Series_WWH of Scaling- Part 3 How to scale?

 How to scale?

Hello readers, Hope you had read my previous two articles on WWH of scaling which was about When & What to scale. Third and very decisive module of this series is How to scale the business.

I had ease out the Scaling process so that all level of startups or businesses can adopt it. This process comprises of below steps -  

1.       1. Promotion strategy building with breaking the ICE

                Identifying medium

                Campaign designing

                Execution

2.       2. Process creation

 

3.        3. Ts of Implementation

Team

Technology

Tieups

1. The ICE plan is elaborated below -

Identifying medium

Right way of marketing in particular region is to select the right medium of marketing. For example - If you are promoting in tier 3 or rural regions than right way can be traditional media like news papers, hoardings, posters, wall colour, sampling, stalls.

While for metro and tier 1 cities best way is digital media, viral marketing, branding in malls, event sponsorships.  Targeting will further depend on type of product and specific target group (TG).

 

Campaign designing

Advertisement or promotion material to be designed based on demographic and geographic data mining and analysis. If it’s a product for family than an emotional touch in promotion material or punch lines will attract consumer attention like – LIC, HDFC, Policy bazaar are doing these days.

If your TG is youth then promotion should be trendy, loud, bright, joyful like Pepsi, 5-star, White Hat Jr.

 

Execution -  This is action stage of your plans. It has to be perfect else planning will go useless. Step by step execution of marketing and promotion plan with acute deadlines, monitoring, control is elementary. 

In any stage it seems to be failing then re-planning and re-execution to be done else it will burn the cash with no positive impact.

2. Process creation

All businesses from vegetable vender to Amazon, Paytm, Facebook like unicorns have set standard operating processes [ SOPs] for business. A manpower may come and go but process stays forever and every person in organization has to follow the same processes for uninterrupted operational flow.

If you are in food business than standard recipes to be frozen out, if you are in tech oriented business than your need to have work flow designs for every functions like operations, support team, with defined turnaround time for every step [TAT].

Whenever new employee joins, HR or Team head must provide SOPs and explain the process him for quick involvement in system.

 

3.  3 Ts of implementation -

Team

“Entrepreneur is foundation and Team is pillar of business.” Once your business is on auto pilot and self sustaining and you had decided to scale, you need to on-board strong leaders who can head your operations and growth.

If you are going in other city, endeavor to hire maximum resources locally as they understand domestic market intensely and they have network of people there to garner business or support.

Top leading positions are likes of COO, CMO, CTO or CxOs…. Once hiring is d

one half way is accomplished. Management concept of right person, at right place at right time applies here. Google appointed Mr. Sunder Pichai as CEO when it felt to launch new product and increase monetization.

 

Technology

Next important aspect is technology. Technology can be used for managing Database, CRM, Lead funnel, customer support, understanding consumer behavior. If your customer touch point is through technology like- App or web then your front end interface [UI] must be robust and attractive and if your customer is connecting you through offline centers then your backend technology needs to be strong.

You can understand the importance of technology from the case of Askme.com. Primary reason for failure was that its platform [ product & technology] was not great and couldn’t beat easy use platforms like justdial or indiamart. Further, to fight against competition and get traction, it started over spending on branding and due to that it faced lack of funds to survive.

 

Further, there are low cost ready tech tools available to start with like ZOHO CRM, Shopify, Marg ERP, BI tools, GSuite, AWS startup package. At the end you should have your own proprietary technology to give best user experience and monetize the product.

 

Tieups

Another model for scaling into new markets can be Strategic alliance with dealers, local players, franchisee, channel partners. In such type of models your capex is saved and local players understand the market well.

                                                                                      

It also helps you to curtail team costs and generate recurring incomes. This can be structured on cross selling, up selling models or revenue share basis.

 

Hope you will remember ICE plan with topping of 3Ts to enjoy the thunder of scaling. Pls drop your views and queries in comments section. 

All the best for future endeavor in business with the concept of WWH of scaling. 

Best Regards,

Amit Pamnani

Ex-VC , Mentor

Indore, India

What to scale in business? Part 2 of WWH of Scaling series

                               What to scale in business?  Part 2 of WWH of Scaling series

I hope you read and liked my previous article on When to scale as part of the series of WWH of scaling. 

In this blog I will tell you about What to scale. You will say of course I will scale my product, but there are many internal and external factors to be considered before finalizing product features, revenue model, pricing, etc.

