Entrepreneurship in India – Rules for Spectators – Part 4

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Rubber meets the road

In early 2004, in its fifth year, our first startup broke even. I recall us making plans to finally buy decent ergonomic chairs for our committed and long-suffering employees. The demands of growth and the challenges of cash flow made sure we never got those new chairs. Yet with more clients, more visitors and greater travel by our staff, we ended up hiring a car and driver on a monthly basis. The same people who’d send us a cab for the airport trips now sent a car and driver who’d be at our disposal all the time, for a flat monthly fee.

Balan* was the driver and in my first trip to the airport I learnt that he owned the car we were in, and he was a sub-contractor to our regular rental car supplier. Over the next two car rides, I picked up his story – high school drop out, set out driving an auto (that he’d rent on a daily basis), then worked as a driver in a company, before saving enough money to buy his first Indica. Now he owned two cars, drove one himself and had another driver on his payroll. He sub-contracted for a number of folks who had small fleets and one day hoped to build up his own fleet.

Last week I got a call from Balan. He was calling to introduce his nephew, who’d just graduated from college. Balan’s fleet has grown from the two Indicas to two eight cars now. Despite the recession his business had thrived and he’s effusive in expressing his gratitude for us giving him a leg up with our steady business. At a time when even basic services such as barber shops and restaurants were seeing customers cut back on their spending, that fact his business had grown is testament to his drive and what Ram Charan terms “business acumen.”

The town and the gown

Once we sold our first startup in early 2006, I have had the time and opportunity to consult for friends and several clients to help with their businesses. These have all been college-educated, entrepreneurs – ranging from manufacturing (electrical gear), distribution (music to mobile phones in Class B towns), software products to training services. In many instances, Prasad the barber, Girish the restaurateur and Balan the fleet owner, have a far clearer sense of where their businesses stood, who their clients were and where they made their margins. And these were the folks without the college (or even high school) degrees. Yet both groups of entrepreneurs are successful and struggling with common questions – from the strategic, “How do I grow my business?” “Should I grow my business?” “How do I raise capital?” “Should I take on debt or do I dilute equity?” – to the tactical decision making on hiring, pricing, marketing and promotion.

Academicians who study entrepreneurship make the distinction between voluntary (those who make a choice) entrepreneurs and those that fall into entrepreneurship, without a choice. Most entrepreneurs that get formal funding or the media mostly talks about belong to the former voluntary group while folks who go into their family businesses or traders and micro-entrepreneurs fall into the latter, involuntary group.

Yet both these groups have far more in common, particularly when it comes to problems they face and mistakes they make. Much like parenting, most entrepreneurship involves learning on the job. While reading up about parenting (particularly in my case about adolescent behavior) will help, it only takes us so far. Grand-parents (for people) and consultants (for businesses) help speed up the learning and avoid the most egregious mistakes, but nothing can replace the learning that experience brings. Yet the journey to achieve such experience need not be as stressful and lonely as it sometimes seems.

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Entrepreneurship in India – Rules for Spectators – Part 3*

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Watching the numbers, one dish at a time

Ramani, my neighbor is himself a first generation entrepreneur. Though formally trained as a chemical engineer he has built a successful electrical business, initially in trading and subsequently in panel manufacturing. An active member of the morning walking group at the local park, he has roped me in as well to bundle up even on cold Bangalore mornings to put in our six or so rounds. The talk inevitably turns to our businesses and the challenges we face and many a days we lose count of both the rounds we’ve made and time that hurries by. I met Girish (name changed) at one of these morning walks.

A diminutive man, who’s rapid walking pace merely hints at the energy packed in him, Girish came to Bangalore less than 20 years ago. Hoping to be the first person to make it to college in his family, he started on his pre-university course. His father and numerous younger brothers meanwhile were attempting to make a go of the family farm in their village. However, the family soon faced mounting debts and struggled to make ends meet. Girish abandoned his college dreams and returned to take care of the family farm. After several years of being a farmer, Girish found himself running very hard to stay in the same place. The little money they managed to eke out of farming went wholly to service the interest costs of the family’s debt. The principal they owed was untouched. Girish made the bold decision to head back to the city, and figure a way to make his fortune there.

