ashish started getting calls from private financiers – he was almost tempted to approach them.

In the fourth year, Ashish sold out his business at a distress price of Rs. 10 L to a buyer who agreed to take over his loan. Ashish was a disillusioned man. “I should have stuck to employment”, he lamented, “business is not for people like me”. He put up his profile in job portals.

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When I met Ashish in the course of his job search, he told me his sad entrepreneurship story. I asked him a simple question:

“Did you do any analysis before you decided on your business?”

“Of course,”, said, Ashish. “I have seen many such shops in Dubai. They are making huge money. My products were the best in the market. I had invested 25 L, which I could make in two years. It was just my bad luck. Indians just don’t have the taste for good quality products”.

I asked him: “Who said you invested 25 L, what about the bank loan of 50 Lakhs you put in?” “What about the investment of your time and the collateral you provided for the loan? Don’t you think these are “investments” of sorts?”

“Ashish”, I told him, “There is nothing wrong with you or entrepreneurship. It was your approach that was faulty. You should always look before you leap.

“But how, what should I have done? Asked Ashish. Here is what I told him

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A business is like a tank where you put in some water (your investment). It has a tap from which water flows in (the revenue or sales). It has an outlet in the bottom, from which water continuously flows out (your monthly expenses or cash outflows) As long as the tank has water in it, the business is functioning. If the outflow is greater than the inflow, soon the tank will run out of water – and the business will collapse. If at any time you stop the inflow and outflows, the tank should have at least the amount of water you started with (your investment).

The stock referred to in the above image is the total amount of water (or cash) in your business at any time. The outflow is the cash that goes out of your business every month (salaries, rent, electricity, supplier payments + loan repayment). The inflow is the money that comes in (revenue + investments+ loan funding).

The equation for the business is simple. If you stop the inflow and outflow, there should still be money in the system that you can take out.

There may be money in the system – that you can’t take out. For example, you may have spent money on furnishing your shop- this is lost. You may have inventory in the system that is obsolete or damaged or that cannot be sold. You may have outstanding from customers that you can never collect. All this money appears to be there – but you cannot retrieve it.

A healthy business is one where you have money that you can easily recover. This must be more than what you put in. This is the simple analysis that all businesses must do before they start. Project your inflows and outflows for 24 months. Ask yourself the question – after 24 months will my tank run dry? Or will there be money I can recover if I want? If the answer is NO, or even doubtful – Do Not Go Ahead.

This is a very simple exercise. The question is how much money should I have left with me at the end of 24 months? Is it what I put in, or should it be 50 % more? There are simple ways to answer these questions.

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Let us take the case of Ashok. He put in Rs.75 Lakhs (25 L of his own + 50 Lakhs from the bank). The first question he must ask himself is – When will I get my money back? After all, you have put in money, you must at least get it back. This is the concept of the payback period.

The payback period is the number of months or years within which you get your money back if your business performs as planned. For example, assume you invested Rs.100 L in your business. After estimating all expected incomes and subtracting all expected expenses, let us say you are left with an average figure of Rs.2 L + per month. This means you make about Rs.25 L per year from your business. You will get back the Rs.100 L invested in 5 years. The payback period is 5 Years.

Of course, there are other complications like income tax and tax shield on interest repayment, etc. We will not get into these for the moment. A thumb rule calculation tells you that your business will give you back your investment in 5 years. This is a great place to start.

This is just a first-level, dipstick evaluation of a business. There is a more complex analysis that you need to do before you invest. But, at the very minimum, your business idea must give you a reasonable payback period. If not, it is wise to abandon the idea in its current form.

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Learning and Renewal – The Theme for 2022

If there is one change to commit to in 2022 – I would suggest – Learning and Renewal. It renews you like none other. You change not just mentally but physically as well. As you learn, you will find renewed energy, the world will seem less frightening, and the sun will shine brighter for you. Of course, it also gives a new boost to your career, improves your self-worth, and leads to prosperity. Can you ask for anything more for the new year?

What should you learn? It could be anything. You have choices. You could decide to learn something connected to your profession. It could be a new software language. You could sharpen your Excel skills; you may want to brush up on your knowledge of statistics. You may decide to do a course on Project Management – It could even be brushing the dust off your old engineering books and learning mechanics or structural engineering once again. It is the act of learning that is important.

Your learning could be in a completely different area. You may be finding it difficult to understand some of the stuff you read in the paper related to the economy- so you decide to learn economics. Or you could be a techie who chooses to learn management. Or it may be completely unconnected to your work – you may choose to learn Japanese or classical dancing.

