Managing Start-ups for Success

Entrepreneurship in Difficult Times

Rajat Kanti Baisya

• Publisher: Routledge India
• Year: 2021
• ISBN:
  9781000396720
• Edition: 1
• Topic: Commerce
• Subtopic: Activité entrepreneuriale

World economics and the industrial environment has recently created a fertile ground for the creation of new enterprises and start-ups. This book skilfully identifies the challenges of building a new business venture from an idea to a marketable product.

It highlights

• Robust methods for keeping up with innovation;

• Designing new ways to grow, improve and market your product; and

• Managing the changes in the business environment, market dynamics and other uncertainties.

The volume is rich with examples and case studies of many small and large businesses. It further reflects on the business and entrepreneurship ecosystem, the challenges and opportunities in India, entrepreneurship and women, e-commerce, the new generation of entrepreneurs, and exit strategies for entrepreneurs.

An essential guide for entrepreneurs and professionals working in business management and marketing communications, as well as scholars of business administration and financial sciences, this book by an industry expert offers many new and practiced approaches, examples and lessons for innovative thinking and breaking new ground in business.

1
ENTREPRENEURS AND ENTREPRENEURSHIP

Challenges and opportunities

Can everyone become a successful entrepreneur?

Can everybody become an entrepreneur? Yes, if they have a fire in their belly to make it happen. At young age, people dream of making things big and the only thing they thought of that it required to have a brilliant idea and starting a company to pursue it. Possibly yes. But it takes a lot of hard work and dedication and single-minded focused approach to make it happen. And that may not be the cup of tea for everyone. There are many personality attributes that help you to thrive as an entrepreneur, and you might have some of those qualities which can help you to be successful. Entrepreneurs are a different breed of people. They can see opportunities where others see only problems. They are natural risk takers and never get disheartened even if they fail. On the contrary, entrepreneurs learn from mistakes and never make the same mistakes twice. Failure does not reduce their enthusiasm but only redoubles their spirit and confidence. They learn from mistakes and rededicate themselves with a renewed enthusiasm after experiencing a failure. They may or may not be educated in normal sense of the term, but they are knowledgeable and educated and a keen learner in whatever they do. They learn by doing and experiencing things by themselves. They are highly self-motivated people, as well as highly focused on their objectives and targets. They normally would like to experiment and experience how it works before making any conclusion from the experiment. They have a natural propensity to try out anything new and innovative, and normally would not like to try the tested route. They are dreamers and have long-term vision and also are highly flexible, and if something does not work out well for them, they will move to try out something new and different – and as such, they do not get permanently wedded to any idea or product and will move to do something different if that idea did not work. They are highly inquisitive about everything to know and get into the deep insight, and would like to make always a decision based on data and analysis – but if need be, they will not hesitate to take quick decision based on just gut feel. Entrepreneurs, therefore, clearly distinguish themselves from the rest and that is the reason their numbers are not too many to be found.

One study from 2008 divided a number of entrepreneurs into two groups: ‘lambs’ and ‘cheetahs’¹ according to their personality and behaviour. Lambs were described as grazing in circles, feeding on the feedback and direction of others. They were popular amongst investors and succeeded commercially 57% of the time. But cheetahs would move quickly and aggressively, work very hard, demonstrate persistence, set high standards and also hold people accountable to those standards. Everyone in this group produced high returns for their investors – each and every one. Success rate of ‘cheetahs’ are therefore 100%. It has been confirmed from many other studies that social skills, combined with the enormous propensity to get things done, are likely to be successful and hence perhaps it is good to ask yourself if you are considering to lead a start-up the question: Do I have an exceptional ability to get things done?

Does prior experience help in creating success?

It has been seen that prior experience is not essential to succeed. Often, questions are raised if someone has to be an expert in a particular sector to be successful. For ‘lifestyle entrepreneurs’, it is probably easier to be an insider within the industry to be successful. But ‘growth entrepreneurs’ are often seen as outsiders. The reason may be that the total outsiders have no pre-conceived notion of anything to pursue and they take decisions totally unattached based on relevant facts, which is not possible with an experienced person simply because he will be inclined to try out something he has seen in his earlier experience. Global success stories have been created by people having no prior experience and by outsiders to the category. Total outsiders with no prior experience have been seen to revolutionise the category that they have embarked upon.

