Business Mistakes Made by Vijay Mallya

Vijay Mallya was termed as the Richard Branson of India at one time. He was flamboyant billionaire having an unstoppable business empire at one time. Today, he is being chased by a number of banks and the judiciary to recover the money owed by him. What happened which led to this complete transformation in his life. Ritu Kochar from Entrepreneur.com highlights the mistakes he made during this time.

'When your business doesn’t make a profit for 8 years, take the hint

This goes completely above me. Once the second-largest airline in India, Kingfisher Airlines was never once able to earn a profit and it still went on for 8 years. In 2009, the net loss went from Rs 213 crore in 2008 to Rs 1,317 crore. And that didn’t stop Mallya from continuing. His delusional optimism of reviving the company went to such extent that the accumulated losses as of March 2013 stood at a whopping Rs 16,023 crore. He did cut flights from 300 to 110-125, but it never reached the skies Vijay was so hopeful about. 

Lesson- Know when to give up. Hard work is appreciated but when it doesn’t yield results, you should know when to stop.

When bankrupt and you see some money coming your way, how about paying the employees first

Employees maketh the company.

Sure, employer will tell what work to do but it’s the hard working members of staff accumulated over the years that will make the work happen. At the end when company gets a big profit, it’s the owner that gets it. An employee gets his regular salary.

Given that and how indebted Mallya was by 2012, it was his inability to pay salaries to 1500 employees that stopped the beleaguered airline to continue operating. When asked why he couldn’t he simply answered, “I don’t have money to pay your salaries”. Okay, believable. But then Diageo acquired 27% stake in United Spirits Ltd. for Rs 6,500 crore in 2013, but no lender or employee was given a single penny, without any reasons stated. Mallya had his own wish list to fill. He spent Rs 9.5 crore to get Australian all-rounder Shane Watson to play for his Royal Challengers Bangalore Indian Premier League cricket team this season. In December 2015, his birthday became a gala with 200 people and featuring a firework display and performances by Sonu Nigam and Spanish pop star Enrique Iglesias worth 3.5 crore. The whole party cost him more than $2 billion. Money well spent, eh?

Lesson – If you’re in debt, a monstrous one, and your birthday is approaching and you have no plans to give salaries to your employees, it’s probably better to take it down a notch.

Do not mess with the banks

If Mallya finds it hard to think in a reasonable business-like manner, he should probably think about the welfare of people as a member of parliament. But how dare we think about him thinking about the welfare of people who pay taxes to state run banks when he can’t even pay his own employees. Mallya owes Rs 9061 crore to 17 banks which include State Bank of India, Punjab National Bank, UCO, Central Bank, Axis Bank, Bank of India, Bank of Baroda, IDBI, United Bank Corporation Bank, State Bank of Mysore, Indian Overseas Bank, Federal Bank and Punjab & Sind Bank. Mallya claims to have paid Rs 1,200 crore worth of loan already.

Hoping that the airline would revive sooner or later and pay back the money, banks kept giving loans and Mallya accepted them. Finally, when things got out of hand and banks panicked, Kingfisher, was declared an NPA by most banks, including SBI, towards the end of 2011 and beginning of 2012.

The only hope for banks is if Mallya has a change of mind and decides to pay back banks from his personal wealth (Mallya has shares worth Rs 7000 crore in various companies and lot more in fixed assets). Chances of that happening seems as minimal as Trump leaving the 2016 Presidential debate.

Lesson – A stitch in time saves nine. The banks, instead of encouraging Mallya to take loans even when he was in debt, should have spent time on making him understand how bad debts can be.

Have the courage to face your mistakes

Everybody makes mistake. Mallya’s happen to be worth Rs 9,000 crore. In any case, how is leaving the country with no prior notice the best idea he could come up with? We get that he messed up big time, but how about giving an explanation first. We don’t mind him taking all his extravagant vacations but expecting people to believe that he wants to go to his country home because he wants to 'see his children' is either him considering people are stupid or a bad excuse made in haste.