Understanding the process of learning

Humans are born learners. We are different from animals. At birth, our brains are far more ‘plastic’ than that of other creatures. It means that it (the brain) is still unformed in terms of learning, unlike that of other creatures. A puppy can fend for himself within about a week of birth. Most skills a dog needs to have to survive on the earth are hard-wired into the brain. It cannot learn very much more. But not so the human baby. The human brain is plastic at birth and retains this plasticity as long as it keeps learning new things.

The human baby comes with a brain that is almost a clean slate, waiting for new learning to be written on it. Every new experience the child has, every sensory input, every event it encounters – etches a neural path in the brain. These neural paths are like lines of code that empower and empower the supercomputer, our brain. The more the lines of code, the greater their complexity – the more powerful, the computer. So it is, with the brain.

What is the Human Brain?

Let us understand this in greater detail. Our brains are made up of brain cells, called neurons – about 86 billion of them. Each neuron can send out and receive a signal. When a signal passes through a set of neurons, it is called a neural path. When we get a sensory perception, a neural path is created.

For example, when I smell a rose, the nerve at the end of the nose senses the flower. A message is carried to the neurons in the brain, which create a path, that compares this sensation with an earlier memory and decides that this is a rose. Thus, every encounter creates a path. Every thought is a neural path. The higher the number of neural paths and the greater their interconnections, the greater our knowledge. Learning reinforces and enhances our brains by creating new paths.

The human brain, from birth, keeps increasing the size, complexity, and nature of the paths in it. A wiser man is the one who has a higher number of such neural paths, with more linkages and the ability to recall the needed path at his will. Learning, therefore, is supercharging our super brains. When you stop learning, you start to decline.

How to learn

To be a learner all your life, here are some tips:

Curiosity

Curiosity fosters learning.

A child is curious. She lives through her life with a sense of wonder and curiosity. The world is a place to de discovered. When one loses curiosity and wonder, they also lose the ability to enjoy and learn from every moment. So, be a learner for life, preserve the curiosity of a child.

The mind of a curious person is like a sponge, eager to lap up the last drop of water- (of course, the sponge sometimes gets full and needs to be squeezed of unwanted stuff occasionally. What needs to be squeezed out is the dogma, false beliefs, and negativity). Continue to have a mind that is always like a sponge. Learning And Renewal

Do not pre-judge

“I cannot learn algebra. I will learn about my religion, but not your religion. I cannot understand any technical stull.” These are negative and anti-learning thoughts. Do not let others limit your learning. You are gifted; you are capable. You are as good as everyone else. Hold on to this belief fiercely.

Go through life with a positive thought that – I am smart enough to learn anything. Once you have this frame of mind, you will learn – anything.

Enjoy Learning

The problem with formal learning is that it sometimes takes away the joy of learning. A child who loves to read stop reading it when it becomes a subject in her class. Just as kids learn through play, adults too should try to incorporate an element of play as they try learning. Learning vocabulary by playing Scrabble is far more effective than memorizing a dictionary.

It is a challenge to make all learning play, but the idea is to enjoy and not get stressed by the chore of learning.

Let 2022 be the year of learning and renewal for you!

Career Pivot – the key to professional success

Everybody hopes for a glorious career. Some make it, but many don’t. It is not always because of skills or proficiency that some get left behind in the career race. It is because they were not bold enough to make a career pivot.

What is a career pivot?

A career pivot is a sharp change in the direction of your career. To give a few examples:

You are a marketing professional with ten years in B2B marketing. All your clients are companies, and you deal with the purchasing department of your client to make a sale. You decide to shift from B2B to B2C marketing. Your clients now are individual customers. Your sales channel is the distributor-dealer network. It is a completely different ball game from the one you were used to. This is a career pivot.
You are an engineer and have spent the last 10 years on the production shop floor. You did an online MBA and asked for a change. Your company offers you the job of procurement. Instead of dealing with machines, you are now dealing with suppliers. This is also a career pivot.
You are heading the finance function. You keep cribbing to your MD about how a business unit is not focused on the bottom line at all. One day the MD promotes you as the head of that business unit with P&L responsibilities. You now need to think not of as an accountant but like a businessman. This is also a career pivot.
Finally, after ten years as an employee, you decide to try your hand as an entrepreneur. You no longer have the comfort of a steady income. You must get business and deliver if you want a salary. This is the ultimate career pivot.

