Increasing profits under limited resources

TL;DR decreasing expenses by even slight margin can increase profits exponentially as opposed to increasing price.

 

At times it gets very expensive or hard to grow due to multiple restrictions. Example could be running a hotel which has limited number of rooms. There are 2 very obvious ways to increase profits

#1 Increase the revenues

#2 Decrease expenses

Mostly people will prefer to go with #1 to grown profits. #1 looks like an easy option where you just increase the rents by 5% and boom, you have grown by 5% but we ignore that there are extra cost associated with this increase & wont result into 5% growth.

Now consider #2, where if you are able to decrease the expenses by just 1% of the total revenue, profits will grow by 10%.

*  Supposing gross margins = 10%

2016-03-06T15:47:39+00:00September 24th, 2015|Categories: Startups|2 Comments

Don’t look at the wrong Score Card to define Growth

It is easy to be trapped into the illusion of growth by looking at the wrong score card. Growing burn rate doesn’t correlate to customers. While spending money is easy, getting it is far difficult.

Here is a simple formula to calculate growth

CCA – Cost of customer acquisition = X

LTV – Life time value of customer = Y

COG – Cost of delivering value to customer over Y period = Z*

Here are the two goals to achieve growth

#1 Make this happen   Y > X + Z

#2 Increase the delta in above equation, either by increasing the LTV or decreasing the CCA and/or COG. 

If #2 is increasing then you are growing, if not then you are throwing away the money

*For simplicity and understanding X, Y & Z are considered constant here while in real life they are not.

2016-03-06T15:47:47+00:00September 13th, 2015|Categories: Startups|4 Comments

What investor is looking for ?

When investors are evaluating a pitch, here is the order of how investors get interested.

1 – Is this a big problem  ( Opportunity )

2 – Is this the right solution/approach ( Solution )

3 – Is this the right team ( Execution )

It is hard to excite them on a bad idea or a small opportunity, even though the team is amazing and have an excellent way to solve a problem.

 

When it comes to investing, the order changes

1 – Is this the right team ( Execution )

2 – Is this a big problem  ( Opportunity )

3- Is this the right solution/approach ( Solution )

It is almost impossible for an investor to invest in a bad team, even though the idea is brilliant & the solution is great.

2016-03-06T15:48:03+00:00April 13th, 2015|Categories: Startups|17 Comments

Finding best remote worker / freelancer

All of us have tried to outsource our work at some point. It is a very difficult process to communicate your requirements and get the work of your choice in such situations. There are multiple reasons to fail but mainly it is poor communication & lack of commitment from both ends. It is very hard to initiate and maintain long distance relations.

Here is one technique that I use while picking the right remote worker/freelancer.

– Write a job description that you would generally write for a specific task

– Scout 6 people for the same task

– Analyze all of them & pick up the top 3

– Write another task & give it to the top 3

– Analyze & pick the top 2

– Write another task & give it to both of them

– Analyze & judge if you found the winner

– Repeat the last step by giving another task

– If the choice remains same, you found your gem

– If not, go for one more and pick the one who was best twice

You found the best talent. It might look an expensive exercise, but the cost of wrong hire is multiples of what you are going to spend in this exercise. It will also help you in improving communications.

This technique should work with local in-house staff too, but it might screw up the culture if you are a startup.

 

2016-03-06T15:47:55+00:00April 3rd, 2015|Categories: Fintech, Life|10 Comments

Innovate or Sell first ?

We innovate to solve a problem in a better way in a way that it is lucrative for your customer to change their habits & start using your product

Without innovation, it is hard to distinguish yourself once you launch a product due to lack of incentive.

Common belief is that a product need to be 10x better than the existing alternative. Now this 10X term is somewhat exaggeration but to explain how better a product should be, because it is very hard to quantify alternative solutions. There should be a difference of day & night and compel the user to say Waoo.

Innovation & selling go together, however, the order in which they come differentiate if it’s a research or startup.