So, What to scale?

If your product is successful in one or two markets it doesn’t guarantee that it will be hit in any market. Edtech startups like Byjus, Udemy got good traction in metro cities since 2018 but in tier-3 cities it was not gaining that traction till 2019 end.

Before scaling in newer markets, in-depth market research is required to be conducted by management team. It shall cover –

Competitor analysis

Consumer behavior

Taste and preferences

Demography & Culture

Purchasing power

Survey

Right product & service -

After above market research and its findings, entrepreneur can make changes in product placement, if required. This changes can be product design, taste colour, packaging, presentation.

Preferences of customers in south can be different than in north. If I take example of a fine dining restaurant – in south people with prefer more dishes of fish in non-veg while in north preference is chicken.  Similarly, in north consumer prefer spicy while in south preference is for low spicy.  In short, if you don’t have a product-market fit then your business will fail in that market.

Pricing 

Is highly crucial factor that decides the way forward. Indian market is very price sensitive. Competitors’ pricing and offerings need to be compared meticulously and accordingly product pricing shall be finalised.

In case of Saloon industry, for metro cities like Mumbai & Delhi a man haircut may cost Rs. 250 but in tier 2 or 3 cities like Jaipur, Indore, Pune saloon may not charge more than Rs 100 to 150 initially. 

Shotang a Bangaluru based startup that was into B2B lifestyle goods, connecting manufacturers and suppliers and getting commission on transaction, failed due to high competition like India mart, Just dial. 

Once your product and pricing strategies are finalized as per the findings of the new market, then comes the promotion part. I will cover this in my next blog of this series i.e. How to scale.

With warm regards,

Amit Pamnani
Ex-VC | Mentor | Angel Network


(P.S. your comments are motivation for me.)

"WWH formula of business scaling" How to scale startup?

It is the tendency of Business to growth and expand. Entrepreneur aims to increase turnover, profits, venturing into new geographical regions, new products and more.  But expansion cannot be done by magic wand. There is a systematic process of scaling and needs deep brainstorming.  

You cannot scale until you have clear written plan of action. It is validated fact that 90% of the startups in India fail within 5 years of commencement because of reasons like product market mis-fit, lack of capital, poor revenue model, inexperienced team, bad timing, etc.

You can chalk out your scale up plan with the help WWH formula that I will explain in three different post for clarity.

The WWH formula is –

When to scale

What to scale?

How to scale?

Lets understand the first ‘W’ that is -  When to scale?

You know when plant grows to become tree; once its routes are strong and are deeply penetrating in ground. Similarly, once business set up its route deep into market of origin then entrepreneur shall think of expanding.

Product solving problems - 

Products needs to be tested in one or two markets and delightful feedback from customer is successful proof of concept. Once product is solving problem of mass consumers and gaining rising traction like increase in revenue, increase in app downloads or website hits, it is ready to scale. But there are many other factors too.

Bangalore based Bike rental startup Tazzo failed due to low customer demand, low revenues, early to market and lack of capital.

Management bandwidth/ succession -

Before management decides to scale it need to go on Auto mode. Yes, Entrepreneur needs to have succession plan, second level leadership that can take committed control of existing market or new market or new product line.

Availability of surplus funds -

It is crucial to have before expansion. It is not advisable to disturb the working capital of one market to enter into new market or new product. Expansion is done from growth capital whether it is generated from profit or new capital is bought in by entrepreneur or Investor.

‘Holachef’ a food delivery startup connecting consumers and chefs, started scaling when foodtech was not profitable and giants like zomato, swiggy, Uber eats were offering huge discounts and free delivery. It was bad timing for scaling, it couldn’t get next round of funding and hence it could not grow.

Right timing to expand -

Most of the businesses are cyclical in nature, hence suitable expansion time is when demand is there or it is up cycle. As in down cycle business will have to face loss for few months till the demand time comes.

If you are in finance or fintech industry rainy season is bad time to invest in expansion, good time is September to march. For education / edtech business, best time to pitch to new market/ customer is December to February.  For e-commerce good times start from August to mid February. For restaurant industry the right will be from October to January.

Further, it is also needed to be considered that how other players are performing, what is consumer behavior and adaptability rate, habits, etc.