These are examples of career pivots- and it is these that lead to a glorious career. Let us see why.

A career pivot challenges you!

An individual performs at their best when challenged. Olympic records get broken every time because of this. The best performer is challenged – this improves the performance. As in sports, this is true in careers as well.

A career pivot challenges you unlike none other. You are in a new and unknown territory. You are out of your comfort zone. It is either a sink or swim situation. This strengthens you mentally and physically. With every pivot in your career, you gain greater confidence. This shows in your body language which others read. With renewed confidence, you perform better.

Success comes to those who dare to move out of their comfort zones.

A career pivot broadens your outlook

As you move out of a known area and take on something new, you change as a person. In addition to the renewed confidence, we talked of earlier, you also increase the breadth of your knowledge. The production engineer who becomes the procurement head brings far greater product knowledge than a pure commercial person who heads procurement. This wider knowledge makes him more effective,

Similarly, a B2B marketing person when he steps into B2C marketing brings with him or her a new set of tools to navigate the new marketplace. This always makes him or her a far better performer.

The broader your perspective, the greater your chance of getting to General Managerial and C Level positions.

Career pivots take away the boredom of a job

Doing the same job day in and day out can become dull. This results in a lack of enthusiasm that shows on the job. This leads to poor results, bad appraisals, and negative career growth. Frequent pivots are one way of keeping the interest and enthusiasm in a career alive.

You don’t grow in your career if you display a boring look. Everyone, especially your boss can see it. Asking for pivots is one way of overcoming this career dampener.

All professionals should look for opportunities to pivot their careers. It is the sure-shot way to professional success. A transition from Employee to Entrepreneur is the best pivot – you are guaranteed an exciting life of freedom, challenge, and wealth.

Read BYOB – Be Your Own Boss, a systematic guide to making a successful career pivot. Order your copy from Amazon.in or visit the online store to get a signed copy.

Top 10 Strategies to beat Stress at Work

Stress is a good thing. It is our body’s defense mechanism that helps all creatures deal with danger. It triggers the production of hormones like Adrenalin and Cortisol that increase heart rate, blood sugar levels, and blood pressure. This gives the energy to fight or run away from danger. Stress, therefore, is nature’s way to save and protect… Let’s see how to deal with stress at work.

But in the case of humans, stress is generated even when the danger is not real. Imaginary threats and fears, created by an overactive and sensitive mind, create the same stress response as when facing real danger. High levels of hormones that result, cause permanent and chronic illnesses like Diabetes, Hypertension, and Coronary Heart Disease. A young man instead of leading a happy and enjoyable life becomes a patient.

Most of the stress of modern-day living comes from our workplaces. With people spending 10 to 12 hours at work, this stress eats into the body, leaving the individual damaged and unproductive. Our offices and workplaces are silent killers.

But this need not be. We must enjoy work. The tensions that come at work must be like the tension in a watch spring – giving the energy needed to work efficiently. But how does one stop being negatively stressed at work? Here are 10 stress-busting philosophies and practices that always work.

Your Time is yours – don’t give it away

You should ideally work only for eight hours a day. At a maximum of nine hours, with at least one hour in between for relaxation. Working continuously, worrying all the time about work is the first cause of work stress.

Be the best – always on top of your work

Those who excel in their work don’t feel stressed by it. They are ahead of others and therefore not under time pressure. As their work is good, there is less criticism. Good work also gives them greater self-confidence.

Be prepared to walk away

If after all you do, the workplace is toxic and stressful – Quit. It is not worth staying in a company that doesn’t appreciate your work. You will always find a better job.

Detach from Your work

Don’t let your office be the center point of your life. Work efficiently and well. Take pride in your work, but stay detached. Life is not just your work. You are not defined by your work alone. Your work should be seen as only one of the many things that define you as a person.

Be Creative – then it doesn’t leave time for stress

A person who is full of ideas, always thinking of the next thing to do, has no time to feel frustrated at a job. Develop many interests – a hobby, sports, another skill. Cultivate curiosity as a value. You will find that stress is powerless over you.

Refuse to allow any boss to ‘boss’ over you

Your boss is only a structural position in a hierarchy. He or she is not God or the devil. He or she is also trying to earn a living like you. Both of you are employees in the organization. Never forget this truth. Do not let any boss getaway by treating you like dirt.

