By Vinod Menon, CEO & Director, Citrus Ventures
Vinod Menon, CEO & Director, Citrus Ventures
I distinctly remember learning the gospel truth that businesses should invest capital into opportunities that generate profits and eventually maximise shareholder value. Circa 1990 armed with this knowledge and a new liberalised environment, Indian entrepreneurs from sectors as diverse as Banking, Software, Pharmaceuticals, Telecom, Automobile and Components & Infrastructure raised capital from shareholders. Over the next decade all of them grew exponentially with strong profits. In the process, these companies delivered highest value to their shareholders. A new breed of entrepreneurs started arriving by mid 2000’s to provide services on internet, thanks to the telecom and software revolution unleashed by the 90’s entrepreneurs. These entrepreneurs were providing services around niches including matrimony, ticket booking, yellow pages, payments etc. This article would focus only on the profit making value creator companies and not on the irrational valuation cases, which may turn profitable.
How did they succeed in creating a market for themselves? How can we also grow our company exponentially? How can we maximise shareholder value?
I have watched these companies, interacted with their employees, customers, service providers, taken their services and formed my own 6 strategies for exponential growth and building value.
Know your domain
The basic rule is not to venture into a domain that you have no experience in. Domain knowledge here refers to hands on experience at the highest level in building the product or selling services. Every business has its own unique macro environment strewn with competition, regulations, capital providers and people who are setting the market place. A good knowledge of the ground rules helps you in achieving excellence and customer loyalty. Once you have started off your business, be part of peer groups and industry associations to know what is happening around you and look for opportunities to collaborate.
Set a road map
Business is like a voyage and a road map essentially helps in articulating whether you should reach your destination.
Whatever be your road map, it helps you to identify the capital you need to operate the business, the infrastructure required and the skill sets required from people for the business. The most important part of the roadmap should be short distance milestones. It will help you to hold on to the right course or if you are straying to do a course correction.
Build a team
Rambo’s time is over. You are not fighting the dirty warlords in deep jungles any more. Today’s business environment is akin to Star Wars. It is a near perfect market with customers who have information on their finger tips, no monopolistic position and relatively predictable price point. Within this constraint if you have to win and retain the customer you need a team. To build a team:
Stay lean and mean
When you recruit, invest into building a team that has the energy and commitment to achieve the set objective. Capital is a scarce commodity and should be conserved for the long haul. As a country, we have transformed into a tiger economy by being the outsourcer to the world. There is a lesson in it. Whatever services can be outsourced without compromising on the value proposition to the customer should be outsourced. When you outsource, don’t enter into pension kind of fixed price agreements, always keep a good value portion variable to the performance. This way you are not expensing the whole amount-- the variable part is just a share in your profit. With shorter business cycles in a completely connected world, you cannot afford to keep increasing the headcount.
Know where the money is going
You should have a clear knowledge of where capital is committed and what is the cost of operating business on a monthly basis. This is like the fuel gauge that will tell you if you are good for the entire journey. Accounting and presentation of financial information may be complex but cash flow is simple. Master the cash flow of the business and if you anticipate any period of slow down or higher spending, then you can plan for having additional capital or arrange an alternate source to avoid stoppages.
Trust is of gold standard in business and a very rare commodity. In business, trust is created by:
Trust is very important not just with customers; it is equally important with capital providers, employees and the suppliers. As an entrepreneur, I am in pursuit of exponential growth for my business. These small steps are the new gospel for my business.