Search This Blog

Monday, 25 February 2019

A letter to an Entrepreneur - 8

Dear Entrepreneur; 

         It's great to hear from you that you have decided to 'Grow' your Organization by 'Expansion'. I am sure you might have taken this major decision after deep thinking. I must congratulate you for your decision but also caution you with some words of experience.

     You might have heard about 'organic growth' and also might have learned about its advantages and disadvantages. Expansion can be done in several ways. But I would love to discuss the expansion strategy which you will see in the Facebook Game FarmVille-2. You see, the game is really simple to play and looks simple at first instance. But just imagine that those coins are real Money and your farm, kitchen, Workshop etc. are real assets and then play the game. You will realize how effectively it teaches you the basics of strategic management. You can search in Google about 'FarmVille-2 & Management' or 'What FarmVille-2 teaches?' etc. keywords and you will get plenty of results and wise posts on some blogs. But here, I will tell you only about 'Expansion Strategy'.

    In the game, you are a farmer and obviously, your farm is your 'core business'. Whatever crops you grow on your plots can be sold in the Market stand to earn Money. You can 'plow in the profits' into the farm by buying more crops seeds and sowing them into the plots. When you level-up in the game, you can expand your farm by completing the task which you can see in the pop-up window in the nearby land. This way once you complete the tasks and you have sufficient money to buy the land, you can expand your farm. Understand the basic things; the tasks are something like prove your kitchen skills/workshop skills etc. by preparing some recipes or Articles etc. Then collect some materials from friends and finally have the money in hand which is the 'buying cost' of the land. You know what?? Same applies in the business. You must grow only when you have acquired expertise (skills), you have all the resources (materials) and capital (money) to do the expansion. These three are crucial parameters on which decision of growth can be made. You can not decide merely on Demand-Supply whether it's the right time to grow or not?

       You must have surplus money over the working capital of your existing business and at least the initial capital & working capital (which can suffice till your break-even of a new unit). You should never be in a hurry to expand your business if you are not in a position to do so. If you will do so, you will suffer a capital deficiency in the new unit/venture and lack of working capital in the existing business. Even if you will try to do Cost-cutting in the existing unit, it will affect the quality of work which in turn will reduce the profit margin of the same. In short, both your units/venture will suffer. Mind you, it's not only about Money. The same thing is applicable for your other resources. And in such case, you will get buried under the loans as the new unit/venture will become black-hole which will keep asking you more and more investment and the old unit/venture will pile-up liabilities in front of you. I hope you have understood what I mean to say.

      Secondly, Expansion in allied businesses is a good strategy to do the expansion. Kitchen and Workshop along with Poultry (Hen House), Yogurt Machinery, Honey Manufacturing, etc.  in Farmville are allied businesses which helps you grow rapidly. A stage comes when the increase in the cost of expansion in expensive areas becomes easier due to such allied businesses.

       Thirdly, as you can see that the value-added products (recipes & articles) which you craft (in kitchen & workshop) provides you good returns. You can thus add such products to your product-line if you really want to manage the new unit working capital without affecting the old unit's operation. 

      Irrespective of all these logical things I must also add here. Sometimes mere intuition, guts, and risk-taking capacity etc. are used by many for deciding the right time of expansion. But only few are the lucky ones who escape the disaster and come-out as the winner in flying colors. But I advise you not to depend on the 'luck factor'. Wish you all the best for your expansion.

Regards,

Your Friendly,
Deepak Doddamani  

A letter to an Entrepreneur - 7

 Dear Entrepreneur,                              You & I, we have worked together in past, and I have seen your strong desire to create your own organization. I am sure you will do it in future, as your track record clearly says that you have achieved whatever you aspired in your life. You have also discussed your start-up ideas with me and I gave you some inputs from my side on those. But I forgot to share the most important aspect of a start-up which I am going to share with you in this email.

                   Friend, first of all, understand this fact that entrepreneurial bug bites everyone at least once in their life. But not all dare to start something of their own. Some are afraid to take risks and some wait for the right time..which never comes. If everyone would become self-employed, then who will work for entrepreneurs like us? Hence, never force anyone hard to understand your visions..yet try to make them part of it. Yes, you got it right. I will be discussing 'How to make the right team?'

                        Success or failure of any organization depends on the people involved in it. No two people are the same and so it's really difficult to search for the right ones. In Business you must not look for people with similar skills - the key is to search for people who possess complementary skills to you. Most of the successful ventures are results of great team-work and the success of an organization depends upon how well the team members complement each other at the same time gel themselves in a team.

                          When you will approach Venture capitalist with your business plan, the first thing they would see is "feasibility of your project" and the second - "who are the people with you involved in your project ?" The most important aspect of any team is 'Goal congruence'.  Are your team members aware of the overall mission of your organization? Are they aware of their responsibilities in a team and the importance of their area to the overall growth of the Organization? Are they all motivated and competitive enough to convert paper plan into reality? An entrepreneur should first consider all these aspects of team building (human resource management) as a really early stage. Because the performance of your organization very much depends upon the nascent stage of your Organization.

                            Every team member has their professional goals and personal ambitions and a stage comes when everyone tends to walk in a different direction if they are not fully aware of their growth w.r.to Organization growth. And that can result in poor delivery of results or lack of enthusiasm towards work, which can shut down your business completely within a few years or deceleration of growth. So it's really important for a leader to make them understand their growth path and how they can achieve it? Remember, you can't afford to show your depression in such stages. A leader must always motivate team irrespective of what he feels inside. He should discuss his fears, but shouldn't create panic situation among them.


                   The subject is really vast and maybe I will discuss more Human Resource Management and Team Building with you in coming letters. But at this stage I just want to suggest you that; don't be in a hurry with start-up if you don't have the right people to bank upon. Work with smart people - even smarter than you to keep yourself always on toes. Discuss your plans with them and don't even try to force your vision on them, no one can see what you see for your Organization. And finally make a team which may be an amalgamation of people with different skills like Sales, Marketing, Technical expertise, Legal knowledge, Troubleshooting skills, Finance knowledge, etc. Choose most enthusiastic and people with a positive attitude among them.
All the best for your start-up. Be in touch. Maybe your humble friend can give you more handy tips for your organization in the future. Take care. Bye.

  Your friend.
                                                                                                 
 Deepak Doddamani