Through a family friend, he got his first job, in a darshini – a fast-food restaurant. Paying a princely sum of Rs. 700 a month, the job required him to stand by the kitchen door, and note down every menu item that left the kitchen through out the day. At the close of business, his numbers had to be reconciled with the receipts at the cash counter. The very first month, the (absentee) owners of the restaurant saw so much savings, that they gave Girish a more than 25% raise to Rs. 900. Within six months Girish became the manager of the darshini, with yet another pay raise. The bulk of Girish’s monthly income was sent home to retire the family’s debt. Through family friends, a marriage proposal came and Girish soon was a married man.

A couple of years of running a restaurant 7 days a week, awakened him to the potential of the business. He approached the owners, who’d pretty much ceded the day-to-day operations of the business to him, with a proposal to expand their single outlet to a chain of fast-food restaurants and a small equity stake for himself. The owners were conservative and a little aghast that this 20-something wanted equity in the business and turned him down. Whilst disappointed, Girish did not give up on his dream and decided to strike out on his own. His father-in-law was prepared to provide him some seed money to get started. So Girish, in his own words, “I sought the permission and blessing of my employers” to set up his own restaurant and never looked back.

When I met Girish on that morning walk, he was handing out laddoos from Tirupathi. His son had just been admitted to engineering school and he wanted to share the good news with his walking friends. His first food outlet had grown into a chain of five restaurants. Starting with his second restaurant, he had taken a (different) partner for each new restaurant – these partners being nephews and other young relatives of his father-in-law who were getting started with their lives. Making them his partners, Girish had groomed a whole new set of entrepreneurs. This was his way to repay his father-in-law’s initial support and faith bestowed in him. He had not only paid off the family debt, but personally paid for the restoration of the village’s dilapidated temple – the prasad from which he was sharing with the Tirupathi laddoos.

Ramani, my friend, piped in as Girish completed his story, “Sri’s a food aficionado. He’s been talking about maybe starting a restaurant.” “You’ve got to watch the numbers, at two places – when you procure your supplies and at the billing counter. That’s all there’s to running a successful restaurant. Happy to talk to you anytime,” was Girish’s immediate response.

Girish’s entrepreneurial story, if seen in a movie or a TV show would seem too good to be true. It might even be dismissed as typical Bollywood fare (without the gyrating damsels, alas). Yet it is, I suspect, representative of a large number of unheralded Indian entrepreneurs.

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Entrepreneurship in India – Rules for Spectators – Part 2*

Lessons from a close shave
In 1996, when I first returned to India, Ramani, my neighbor and friend, took me to the local barber. Harking back to the barber shops of my childhood, it was two barber chairs in a room the size of large shower stall. Prasad (all names changed to protect the privacy of individuals) the owner of the barber shop seemed barely in his twenties and full of life and great enthusiasm for the task at hand. He greeted my friend in Kannada, even as he cropped a customer’s hair, acknowledged me with a quick nod and kept a close eye on the other barber. My positive impressions of that first day were not only borne out but grew stronger, as over the years Prasad bought out the neighboring space and expanded his barber shop. Now renamed as Classic Hair Saloon (CHS), he added head massages first, then facials and subsequently full body massages, in an expanded back room.

Three years after my first visit to the CHS, several friends and I embarked on our own first startup, Impulsesoft. I relocated overseas as we set out to grow our business and in my frequent trips to India, I’d always make it a point to bring my hair cutting business to Prasad and the CHS. The half hour or thereabouts I’d spend on a padded chair having a luxurious shave or an oil-soaked head massage proved to be my own personal MBA class.

In 2000, our chosen market (Bluetooth technology) sputtered in the downturn and well funded competitors threatened to swamp us. Yet as I saw Prasad thrive in a market with nary an entry barrier, hiring more seats and hands, I learned the criticality of customer focus and personalized service. Subsequently when we set out to raise money, capital had dried up as the market seemed stillborn or delayed in 2002. Again the lessons of repeat customers, word-of-mouth referrals and growing existing customers by up-selling (cut to shave; a shave to coloring; to head massage) were apparent in Prasad’s growing business. And whenever we despaired that hiring, training, retaining and motivating software engineers was hard, Prasad’s challenges in ensuring service quality, even as he brought on more barbers, often with few other formal skills, made our own look small.

