Globally, eight out of 10 start-ups fail in the first 18 months. Once a venture fails, it is not only a loss in terms of revenues or the money invested, but most importantly it is the loss of time. Of course, one would say you could learn from your blunders, but the question is how many times.
Entrepreneur India met Ashutosh Kharangate, Managing Director and Co-founder of Mangal Advisory Services, to understand how a venture can survive for the first 18 months and prove it is not just another start- up:
During the entire conversation, Kharangate could not stop stressing on how important it is to know your market before starting any venture.
“If you fail in the first 18 months, it simply means you didn’t study your market well before entering it. When you start your research, you know the size of your market and understand your competition,” he said.
“Question yourself — is it worth the time and money to enter the market?” he said and cited the example of agarbatti business to establish his point.
“The size of the segment is nearly INR 2 crore and there are approximately about 10 players. So, each of them will be getting about INR 20 lakh of business. If a new player is entering the market, the business will come down to below INR 20 lakh per player. So does that number gives you the happiness to enter the business?” he plainly asked.
Emphasizing that the dynamic market will change from time to time, the MD said, “One must remember that the first move advantage is always good since you are way ahead of the learning crowd. But, at times it is good to be behind to learn from somebody else’s mistake.”
For all those entrepreneurs who are aiming to set up a stable business, Kharangate’s message is loud and clear: “Understand the nature of your consumers and its capacity to pay. There is a difference between being rich and the capacity to pay. It may not be necessary that cities that offer good standards of living are home to a population that is willing to pay.”
Attention to Advice
The expert businessman was particularly critical about the ‘know-it-all’ attitude of most of the entrepreneurs. “After a little bit of success gets into the mind, entrepreneurs do not seek advice,” he said and added, “Investors are investors because they have made good money from their multiple channels. If they are advising you something, it is for your own good.”
The key idea, according to Kharangate, is — “Listen wisely to your investors and team members.”
“When you get the ball rolling, do not jump into the idea of funding. First test the product or the market in your nearby area. Secondly, know what your cash flow needs are,” he stressed.
Kharangate explained that cash flows are not just the cost of setting up an office but also your day-to-day capital needs to run the company.
“For bootstrap funding, start with your personal funds or family funds. It is always easier to answer your family and friends against answering someone else,” he suggested.
His last words of caution were, “Remember when you walk up to investors, they will ask for traction. They will only be interested in your venture if you could tell them — from the time you started till the time you reach out to them — what have you done in terms of growth? This growth can’t be on papers, they are real numbers.”