Very successful entrepreneurs like Steve Jobs in computer and mobile phones, Richard Branson in the aircraft industry and Reed Hastings in movie distribution are all outsiders to their industries. In fact, about 55% start their businesses in which they had never worked previously.² Karim Lakhani from MIT, after analysing the activities of the innovation platform InnoCentive, said: “Actually we found that the probability of success increased in areas where they had no formal expertise”.³ But to achieve the success, there is a great deal of hard work, dedication, focus, patience and perseverance.

Entrepreneurship is not for all

Almost all working executives have thought of starting a venture of their own at some point of their life. But entrepreneurship is not for everybody. Doing a job in an established organisation and managing a start-up is not the same. We have discussed in this chapter why people want to be an entrepreneur. However, one of the reasons is that many get tired of the corporate routine and working for a difficult boss. Before jumping on the decision to become an entrepreneur, it is better that you evaluate the reality and challenges of becoming an entrepreneur yourself. The typical challenges that you will encounter will be many.

The dividing line between work life and family life will totally disappear the day you become the owner of your own business. There is no holiday for you, and the long list of pending tasks will chase you even in odd hours, even if you do not like that. The result is that you will disturb your family life and also disturb some of your mental peace.

Besides, soon you will realise that at your own business, you have clients and vendors, your own colleagues are all making unreasonable demands on you and they may not be easily controllable, and you often end up doing their work to meet some deadlines which under normal circumstances you will not be required to do if you are working for others in a job situation.

Also, while working for others, you do not appreciate the comfort of getting your paycheque at the end of the month; when you work for yourself, you will find how difficult it is to manage the cash flow in the business so that you can pay the people working for you on time. You execute orders and will wait for payment to come; your suppliers and vendors will pester you for payments to be released immediately for their supplies, but your clients will find many excuses to delay payment to you. This may lead to cash crunch and you may be forced to take a bank loan or get an overdraft limit from your bank at high interest. Repaying that loan with interest may not be possible as you initially thought, resulting into building up your debts. Sometimes businesses even close down after falling into such a debt trap. Cash flow management, therefore, is very important. Having profit on book as receivables will not be enough for a business to survive. Business needs liquidity in the form of cash.

You will soon realise that your business objective is dynamically changing with the market environment, rather than what you originally planned. Every assumption that you made earlier will be seen as not working and your business requires a different approach to succeed. Once in market, invariably you will find that your clients want a different product than what you produced and want to sell. For keeping customers, you may have to customise product and also introduce product variants, and soon you will realise that you are now trying to explore different opportunities, which is not exactly what you planned to do when you started your entrepreneurial journey. But you cannot quit, as only those who have the tenacity and perseverance to continue even after facing several odds and hurdles can hope to be successful. If your customer liked your product, he may not like your price. There will thus be constant adjustment with the opposing market forces and hurdles.

When you have managed to keep yourself afloat for the initial period and are desperately trying to get to the critical mass but resources is a severe constraint, you will receive calls from private equity investors promising you to fund for faster growth, which might make you feel happy that investors have recognised your business and are willing to value it for infusion of fund against dilution of your equity. But after taking funding, your woes will increase to chase the growth numbers that you have projected to get higher valuation and more funding. And that situation will threaten your existence.

Also, you will always have to think about others working in your office. The infrastructure that you initially created may not be enough for you to provide adequate technical and infrastructure support for your people to deliver results and be comfortable and happy. These issues will also drag you to many administrative jobs in addition to the pain of replacing people who have left your organisation, and that task will not be easy in a start-up organisation.

You thus end up doing many jobs because it is your own business and you have to make up for shortcomings in every other function yourself. That itself is a nightmare for many. You need, therefore, to think many times before you decide to quit your job to start your own, even if you have a very difficult boss to manage or you do not like your job. But if you still feel the urge of becoming an entrepreneur even after carefully considering all these negative influences and demand on your own life and time, then there is a valid reason for you to be an entrepreneur.

