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Quick tips for aspiring entrepreneurs
Merril Diniz
August 21, 2006
On a recent trip to Goa, I decided to stop spending and start
investing for a change. My father quickly made an appointment
with his financial consultant to help me chalk out a good tax
saving strategy before I changed my mind. When I strolled
into the consultant's office, I was surprised to meet two
young guns instead of a middle-aged veteran.
Suraj Betkikar, 27, and Arjun Rebelo, 25, manage Milestone
Financial Consultants in Margao, a small town in south Goa.
Before setting up shop in January 2005, Suraj worked with ING
Vysya Bank in Goa, while Arjun was with ING Vysya Mutual Fund
in Mumbai. Both completed their MBAs in marketing and finance
from the Goa Institute of Management in 2003.
The former classmates proved to be an enthusiastic duo,
suggesting several combinations before we finally zeroed in
on what to do with my money. As neither Suraj nor Arjun come
from business backgrounds, I wondered what prompted the two
to swap a regular paycheck and job security for the hassle of
launching their own enterprise.
Choosing the right business
My first question to them was, why? Their reply: "We make the
rules, we decide when to break them."
I asked them to elaborate. "During our MBAs and working days,
we regularly thrashed out business ideas," they said. "We
were both connected to the investment sector and realised the
time was right to set up a consultancy. With the economy
growing, the broking and investment services industry was
just beginning to boom. We identified Goa, which didn't have
too many organised and professional investment service
organisations. Most people were uneducated about financial
products; the concept of financial planning was alien to
them."
Betkikar and Rebelo wanted to offer a services approach
instead of a product-based one; i.e. they planned to offer
financial planning and advisory services -- to become a
one-stop shop for all investment needs of the average
middle-class person. They also have a private limited company
called Money Factor Financial Services, a franchisee for
India Infoline Securities, through which they provide broking
services.
Choosing the right partner
The duo believe that the main reason for getting into a
partnership, as opposed to setting out on your own, is to
make doing business easier. It is lucrative to join hands
with the right person, provided you and your partner share a
common goal. They say you must also be equally confident of
your ability to deliver.
Ideally, your expertise must lie in different areas so you
balance out your partner's weak points. For instance, Arjun
handles 70 per cent of the marketing and PR because he is
good with his communication skills. Suraj manages 70 per cent
of operations -- back office management, the company's risk
management, accounts, paperwork, etc. However, Suraj also has
his own client base. Both chip in when the other is absent.
They add that you should get along as friends, and that
communication on every level with your partner is a must.
Arjun and Suraj communicate on a daily basis, so both are
completely in the loop about any developments. "Does it get
competitive between the two?" I ask, out of curiosity. " Not
at all," says Arjun with conviction, adding on a lighter
note: "Someone told me that, as long as the moolah keeps
rolling, there's nothing to fear."
Which brings us to that all-important word: M-O-N-E-Y.
Money matters
Every aspiring entrepreneur wants to know: What was the
initial investment? How did you get funding? Arjun says the
initial investment was Rs 25 lakh (including the cost of
office space). They coughed up the amount by digging into
personal savings and borrowing from their respective families
and relatives. "This way, we didn't have to provide
collateral for a bank loan and we had the flexibility, in
terms of time, when it came to paying back the money. This
reduces costs and pressure considerably. We could have gone
to a bank but, since our capital requirements were not too
much, we decided to keep that option for expansion at a later
date."
Most of this money went into infrastructure, i.e. office
space and equipment. A lot went into regulatory requirements
(deposit with Indiainfoline, licenses, etc) and working
capital (salaries, bills, office maintainence, etc.).
"Initially, you may have to wear the hat of a peon, cleaner,
office boy and secretary to keep costs low. Secondly, you
need to have a budget for everything and stick to it,"
advises Arjun.
"We broke even on monthly operation costs within seven
months. We are still recovering our capital expenditure
though. In terms of profits, we each take home a fixed salary
from the firm. Anything that remains stays with the firm for
future investment."
Top hurdles
Suraj says he has already crossed the biggest hurdle --
making up his mind to take the plunge. "We had to resign
ourselves to not getting a paycheck in the first few months,"
he says.
Cutting through the bureaucracy was also a major hurdle. This
involved getting permissions from local authorities, finding
a suitable business premise, setting up the office, getting
registered as agents with various mutual fund and insurance
companies. "The local authorities and infrastructure are not
very conducive to setting up an enterprise. Things that
should have taken a week took a month. For instance, getting
a phone line took lots of time and several follow-ups," says Arjun.
Yet another problem: finding good people. "We have been
trying to expand and want to look for the right people
because, ultimately, our staff will project who we are," he
adds.
The duo maintain that attending B-school paid off. And they
swear by Porter's 5 Forces Analysis and SWOT Analysis.
Clients and competition
Personal contacts and references were what brought in the
first clients. Even today, 90 per cent of clients come
through references. 10 per cent come through advertisements
placed in local newspapers. All clients are salaried or
individuals with a business in the age group of 23 to 70 +.
"Servicing corporates is a different ball game; they require
a lot of servicing and it is not as rewarding. We do not wish
to be in this space currently," they tell me.
How does one cement the customer base? "Think long-term. Keep
your customer's needs in mind, even if it is not immediately
profitable," they say. Know your customers, their families,
their businesses. When equipped with this knowledge, you can
relate to them and understand their needs better. You can
keep your business professional, but never lose the personal
touch. In other words, genuine customer service is received
much better. When customers trust that you are doing your
best for them, they respond with more business and also pass
on referrals. "Our best advertising is through our own
customers. In fact, we have customers who have made an entire
sales pitch for us, " says Arjun.
Since the launch of the company, the competition has become
stiffer. When they first set up shop, there were about nine
brokers in Margao, and a smaller number of agents and banks.
Now, there are more than double the number of brokers, agents
and banks offering with the same services. However, according
to Suraj, many of these companies are target-oriented. "We
prefer to grow slowly but steadily, by building up a
rock-solid client base," he adds.
As they say, the client is king. And these young
entrepreneurs adhere to that mantra religiously.
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