Champ's Blog

Creative Engineering from the Journey of an Entrepreneur.
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Posts tagged "entrepreneurship"

Dropping out from college, not knowing what to do next, a friend of mine now a music director, Chirantan Bhatt, told me he was studying Sound Engineering and suggested I go with him to Chennai to understand what it was. Back in early 2000 it was something unheard off in India especially. As most of my buddies were pursuing their MBA degrees, studying computer science abroad or working towards getting better grades to choose subjects and careers they would be accepted in next, I chose to do what I loved – exploration. Not the deep sea kind, but for life.

I loved music so much, I would give up on anything for it. I always wanted to become a musician, but couldn’t play a single instrument or read or write or even understand notes for that matter. I was never attracted to the business of it, but spent a lot of my childhood mastering tapes compiling and recording songs using various tape decks and techniques mastering them for all songs to sound the same quality and crisp. I never knew that it was a sound engineers job until I went to Chennai for a short trip.

Luckily, my father always encouraged me to do what I loved, he often told me that he wouldn’t mind me being a sweeper, as long as I’m interested and would work towards being the best in the world. After all, every profession is a respectable one and is valuable to you if you truly love it. No matter what others think of what you do. Chirantan always wanted to become a music producer. His father fought with him and pushed him to do his MBA. Chiru, lovingly and respectably obeyed, completed his MBA degree and gave his father the certificate and went to the newly opened Australian franchise of SAE (School of Audio Engineering) in Chennai to pursue his dreams.

From Columbus to Chennai in three weeks, changed my world. After spending a year bathing in hot water smelling like eucalyptus, walking around the world’s largest campus, discovering new music with a diverse set of friends, having subs by the lake and another year and a half; being haunted by ghosts at home, sitting on one side of the bus or negotiating with auto rickshawallas, bathing in chilled water under the terrace tank, not getting decent food to eat and moving in auto-pilot mode without sleep for days together.

Those were some of the best days of my life. The United States broadened my horizons and vision, Chennai taught me adaptability and a subject I loved most – Sound & Music.

I wrote songs, I produced them with my very talented buddies playing for me and I boldly scored for them, although I never tried anything brown, green or white. We got along in the studio like a house on fire, there was always a humour and jokes on even the most senseless things, just like creative minds do together.

The silent killers of growth -

“Not having a mentor is like growing up in an orphanage.” - Champ
To make work fun, only spend your time and energy doing what you’re best at. Delegate the rest to those who are best in what you need to get done.

1. Silence out of chaos. After a night out or coffee with friends and other inspiring people. Or, things done in a dis-orderly or tedious manner that can be better and simpler.

2. From needs. When you’re looking for a product and can’t find it. Then, you think of building it and then you feel that there’s a market for it.

3. Passion. If you’re passionate about something, you probably feel there are many others who’d love to join you and use what you’ve created.

What do you think?

In an age full of brilliant people today than have ever been - entrepreneurs, scientists, inventors, artists, workers, thinkers, etc.. unfortunately, most of us have gotten comfortable in our own way of doing things. And, “change” or the “idea of changing” shocks us back with an instant refute at the thought of it. But, ask yourself if you’re getting lost towards your goals on day-to-day mundane matters - here, now and where? What is there was a solution, would you go for it?

Getting there takes fundamental change. Something that gets difficult to achieve with age and maturity. But, can be easily done with practice.

Here’s when you know whether you’re working hard or playing smart?

1a. Working hard is when you spend over 2 hours commuting to & fro from work.

1b. Playing smart is when you relocate closer to your work place or your work place closer to you.

2a. Working hard is when you try to do everything yourself.

2b. Playing smart is when you hire the right people and trust them to execute the assigned tasks.

3a. Working hard is doing.

3b. Playing smart is planning and getting things done.

4a. Working hard is delivering.

4b. Playing smart is over delivering.

5a. Working hard is learning from your own experiences.

5b. Playing smart is learning from the experiences of others.

6a. Working hard is talking about your achievements.

6b. Playing smart is leveraging your achievements to help others succeed.

7a. Working hard is not chilling on the weekends.