Even as I write this, the CHS has held its own against newer competitors (including a fancy upscale national chain and another barber shop that sprang up in the neighborhood) and has continued to grow. Prasad has demonstrated bootstrapping success, growth through hard times and sustained product and service innovation. He has built a strong and passionate customer base and seen good financial returns. In other words his business is an immense success by most measures, even though it has yet to figure in any mainstream story or have its own case study.

Entrepreneurship in India – Rules for Spectators – Part 1*

man_in_fence“If a tree falls in a forest and no one is around to hear it, does it make a sound?” is a riddle philosophers have posed to question reality and its relationship to observation. Much of the entrepreneurship in India is like trees falling (or growing) silently in an unobserved forest. The media rarely notices it and the public is hardly aware that its happening. Does this mean it is not happening?

The casual reader of the business pages could be forgiven if they reckoned that entrepreneurship in India happened only with technology or more recently Internet startups, often venture funded. Coverage outside the technology domain focuses on the hyper-successful and all to often on personalities. The stories of Dhirubhai Ambani, and his humble start in Aden, Karsenbhai Patel’s Nirma taking on the entrenched multinationals and more recently Kishore Biyani and his Future Group’s rise in retail have captivated the media and readers’ imaginations.

In many ways, the recent appointment of Infosys founder, Nandan Nilekani, as the Chairman of the Unique Identification Authority of India (UIDAI) marked a milestone in Indian entrepreneurship. In his own words [Infosys] “… was not a family-owned company. It was not a multinational. It was not a state-owned company. …It’s become a metaphor. If they can come from nowhere and create a world-class organization, then anyone can do it.” The grant of a Cabinet level post to someone who has cut his teeth as an entrepreneur and a professional manager is the most visible sign of mainstream acceptance of entrepreneurs.

Entrepreneurship in new light

However as we have learnt, having a woman prime minister or now a woman president, symbolic as it is, does not automatically solve all the issues plaguing Indian women. So too this recent interest and boosterism for all things entrepreneurial, while welcome, is merely a start. Even today, traders who likely constitute the lion’s share of Indian entrepreneurs are referred to in pejorative terms. Unlike the titans of technology or rajahs of retail, whom we read about on page 3, all of us encounter traders on a daily basis, but rarely recognize them as entrepreneurs. So there is much each of us as individuals, organizations and as a nation can do to encourage, nourish and grow the flame of entrepreneurship. This article is a small step in that direction.

Ram Charan, author and renowned management consultant, frequently points to his family’s shoe shop and to street vendors in India and elsewhere, and the lessons businesses can draw from them. Without romanticizing either the giant multi-billion dollar corporations he consults for, or the fruit seller on the street, he is able to highlight the commonalities that underpin businesses. It is such a balanced view of entrepreneurship – whether small or large, tech or non-tech, urban or rural – that we all need to develop to build an ever stronger ecosystem that will foster Indian entrepreneurship and innovation. The two books, “Stay Hungry, Stay Foolish,” published by the IIM Ahmedabad and “Inspiring Women to Start Innovative Enterprises” by the NSRCEL at IIM Bangalore, are a great start. Whilst still about college-educated entrepreneurs, both books highlight a wide variety of entrepreneurs across various stages of the business cycle. Without focusing solely on the large or “successful” but by including several still-at-an-early-stage businesses, they are a step in the right direction.

In this article I will share a few common but untold stories of entrepreneurial journey, along with my own experience as a first generation entrepreneur. Drawing on these and others’ experiences, I will stake a position on how we can influence the perception, coverage and the course of entrepreneurship in our own communities.

*The fine folks at Indira Institute of Management approached me to write an article for their quarterly magazine Tapasya. This article first appeared in the Summer 2009 issue of Tapasya.

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