Lesson – Be smarter about your mistakes. They’re going to be out in the open at some point. The better path will be to accept them and save the drowning boat. Right your wrongs always. '

Build a Prototype First

A good prototype is very important for a startup as it is the first offering by the startup which gets to interact with the target market. The most important deliverable we can get from this is good, authentic market feedback.

A good prototype should

: convey exactly what the startup intends to do. Never confuse the product by adding features which do adhere to the core business idea. We tend to add more features to the product so as to make it more acceptable by our TG. For example, if I am trying to create a website to sell premium teas, I should not add other beverages to increase acceptance by the market. The aim of the prototyping stage is purely to get a feedback for the core business idea. So build a prototype which does exactly that.

: be a minimal product which can be easily modified. Sorry for being repetitive but the aim of prototyping is purely to get market feedback and make necessary amendments before going full steam ahead.

Prototyping is really important and is a stage which a lot of us tend to ignore completely. We go with our gut and end building a final product without taking any market feedback. This leads to a waste in resources as once we enter the market and get feedback, making amendments to a more complicated product is a much more costly affair.

Never Be Conservative With What You Can Achieve With Your Business

Andrew Carnegie was the founder of the legendary Carnegie Steel Company, who made a vast fortune only to give it all away, becoming the first great entrepreneur turned philanthropist in history, a tradition that was followed by his contemporary, John D. Rockefeller and much later by Bill Gates and Warren Buffett.

Carnegie always believed in running his business top capacity and not bothering about the margin. He was always clear to his managers that he wanted his steel factories to operate at full steam, regardless of highs and lows of the economy or other factors. His goal was to be the biggest and the most dominant steel producer in the country, regardless of any external challenges.

What can you learn from this? Greatness can never be achieved if you are too moderate with your ambitions or too conservative. To achieve greatness, you must stretch you capacity to the maximum. 

Don’t worry about temporary pitfalls; always focus on a larger goal.

(taken from http://www.liverix.com/4-business-lessons-you-can-learn-from-andrew-carnegie)

Working with your Spouse

Should you or should you not? A question which may not have a same answer for everyone, but the reasons in favor and against this decision seem more or less the same in all cases.

My wife and I were working together in Beveragewala, although she was not formally a part of the business. She was involved in the daily operations and looked primarily after the packing/dispatching activities. Some of the experiences I had because of this and would like to share are as under:

POSITIVES

Better Understanding: Since we both understand each other very well and also the business, we were able to work together with a common vision.

Shared Passion: Since we both spend so much of time together, our individual passion and energy used to rub off on each other. Working late hours with no resentment back home is a big positive :).

Better Feedback: This is one positive I felt was very good for the business. Your spouse will not think twice before saying anything to you. My wife, from time to time, pointed out a lot of mistakes we were making and she was quite candid about them. A lot of the time we see team members not being very open and honest to each other because they feel uncomfortable and having a fear of being misjudged.

NEGATIVES

More Conflicts: There used to be more disagreements between us as we started spending literally 24 hours with each other. Space is required to analyse matters individually so that you can have a more unbiased view of things.

No Personal Life: Since both of us were working in Beveragewala and extremely passionate about it, we used to discuss it even when not at work. In some sense, we did not have a personal life while Beveragewala was running. This, though, is a more work-life balance issue.

Casual Attitude: Since the only person you need to answer is your spouse, you may tend to be more laid back and casual in your attitude towards your responsibilities at times.

To conclude, I feel there is no 'one size fits all' solution or suggestion. The best thing is to look at the pros and cons in your case and take your call on this.

Good Clothing - Better Performance

A recent study conducted by researchers at Notre Dame, the University of Kentucky, and Penn State found that using brand-name gear can provide a noticeable placebo effect that could boost performance. In other words: If you’ve ever felt like you give better presentation when wearing an expensive designer suit, it might not be your imagination.

In the study, researchers found that simply being told you were using a Nike golf putter over a no-name club improved participants’ performance by about 20 percent. And this effect isn’t limited to the physical: The researchers also found that subjects who wore earplugs while taking a math quiz did better when they were told they were using high-performance 3M earplugs. The performance bump for this part of the study was also about 20 percent.