7b. Playing smart is taking the weekends off to start the next week fresh.

8a. Working hard is running late.

8b. Playing smart is always being on time.

9a. Working hard is when you value money over time.

9b. Playing smart is when you value time over money.

10a. Working hard is being correct.

10b. Playing smart is being wise.

11a. Working hard is not taking risks.

11b. Playing smart is risk taking every moment.

12a. Working hard is copying others and trying to out-do them.

12b. Playing smart is doing your own thing.

13a. Working hard is doing things their way.

13b. Playing smart is doing things your way.

14a. Working hard is leaving office late.

14b. Playing smart is leaving office on time.

15a. Working hard is allowing others to take over your day.

15b. Playing smart is doing everything you planned for the day.

16a. Working hard is when you put in more effort.

16b. Playing smart is when you bring in more value.

What else can you think of?

Life is like a tennis point. If you’re not winning, rather relax and change your technique of hitting than getting frustrated and letting it go.

Digg at USD 60 million.

These guy’s company, once valued at USD 250 million in June, 2006; after starting up with $ 6000 seed capital in 2004 was sure a success story back then. Only 6 years later, the company gets sold at less than $ 500,000 and one of the founders gets employed at Google (who had once offered to buy his company for USD 200 million).

Now, that’s the Story of Digg.

Most largely funded eCommerce companies in India seem to be going the same way. Cost to acquire a customer is Rs. 1000 - Rs. 3000. Average first gross sale per customer is Rs. 500 - Rs. 1200, net margin is less than 5%. i.e. Company gross earning per sale Rs. 25 - Rs. 60. Of this, company bares taxes, shipping charges, marketing costs, salaries, etc. etc. costs.

And yet, investors and entrepreneurs are bullish about these models to scale.

Oops! Does this make any sense to you? - No?!

Let me tell you how it makes sense to investors and the other folks (more investors).

Entrepreneur (E) starts a small online venture. Sells stuff for dirt cheap, even below cost at times. Obviously, customers flock to his store. Seeing the number of customers come in (traffic), an investor puts in a little money (assume Rs. 10 lacs) for E to advertise and get more traffic.

Assuming, E’s store advertises on Google and other networks, spending Rs. 20/click, he gains 50,000 new visitors. Since he sells stuff for real cheap, his conversion rate is high. That means, of 50,000 visitors, 5000 (10%) end up buying.  The average sale per visitor is Rs. 300, yet, as the website is new and sells books, cd’s, t-shirts, etc. Total money collected is 5000 x Rs. 300 = Rs. 15,00,000/-

E tells the investor that of these 5000 customers, 4000 will shop again. This time, they will spend a bit more. That is, 4000 x Rs. 500 = Rs. 20,00,000/-

And, they will shop 4 times during their lifetime, that is 20,00,000 + 20,00,000 + 20,00,000 + 15,00,000 = 75,00,000/-

E also tells the investor, that each of these repeat customers will influence other customers. So, 4000 customers will multiply twice to become 8000 customers. That is 8000 will generate a sale of Rs. 1.5 Cr. in their lifetime.

Aggregating the entire business model, the E and the Investor on spending Rs. 10,00,000 have made a sale of Rs. 2.25 Cr!

Sounds good?

Not yet!

Now the company earns 5% of 2.25 Cr = Rs. 11,25,000 of which Rs. 10,00,000 was spent  in advertising, balance Rs. 1,25,000 of which part goes in shipping, packing, taxes, salaries and other expenses.

So, they put a value for each customer - 2.25 Cr / 12,000 customers = Rs. 1875.

With this value, they find another investor and tell him that if he invests Rs. 1 Cr. like the investor did of Rs. 10 lacs, he will have 12,000 x 10 = 1,20,000 customers, each valued at Rs. 1875. Can you imagine what his company worth would be?

Reverse it!

So, if eCommerce companies in India, report a sale of Rs. 500 Cr to Rs. 1200 Cr per year, are they really making money?

Nope, it only depends on when and at what price do you exit. At some point, unless you own patents like Amazon does and other intellectual sources of income, your bread will always just be bread. It may get a bit sweeter, but will never turn into cake.