Would entrepreneurship mean gruelling work culture?

Alibaba founder Jack Ma supported the long working hours which is often referred to as 996 meaning slogging 9 am to 9 pm six days in a week. Many start-ups do follow such gruelling working hours and many entrepreneurs also approve of this saying that it is necessary to meet the ever-increasing demands from investors and shareholders to deliver results. Many employees end up working extra hours and even working on weekends and also during vacations. Some start-ups even keep their female employees to work late hours and they themselves drop them home as they cannot afford additional transport cost for dropping employees back home when they are forced to work late hours. Start-ups always keep a lesser number of employees than required and is also necessary, which automatically increase the workload of the staff, as well as on the entrepreneur himself. Does that mean that for succeeding, such working culture is essential?

Japanese and Chinese have killer working hours, but India also not far behind. It has been observed that both big and small companies, as well as start-ups, in India are exactly becoming like Chinese and Japanese companies. I can recollect a situation I myself experienced in Japan many years ago. I went there to negotiate for some capital equipment for setting up a project in India. I reached Narita International Airport in Tokyo in the night from San Francisco and went straight to my hotel in the city centre. The next day by 8 am, someone was supposed to come to pick me up from my hotel to take me to the factory located about 100 miles away from the Tokyo city centre to reach there at 9 am for the meeting. After dinner when I was about to go to sleep, I heard that someone knocking at my door and when I opened the door, I found a Japanese gentleman standing to tell me that he was the person to accompany me tomorrow. He said that he was also staying in the hotel and asked me if I could take breakfast little earlier so that we could start at 7.30 am, half an hour earlier than scheduled. When I asked him why he is here today, he replied that if he has to come from his place to pick me up at 8 am, it would not have been possible and I would have got late at least by half an hour to reach the factory to which I asked how that would make a difference and what was the harm if we reached at 9.30 am instead of 9 am as per our appointed time. The gentleman replied that it will not be acceptable in his company. That kind of work culture had surprised me. But in subsequent years, I have experienced doing long working hours myself in Indian businesses, as well.

Often, the problem in early-stage start-ups is that work rules are not clearly defined and as staff are invariably less; often, they end up working extra hours also because they are required to perform variety of tasks. If someone is hired to head marketing function for a start-up, he may also end up looking after the operations function. But the fact of the matter is that long working hours will not mean higher productivity. Instead, both productivity and creativity reduce if employees and entrepreneurs themselves work extra hours every day. The occasional working extra hours is understandable, and there could be a need for the same to meet some deadline or milestone, but that should not be the routine. Usually, banks have such kind of long working hours, which has resulted in employee fatigue and dissatisfaction, and in later years we have even found that some employers even introduced flexible working hours. Some companies have even done away with clocking and recording of employees’ attendance to give more flexibility and create a sense of trust with the employees. When having employees in multiple locations, this of course, does not work. But for a start-up with few employees to begin with, this is a positive and welcome practice.

For start-ups, working hours can be flexible and as per requirement of the business plans and actions to be implemented. For start-ups, one should not keep tasks pending to be finished next day, and work output has to be much higher than normally expected from an average employee in large companies. A large company can afford to carry passengers in its payroll, but in a start-up you need only performers driven by the leadership and direction of the entrepreneur.

Some common beliefs about entrepreneurs

There is always a question whether entrepreneurs are born or can be made. Is it an inborn quality, or can becoming a successful entrepreneur be developed, taught and trained? And arguments can be put forward in either way to prove the point in favour of both. But it is true that entrepreneurship quality can be cultivated, provided some of the basic qualities as mentioned earlier are there. Some of the very well-known and successful entrepreneurs had no formal education and they started working alone, and from very humble beginnings, they created global success stories. While there is no established rule that formal education and training in entrepreneurship management will help someone to be successful in new venture, it is true that education and training and some experience helps in managing a start-up much better. Some people believe that entrepreneurs are made, and still some other people believe that these are in-born qualities. Both may be correct or partially correct. How...