“Some people have a power suit that they put on for important presentations, or they have some special cufflink that they put on to bring them luck,” said Frank Germann, Ph.D., an assistant professor of marketing at Notre Dame University’s Mendoza College of Business who worked on the study. “I think our research would suggest that engaging in that kind of behavior might actually work.”

Germann and his collaborators — Aaron Garvey of the University of Kentucky and Lisa Bolton of Penn State University — say that brands have the ability to boost users’ confidence and lower performance anxiety. “When you think that you have this performance brand, you have higher-state self- esteem,” Germann says. “As a result, you feel better and your self-confidence is elevated at a certain task. In turn, you're less anxious, and because of that, you're performing better.”

(taken from businessoffashion.com) 

The Story Of My Life

Everyone has a life story that they tell themselves and other people. What's yours? Like the college student, many people play a certain story in their heads. Every time we tell our life story, whether it's past or present, we believe it more and more. Don't relish in poverty, unless you want more of it. Too many people celebrate their broke story in order to seek acceptance from other broke people. 

To change your life story, focus on whom you're becoming. You might not know exactly whom you'll end up as (who does?), but you can focus on telling yourself and others about who you want to become. Sometimes, I'll ask the universe to reveal the truth about my path and what I can do to materialize those objectives. Once you create your life story, become obsessed with it and keep feeding into it.

(advice by Daniel Ally on www.entrepreneur.com)

Hiring Interns

Hiring good interns has become an intrinsic part of any startup's growth path today. With all startups wanting to cut excess fat and wanting to keep their setup as lean as possible, hiring interns is the way forward.

Interns are generally hired directly from University and work on a host of projects such as a new product launch, generating content for the website/blog, marketing campaign, doing backend work etc. I found this interesting infographic on yourstory.com on what the typical day of an intern looks like.

The benefits of hiring interns to a company include

Testing before Confirming: Though a lot of interns are given full time positions in most companies, the companies get to test them out before offering them these positions. Internships work as a 'try before you buy' kind of a situation for the company.

Cheaper: Interns are paid much less than full time employees of the company, thereby reducing the costs for the company.

Thus it makes it imperative for companies to have a solid internship programme. Also companies should look at the following techniques to get good quality interns.

Internships Portal: A lot of portals have come up in this space. Companies should establish a good presence on them to get visibility amongst the pool of people looking for internships.

Links with Universities: Companies must develop good links with leading Universities not only for recruiting full time employees, but also for getting best interns from them.

Use Cases of your Product

No matter how good you feel your product is, customers should be clearly told why they should use it. When building your product and business plan, it becomes very imperative for an entrepreneur to clearly list down the various 'use cases' he/she feels might exist. Listing down use cases will help entrepreneurs identify how the product may get used by certain customers, and will assist the entrepreneur in building features of the product accordingly.

For example, in Beveragewala, we had a strong use case of people buying products which were not available in their location. Girnar is a popular chai which is available in Maharashtra and thereabouts. We, through our portal, ensured availability of all its SKUs and saw great demand for it. We also heavily promoted the fact that we had other such local brands from Darjeeling, Assam, Nilgiris etc.

Defining a use case helps you identify your exact customer and the usage, which in turn helps you structure your offering and tap into the target market. 

Dress Appropriately

This may sound weird but I believe the way we dress says a lot about who we are. An entrepreneur daily attire speaks a lot about the culture of the company he/she wants to build.

Prior to Beveragewala, I was working with a K-12 school in Gurgaon. There were 250 odd people in the team there. Mostly every one of them used to be dressed up very formally, men wearing shirts properly tucked in, trousers, women in sarees or formal suits etc. The dressing complemented the formal culture that existed there, with everyone addressing each other as Sir or Ma'am, timings of entry and exit of the staff were very strict, every little thing was documented etc..  The management had made an effort to build this. I learnt from this that the management wanted to build a formal atmosphere in the office and was successful in doing so, which was also clearly visible in the clothing of the team there.

Similarly, the culture we build through our clothing also emanates to people outside the organization. If I know I am to meet someone from American Express, I would expect someone dressed up very neatly and formally. On the other hand, maybe someone from a startup like Facebook can be expected to be seen in a pair of jeans and a t-shirt (it's an assumption).

