BEING AN ENTREPRENEUR - 1
Who is an Entrepreneur?
Well, the dictionary says that an entrepreneur is a person who organizes and manages any Enterprise, usually a business with considerable initiative and risk. As simple as the meaning might get, the life of an entrepreneur is next to a roller-coaster ride. I'll hereby take you on a ride on the life of an entrepreneur in general which will be presented as a series of posts.So let's get going and start with how an entrepreneur is born?
When life gets mundane, and when there is an element of excitement missing in life each day, one loses the purpose of living and would not find a meaning to his life. At this juncture, people who fight back with the circumstances, family and the society with zeal and passion to add some excitement to his life, the road that is less travelled upon is chosen to explore and is set on an adventure giving birth to an entrepreneur who would strive to provide some meaning to his existence and value addition to the society at large.
Being an entrepreneur gives constant adrenaline rush each moment. An entrepreneur develops two sets of the audience for himself. One that supports and gives appreciation for the establishment of the idea and for the brevity, the guts that are required to break the shackles of commonplace thought - leaving a regularly paying job and entering into a risky business. The other portion of the audience, that staunchly provides criticism and stern opposition, trying desperately to bring you down. A healthy combination of both the sets of the audience will put you on your toes each day and keeps you motivated to sail through the storms.
How did the business of 'The Business' start?
It all started with the origin of human beings on Earth. According to climatic conditions, the fertility of the soil and the availability of water, the crops that were harvested in each area were different. For instance, an area richly harvests watermelons and another area harvests mangoes. Individually, these areas cannot cross produce crops. However, there is a demand for the fruit in the other area too where it is not harvested. So, the barter system took its existence for the exchange of the produce between the communities of both areas.
But then, is one unit of watermelon equal to one unit of a mango? This questioning has led to the idea of money. Minting money has started with the erstwhile copper coins to provide a common medium of exchange and to value the goods according to the effort and resources that are required to produce that particular good, size, quantity and the final value that a person who consumes the product derives out of it. More the value more is the price of the good.
The margin that is earned on a product or a service over and above the inherent costs is the profit for the business and is required for the survival and the continual running of the business. This had been the core concept of business since ages.
However, this core concept of business seems to be over-written by the modern day entrepreneurs. Business for them involves constant 'Money-burning'. For instance, let's take an example of Hush Puppies shoes that I had bought recently from a prominent e-commerce site. The MRP of the product is Rs. 5000/- However, I could buy the same pair of shoes online at a much lower price of Rs. 3000/- Isn't it amazing to get the product at a whopping discount of 40.0%! Well, as enthusing as it may sound, have we ever thought of how are we able to avail such discounts which are next to impossible to avail when bought in a store? It is the business that is bearing the cost of the discounts enjoyed by us. The raw material cost, procurement cost, designing, manufacturing costs all sum up to Rs 5000/- which also includes a margin for Hush Puppies. The e-commerce site pays the brand it's due worth for selling the product through its channel. However, the point that needs to be noted here is that the e-commerce business is actually not earning any margins on the product, instead, it is incurring additional costs such as fool-proof packaging, online presence, and digital marketing and the logistics of the product till delivery. If the costs of the same are included, the cost to the e-commerce site is much more than the original MRP. In the urge of acquiring customers and to do business in volumes, the business is taking the brunt by burning cash. But as a customer, how are we so assured of the quality of the product? Only time shall tell that. In this whole transaction, one thing is assured for sure, that neither the customer nor the seller understand the true worth of the product. The value of the product is actually diminished in the minds of the customer. Just think about the difference in treatment that you give to a similar pair of shoes bought alongside the road and the ones that are bought in a branded store. The core value of the product and it's worth is at stake.
Thus, burning cash has become a trending sutra by way of mega sales, promotional discounts. Thus, burning cash back and so on for startups to stand out among the rivals and attain growth. Off late, this has become a reason for the shut shop of many budding entrepreneurs as they are unable to get the funding to match up to their cash burn rate (the rate at which the company is losing money) and subsequently failing to meet the expectations of the investors too.
Thus, burning cash has become a trending sutra by way of mega sales, promotional discounts. Thus, burning cash back and so on for startups to stand out among the rivals and attain growth. Off late, this has become a reason for the shut shop of many budding entrepreneurs as they are unable to get the funding to match up to their cash burn rate (the rate at which the company is losing money) and subsequently failing to meet the expectations of the investors too.
This is also the central reason for the giants of e-commerce sites like Flipkart, Snapdeal and its likes who are still finding it difficult to break-even after being operational for years in spite of availing series of fundings. This concept of 'Money-burning' essentially does not consider the value of the time and resources of the seller. Clearly, the success of the idea of an entrepreneur depends on how sturdily the establishment has been set up on the back-drop of finances. But how would the budding entrepreneurs work towards their ideas, who have left their jobs in the pursuit of becoming a successful entrepreneur if the concept of cash burning persists in the business?
To bridge this gap, the concept of 'Funding' has originated. We shall brainstorm about the challenges of an entrepreneur in availing Funding for the business in the next part of the blog series.
To bridge this gap, the concept of 'Funding' has originated. We shall brainstorm about the challenges of an entrepreneur in availing Funding for the business in the next part of the blog series.
PK
