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80-90% new businesses fail in the first year after their inception. Do you want to avoid that fate? Read on….
Most of the businesses fail not because of lack of power in the idea behind the business. Nor do they fail because of market conditions. But they do fail because of the factors which can be controlled significantly.
My first and foremost advice is to keep cohesion in the founding team. It is better to take time before the team is formed to ensure that all or most aspects of team bonding should be in place. The founding team should ideally comprise of people who have cut teeth together for a good amount of time. Take example of Infosys’ founding team, or new age companies such as Snapdeal or Flipkart.
Another thing which really makes or breaks a company is managing cash flows. In the pursuit of growth, entrepreneurs may and usually stretch far to capture more customers. In the process they may even offer the terms which give revenue visibility but no immediate cash flows. On paper the business may look robust; however, cash position to run day-to-day business may go for a toss. This folly should be avoided and entrepreneurs may even take inspiration of old Marwari Parta system.
My third advice is to put great emphasis in putting at least basic systems in place. The system may evolve with time but great deal of thought should get into making even the first framework. Properly designed systems will add to the growth of the business by eliminating redundancies in the system. A system as simple as documenting pricing strategy can save enormous amount of time and efforts later even if a single person is making pricing decisions.
Business building is a painstaking process. Therefore, entrepreneurs should plan for longer horizon. It may take even 2-3 years for a business before it begins to realize its potential. Sustenance is the key word. It may even require slight defocusing to generate enough cash to weather the lean period.
In conclusion, the above mentioned 4 points should always be held paramount in the beginning and building phase of a business. Business building is akin to giving a birth to a child and bringing her up with right environment. Once reaching a certain stage it will build itself.
Rohit Chaturvedi
Managing Partner