Hence, it becomes very important to dress up appropriately, by appropriately I mean wearing something which actually reinforces the culture of the company and unites the team together.

The Importance of Challenges in our Lives

"Ups and downs in life are very important to keep us going, because a straight line even in an ECG means we are not alive"... Ratan Tata

The downs are the periods where we learn and grow as people. We can relish the ups only because we have experience the downs. So take up challenges as they come, learn from them, overcome them and keep moving!

The Art of Pitching!

Just having a detailed operational plan is not enough to impress investors, pitching it right plays an important role. Some pointers should be kept in mind while pitching.

Know your purpose – Don’t bore your audience with excessive details. Use your pitch to generate interest.

Concentrate on the essentials –  Keeping it short doesn’t mean you skip the important stuff. Highlight on your strengths and core focus areas. Do not spend too much time on talking about the market and consumers, instead focus on how your startup will solve a particular problem or demand and with what products or services.

Explain the plan – Tell them your plan, tell them where they and their money will be going and how it will come back to them.

Introduce your team – It is important that people see your start-up as a well-rounded team, rather than a smattering of disconnected talent. Showcase your people as a team of like-minded individuals sharing the same vision.

Be yourself – Be your authentic, 100% real, no-bullshit self. A startup usually grows from an innovative idea and the audience would love to see that it comes from an original source.

Believe it or not, take care of these points and, you will surely impress your investors!

(taken from eazyhire.in)

Customer is King!

We don’t realize that our business is structured around 1 stakeholder, i.e. the Customer. And if it isn’t, it’s should be. The customer determines how a business is structured and how it operates.

Marketing: Our entire marketing effort is based on our customer’s behavior. Looking at our customer’s activites, we should analyse what channels will give us maximum visibility and should use the requisite tools to maximum sales. For example in Beveragewala, we knew that one large set of customers would be health conscious people. So we tried to brand ourselves in health blogs and sent our promotional material through affiliates operating in the healthcare space.

Operations: Our operations and supply chain systems should accommodate our customers’ needs. In Beveragewala, we got feedback that our deliveries were quite late in general. Based on that, we started using a faster delivery service (though it costed us more) to satisfy the wants of our customers.

Business Model: Bitequest was a restaurant reservation portal and we were targeting a premium clientele for it. Hence our business and revenue models were structured accordingly.

Hence, we must realize that our business is should be structured keeping our target customer as the centre. This will help create loyalty towards our business and will make the sustainable in the long term.

Business works on Relationships!

A startup should always keep this is mind. Making a new customer is much more difficult and costs much more than retaining an existing one. Hiring a new employee costs much more than retaining an existing one. Business is all about creating and then maintaining these relationships. In startups, we often to tend to concentrate on 'acquisitions'. Acquisitions create growth. However, 'retention' is a more important formula for a business to sustain.

- Customer Relationships: At Beveragewala, in our initial days, we were only looking to acquire new customers and were totally focused on that. As we matured, we realised that repeat customers were nearly 70% of our monthly revenue month on month. We realised that besides having a budget for acquiring new customers, we must ensure that our existing ones are happy with our service and started focusing on how we could improve their experience and strengthen our relationships. We started taking constant feedback from them and acted upon it. We saw a steep growth in our sales, despite virtually no marketing budget. Our existing customers had started using our portal more frequently and also we saw organic growth in our customer base, i.e. the number of customers were growing with no marketing effort. 

- Team Building: I cannot stop emphasizing how important this is. Building a good team is one of the most difficult challenges an entrepreneur faces in this competitive environment. Finding a new team member is an expensive and highly cumbersome task. Hence, it becomes imperative for an entrepreneur to build a strong culture and bond to ensure a motivated and long-lasting team.

We should always focus on building relationships to create a sustainable organization. This also includes strong relationships with all other stakeholders which a business may have like vendors, suppliers, lawyers, auditors, media agencies etc. The rule should as far as relationships should be 'Create, Build & Strengthen'.