Basic Lesson in Entrepreneurship

Today's ET carries a piece by Sudeshna Sen titled "Rita Sharma: England's richest Asian woman entrepreneur", profiling England's richest Asian woman entrepreneur.

It's refreshing to read a name that hasn't been splashed all over the papers, and although there is less said about Rita's journey to building a successful travel agency and picking up the Entrepreneur of the Year award to boot, than about her glamour quotient, the story provides some interesting insight into the stuff she's made of.

Contrary to the officious sounding success mantras spouted by a lot of pin-up entrepreneurs, Rita appears deeply rooted to the ground. Coming from a family of first generation Punjabi immigrants, she candidly admits that the lessons she learned growing up are what have made her the businesswoman she is. Not surprising, since the characteristics of enterprising Indians are possibly the most visible in the pockets they migrated to.

Conservative and careful in a world of shooters-from-the-hip Rita Sharma stands out as real. And that's the most important lesson aspiring entrepreneurs can learn from her success.

How to raise prices and not lose business

If there’s one worry that dogs business owners, it’s the problem of having to raise prices. Inflation is part of every business’ reality, and sooner or later you will have to up prices in order to keep the margins. But as long as customers see value in your product or service, raising prices is not going to sound a death knell for your business.

Here are some tips on how you can increase prices and get away with it:

Your business must differentiate itself sufficiently. Being the cheapest in the business is not a sustainable USP. Competing on price alone, sooner or later, some rival will undercut you. Therefore you need to make sure that your product is perceived as being different from that of your competitor, by your customers.

If you manage to set yourself apart, you will carve a special place in the customers’ mind and consequently a specific niche in the market. When you gain customer loyalty, you will find that the demand for your product will not fluctuate with price.

Focus on delivering value. Most discerning customers will look for maximum value for their dollar, rather than rock bottom rates. With value, you can always win over price.

Target the right people. Don’t chase the entire world when trying to sell. Especially in B2B businesses, 80% of revenue comes from 20% of clients. Focus on developing high value buyers, as they are less likely to be swayed by increasing prices.

Invest in your customers. Don’t forget to build and sustain relationships. That is what draws your customers back to you time after time. A good product must be backed by exceptional service, because that is what secures loyalty.

Time it right. Don’t put off the decision until it reaches flashpoint. If the competition is raising prices, take the bait and follow suit. It is best to increase rates with the herd, rather than lag behind and then stand out for being the only one to do so.

Having the older and wiser in your workplace

Most business persons will acknowledge that they owe a lot of their success to their employees. Human resources are among the foremost and most expensive resources, and are notoriously hard to build and nurture. While ballooning wages are always under the accountant’s scanner, a business cannot afford to compromise certain positions which require specialized skills and experience. This is where hiring senior part time workers could be a win-win for all.

The aging of population in the developed world and the frenetic growth of developing markets have both created a shortage of able bodied people that industry can draw upon. This has resulted in an extension of retirement age in the former case and recruitment of retirees to fill certain positions in the latter. All in all, hiring older workers on a temporary or part time basis offers several advantages.

The benefits of using temporary help are not unknown. As a business manager, you might have recruited summer trainees, employed contract workers or taken on temp staff for the duration of a short project. But when you take on part-time senior workers, you can deploy them in high impact jobs and in crucial positions since they carry a wealth of knowledge and wisdom. Since seniors are not looking at building a career, your business is spared the weight of large staffing costs in the long run.

But that’s not all. Hiring older people has other merits too. Their innate sense of responsibility means that they can work independently, without supervision. You will also be pleased to know that they value time more and are therefore less likely to be absent or late. To top it all, seniors usually have strong work ethics.

If you would like to hire senior workers on a part time basis in your company, take care of a few details, to maximize results.

Offer them the flexibility to choose their working hours. A lot of older people will not want or be able to handle a stressful sixty hour week. Also, assign tasks that don’t go beyond a few weeks to part-time senior workers, since they may not be in a position to commit for a longer period. Think of them as consultants instead.

Be sensitive to their needs. Just like you provide a crèche to ease the burden of young mothers, ensure that the older personnel have a comfortable working area and a place to rest.

Treat them with respect. A heavy handed approach is not likely to go down well with any employee, least of all the older ones. Watch your words around them. At the same time remember that older, experienced people pick up new tricks pretty quickly, so don’t assume that you cannot expose them to new technology or methods.

On the flip side, hiring seniors might create some conflict among other regular employees, or go against the company’s retirement policy. Consider these implications before you act.

Ways to manage the business cycle

Managing the business cycle is one of the biggest challenges that entrepreneurs can face. And there is no escaping it.

Given the globalized nature of business, events in far shores can make a big impact on your business, let alone the more predictable seasonal variations. The recent sub prime crisis in the United States is an example.

Not being prepared to withstand such vagaries could well mean the end of the business. Therefore, for a business owner, it is very important to learn this lesson early on, lest he or she is forced to do it the hard way.

Here are some ideas on how a business can be better prepared to handle the ups and downs of its business cycle.

One must learn to anticipate, although that is easier said than done. Many businesses have been caught unawares by an “unexpected” recession. Since businesses are highly interwoven, even developments in far flung corners have a way of creeping up on you.

It is very important to stay abreast of major economic trends, track regulatory changes and stay clued into the goings-on within your industry. If you can afford it, and your business justifies it, hire someone who can forecast.

Rethink capital expenditure – that does not necessarily mean cut back. In the face of a downturn, the conservative may defer capital investment; the proactive may go ahead in order to gain a first mover advantage when the economy recovers. Naturally, the decision depends on your actual circumstances.

You will also have to devote careful thought to how you will manage inventory closer to a recessionary period. Being saddled with piling inventory is no joy, but neither do you want to be caught with no product to sell when demand picks up. The inventory decision will also be influenced by the nature of the product (perishable/ seasonal) and production compulsions (minimum run). If you can store your product, it may be worth negotiating better terms with vendors in return for maintaining off-take in tough times.

Continue to advertise. This is the first casualty when business is slow. Sadly, most decision makers forget that advertising is an investment that can help maintain your business in the customers’ field of vision. During recessionary times, advertising rates go down too, so you can secure better visibility for your money.

Reassess your staffing needs – again, we don’t necessarily mean downsize. Obviously, employee headcount will vary with the business cycle. However, do remember, that during off season, the labor pool overflows. If you have been struggling to find the right people, you might get lucky during the slow season.

India 'one-person company' proposal

Business Standard reports that the draft Companies Bill 2007 has proposed a new entity called one-person company (OPC) that will be a private limited type of entity for an individual promoter. Currently, many individuals conduct business through proprietorship or partnership entities - both these forms have simpler compliance requirements but pose unlimited liabilities on the promoter(s). The OPC is expected to provide individual entrepreneurs the flexibility and low cost of proprietorship/partnership concerns while restricting their personal liabilities similar to a private limited company.

This bill is being studied by various departments of the government and if approved would go to the Parliament for legislative approval at some point in the near top medium term future.

This is a positive move for business people and will boost entrepreneurship in India.