“Doctalk” – online medical consultancy app and digital report storage startup failed due to non adoptability by consumers in 2018-19. In India doctor consultancy is preferred offline hence it proved bad timing for Doctalk as it was early for Indian market to follow this model. Today in 2020 it is the right time for such online medical apps.

Considering factors like – Product market fit, management bandwidth, surplus capital, right timing Entrepreneur / management can take a call to scale and start working on other two equations with What and How.  It will be published in this week itself.

Your comments are my motivation.

With Best Regards,

Amit Pamnani

Low cost fund for your business - LAP or Mortgage loan

In covid-19 pandemic also how lap is useful?

As the nationwide lockdown continues, some leading banks in India have introduced special schemes for businesses and individuals to help them deal with emergency expenses, resulting from the ongoing COVID-19 crisis. With the recent crash in the market, redeeming your Mutual fund units at lower net asset values will hardly do any good.

The lowest cost of fund can be arranged from banks by taking Mortgage loan or LAP. Loan against property is one of the most common forms of a secured loan where you can pledge any residential, commercial or industrial property for availing the funds required. The loan amount disbursed is equivalent to a certain percentage of the property’s value [LTV] and varies across lenders. If there is any temporary disruption in the cash flows, and in some cases loss of income, for the businesses/ individuals, the mortgage loan will bring relief to such borrowers. Tenure of Loan varies from 5 years to 15 Years

RBI has permitted Bank to grant a moratorium of three months on payment of all installments falling due between March 1, 2020 and May 31, 2020. Hence, Bank will not raise the installment demand during this period and Borrowers availing this concession are not required to pay the Installment during the period. Accordingly the residual tenor of repayment schedule will be extended by some months.

One of the key benefits of loan against securities is it comes cheaper compared to business and personal loans. Since the loan is backed by an asset, the interest rates are lower than that of a business loan [18%] and are typically in the range of 9-12 per cent, based on collateral.

Similar to other borrowing options such as business loan, top up home loan and gold loan, loan against property does not restrict usage of loan proceeds, except for illegal or speculative purposes. The funds can be used for various purposes such as child’s higher education, business expansion, foreign vacation, etc.

Not many borrowers are aware of the tax benefits available on loan against property. Tax benefits that depend on the end use of the money borrowed. First, under Section 37(1) of Income Tax Act, the interest paid and associated costs such as processing fee and documentation charges can be claimed as business expenditure.

Second, if the money is used for the purpose of financing/purchasing another house property, then, interest repaid can be claimed under Section 24(b), up to Rs 2 lacs in a financial year, provided the borrower is conclusively able to establish a link between the money borrowed and its ultimate use. However, unlike home loans, borrowers cannot claim any tax benefit on the principal repayment of loan against property.

Other than interest rate, that one should consider while comparing and choosing loan against property from various banks:

•      Current best offer on processing charges as these tend to vary from time to time
•       Service quality, especially post sales service quality
•     Add-on features – like DBS maxgain facility and Citibank Home Credit facility – these help borrowers to save interest by parking surplus funds temporarily in the account and paying interest on net difference between loan amount and surplus parked temporarily
•      Higher loan to value of property ratio [LTV]

Stay Safe, stay focus.

With love

Amit

‘Ask to Get’ a universal success mantra (मांगोगे तो मिलेगा )

Every relation in this world follows one mantra – “Give and Take.”

In Hindi - मांगोगे तो मिलेगा ,  ढून्ढोगे तो पाओगे

Weather its personal, business or social life. In personal life, you give love, care and take back same from family.

In business life, you exchange goods & services with money or kind.

In social life, you give time to others may be friends, neighbors, needy people and get joy, peace & appreciation.

Its prevalent since history, some great examples verifies this mantra.

In Mahabharat, the brave warrior Shri Arjun asked Lord Shri Krishna to give him wisdom & courage to fight against his Guru and Grand father Bhishm.  

If he didn’t asked for the same he couldn’t defeat his enemy and would have lost battle. 

In epic Ramayana, Lord Rama asked for help from King Sugreev to provide resources to fight Ravana. He asked for it and he got help to built path to go & attack Lanka.

Similarly, in our real lives if giver is not giving you money, resources, facilities, benefits, etc. you need to ask to the giver.

For example –

Employee can ask to employer to give his due salary, promotion, benefits, good working environment.

Startups ask from DIPP, Niti Aayog to provide supportive environment, tax benefits

Businessman request their customers to pay on time

Industries and industry bodies ask government to provide tax benefits, suitable markets, subsidy and resources to setup and growth infrastructure.