Never argue – Walk away

You never win an argument by “arguing”. It only creates bitterness and stress. Both parties to an argument will stick to their stand. No one wins – only heartburn and stress results. In a discussion, if you sense that the heat is increasing – STOP. Don’t give the ‘argument’ more fuel – let the other person ‘win’. You will be less stressed and finally, when calm, the other person will start to see your point of view.

Hitch your wagon to a greater purpose

An eagle doesn’t fight over carrions. Don’t be petty. Don’t see your work from a current perspective. Have a greater purpose in your life- and consider your work as a means of achieving this. If you see your work in this manner, you will see that minor day-to-day frustrations don’t bother you. You have a long journey to traverse to worry about the stones on the path.

Rise above appraisals

Performance appraisal time is Stress -Time. If you get a bad appraisal, you get sad, depressed, angry, and stressed. If you get a good appraisal, you will be happy till you know that somebody has got a better rating than you. Then you get sad, depressed, angry, and stressed. As a mature person, refuse to be judged. Who is your boss to judge you? If he or she gives you a good rating, fine. If he or she gives you a bad rating – also fine because the boss is not able to see the good parts of you. The problem is his or hers.

This is the way you should treat appraisals. Be your own judge – don’t give anybody else that privilege. Break your shackles!

Laugh & bring Humor to work

Don’t take your job or yourself too seriously. Learn to laugh, crack jokes and enjoy work goof ups. The moment you start taking work as a big comedy show, with all of you playing part roles, you will start enjoying work tensions. They will lose the power to stress you out.

Our work lives must add to our wealth and peace of mind. If it starts interfering with our happiness, we need to be alert. Your happiness is your birth right. Don’t let stress at work take it away.

ABC of management , Business Management 101 revisited

Successful businesses need these ABCs not a bunch of MBAs.

A is for attention. Paying attention to the customer whose needs are paramount, being aware of changes taking place in the market place and the environment, watching out for the competitor waiting in the wings and the technology that could disrupt your business model. This is the start of a good enterprise.

B is for building the organizations skeleton; the structure , systems and processes to hold the organization together and deliver. A business is like a many headed hydra, each head sometimes deciding and acting on its own. It instead, needs to be an octopus: one head and many arms working in tandem. Appropriate structures and enabling processes creates the well oiled machine, continually delivering value to all stakeholders , smoothly and efficiently. This is the winning enterprise.

C is for control. An engine without control soon spins out of control. Control systems built into the innards of machines, monitor output at critical stages, tracks deviations and sends corrective signals to restore stability. In organizations Control must not be intrusive , while being pervasive, unseen but manifest , silent but heard by all. Hearing whispers of failing systems and responding effectively to restore balance, is of the essence of good management.

It doesn’t matter if you are a start up, SME or a large enterprise. Focusing on this AB & C is the only winning formula needed.

Most startups fail – five steps to increase your chance of success by 500 %

An IDEA alone will never make money. There are millions of good ideas, only one successful company that milks that idea and make money.

To succeed the idea has to be transformed into a business model and executed well. The steps to do this are:

Sharpen Value position : Understand the customer problem your idea solves. This must he known precisely. An idea that doesn’t do this is no good.

Flipkart solves a customer problem of having to go to multiple shops to buy stuff. The site allows ease of shopping at very attractive prices. This is the value proposition.

What is yours? Knowing this is the first step.

Know your customer ? Different types customers- users & payers. Your value proposition must address both these. Understanding customer and meeting needs with your product is the next step.

Google and Facebook are classic examples. You the consumer do not pay for their core service( search in the case of Google) and (networking in the case of Facebook).

Yet somebody pays. Google and Facebook have to take care of both users (you) and payers ( advertisers , etc).

Create Business model : how will you convert your idea into revenue and profits. Fine tune the model . This consists of (1) revenue model (2) sales channel (3) back end processes (4) customer acquisition and (5) key partners.

Revenue model- how will you make money? The answer cannot be – ” by selling my company “. For somebody to be interested to buy your company, it must have a revenue generating capability which is proven.

Sales channel : how will you get sales- how will you deliver. Is it physical or non physical( web, mobile)

Backend processes- what set up do you need internally to make and deliver product or service.

Partnerships – who are your key suppliers/ partners without whom you cannot do your business

Customer acquisition – finally how will you scale up and grow with new customers.

Test the model – throw out what doesn’t work and sharpen all parts of business model.

Get initial customers : get repeat orders – this is call customer traction. No idea succeeds unless a customer endorses it by buying it.
Convert the startup into a company that can consistently deliver and grow. This requires (1) a team and (b) scalable processes.

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