Government take funds from world bank to control economic conditions of country.

Negotiate with giver, vendor you will get benefit out of it. Don’t bring a negative thought in mind that giver will not give or negotiate, try once.

The essence is - Don’t complain, don’t hesitate, just ask polity and smartly. You may hear NO or you may get YES, no third option.

Be happy in your life what ever you do.

With Love
Amit

Investor's choice startup sectors in 2020-21

Startups in warrior segment will be the investor’s choice in 2020-21

Year 2020 is the time for being safe and survival. Business models need to be rethink and structured in innovative ways.

The focus of entrepreneur will be to consolidate the business, retain old customers and find new customers with less acquisition cost. One has to take risk but measurable and under control so as to keep the venture going. 

Investors will now prefer the startups that have successfully implemented their ideas and delivered the proof of concept (PoC). As it is time to quickly execute the business operations and scale to resolve the problems of masses. The covid 19 pandemic has brought new opportunities for few sectors and compelled many businesses to shift to digital platforms. 

Following sectors have been getting great response from consumers and attracting investors for funding -

Edtech – recently funded startups in edtech sector – Vedantu, gradeup, classplus

FMCG & Grocery

Enterprise SaaS – CRM, ERP, IVR, etc.

Health-tech & Hygiene - Esperer Onco Nutrition

Logistics & supply chain - FarEye

OTT/ content – daily hunt raised next round, Tock

Gaming – Ewar app

Conferencing and chat apps

Robotics

Fintech – setu, navi got funding from investors

Startups shall relook their product, make amendments in product, service or business model.  Once its proven to be a perfect product-market fit with low investments arranged from their savings, family & friends, Education Institutions’ grants, Incubators, etc and then later they can go to Angel Investors or early stage funds for raising growth funding. 

A successful Business Model might needs kick start resources including funding and may be some ‘growth capital’ later on but not the ‘sustaining capital’. 

In Q4 2019-20 there was 45% de-growth in startup funding as compared to Q3. But positive side is over 40 prospective startups could raise $550 mn in such a storm, which signals that there is no dearth of funds in India only required is the well thought out business plan with enthusiastic & passionate team to lead the way.

Investors like light speed venture, Eight roads, ICICI Venture, Falcon, SIDBI are actively investing in Q1 2020-21.

Therefore, Investor choice for this year will be startups that have achieved initial milestones which can be in terms of revenue, user base, number of transactions on platform, analytic & database, etc. These figures will enable investors to derive the potential of idea and capabilities of team. 

Also many investors are looking for innovative ideas in above sector but which are scalable with advance technologies like Blockchain, Artificial Intelligence (AI), Machine learning (ML), Data analytics (DA), Digital currencies, etc.

Startup Funding and Stages

Startups investments are broadly categorized in 5 stages or a startup company’s growth journey passes though these stages -

-          Seed stage

-          Angel investment

-          Venture capital funding

-          Private Equity Investment

-          IPO

Seed stage

With context to Indian scenario, Seed stage funding is done by self from savings, family, friends, educational institutes or HNIs in personal network. This is done at idea stage where product in on paper or a blue print is ready. This may range from Rs. 1 lakh to around Rs. 20 lakh.

Angel investment

Startups that have built-up a product and commenced sales or have active users on platform may qualifies for Angel Investment. If the product is innovative and disruptive it is evaluated by Investors on various parameters like revenue model, scalability, team, technology, etc. is

Participation in angel investment round is done by angel network, accelerators, small VC funds, HNI, Corporates, professionals. Ticket size in this round varies from Rs. 25 lakh to Rs. 3 crore.

Venture capital funding

Once the startups reached traction in business and for business growth & expansion if needs Venture capital funding. The objective can be to enhance technology infrastructure, hiring experienced team, marketing, optimizing operations capabilities, etc. a typical VC fund invests above Rs. 6 crore.  

Venture Capital involves money being provided by investors to start-up firms and small businesses with perceived, long-term growth potential. This is a very important source of funding for start-ups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns.

Private equity (PE) funding

PE funding is money invested in companies that are not publicly traded on a stock exchange or invested as part of buyouts of publicly traded companies in order to make them private companies.

These are very large size funds that invest in companies that are having very competitive product, excellent management board, growing very fast and may have prospects to list on stock exchanges or doing global business.