In Startup, you sell first by finding the problem & then innovative on how to solve the problem efficiently. Risk in this approach is that, you might not be able to innovate an efficient way.

In Research, you innovate first because you think there is a better way to do something, and then try to find the customers who have the problem. Here the risk is if it is a commercially viable product or not.

Now it is up to an individual to choose  what is the biggest risk for him, fail to innovate after discovering the problem or fail to sell after innovating!

I will choose innovation risk over selling risk unless I innovate on how to manufacture water based engine.

2016-03-06T15:48:52+00:00March 22nd, 2015|Categories: Startups|9 Comments

Don’t Mix Email & Telephone Calls

TL;DR

Use Verbal/Written communication appropriately. Have a purpose for every communication and based on that choose the appropriate medium.

Thoughts :

Communication is one of the most important aspect of our everyday life. We communicate to understand, assist, or help each other.

Here is a random order, in which I think we started communication

– Hand Signals

– Drawing the hand signals

– Drawing and sending those hand signals

– Invented some sounds to replace the hand signals

– Standardized these sounds

– Converted these sounds into symbols / characters

– Improved on these characters and standardized these sounds

– Language was invented

So now we have two forms of communication

Vocal & written ( I am excluding Body language here )

For Distant people, we invented Postal Mail ( Email/Fax)  & Telephone to communicate efficiently. Both of them have different purposes to communicate. Usually, I have came across when they are not used at the right time, which causes problems. I often find hard to balance between both of them as well, since we tend to use the easiest tool at that point of time. Such as we will call and leave a voicemail, when we know that the person will not be available on desk. We will draft an email in a tone that the other person feels bad. In addition, we also might call the person and poorly communicate a deal to give our self-benefit of doubt.

All of these are wrong practices and should be avoided. I have not yet mastered this and constantly try to improve based on feedback and results. Just make sure, the purpose of communication have been achieved.

 

 

2016-03-06T15:48:59+00:00March 11th, 2015|Categories: Life, Startups|6 Comments

60 Minutes Sprint to achieve Inbox Zero

I get a lot of emails/tweets and other messages per day which are not urgent nor important, however they take away my momentum and attention. They constantly feel like something I am obliged to read or respond resulting in low productivity. PG have an excellent lecture on it. It’s like a to-do list that is created by others for you.

It’s however rude not to respond to emails. I respond to every email that is sent to me even if it was a marketing pitch as long as it is written specifically for me and not generic mass mail. 

With passage of time these emails start to clog up your email and haunt your productivity unless you just ignore them, which I do not recommend because there is always an opportunity to learn more. 

I came up with a 60 minutes sprint twice a week, which helped in achieving efficiency, which I am sharing below

  • Open up the mails there not urgent nor important and could be responded in less than180 seconds.
  • If you are left with some time, I would may be respond to emails that are not urgent but may be of some importance. 
  • Do this while standing 
  • Keep your phone away during the practice
  • No music  or any other app should be open

I wont spend more than 2 hours per week on this exercise and I star/label the emails that are unanswered. I answer them whenever I get time which could be a month even 🙂

 

2016-03-06T15:49:07+00:00February 28th, 2015|Categories: Life, Startups|1 Comment

Technical Debt on Companies

Technical DebtDebt in any form is a redflag. A lot of startups start with a vision but no clear direction. We code as per the final requirements to make sure it works once we reach the million userbase. There is nothing wrong however changes happen all the times and it’s hard to predict the final product resulting in discarding lot of code. Even worse, if the code stays, it affects the entire infrastructure badly. It’s like carrying diesel in your car trunk while you are running on petrol. You have a useful fuel but it’s not just right to drive your company.

Best practices include the following

– Build a modular software by dividing project into as small parts as possible

– Every part ( module ) is independent

– Ship the software as soon as possible

– Try to clean up code periodically. Ideally once a month for a day or every quarter. If you are not doing it at least twice a year, you will have to pay high interest on it

– If you can afford, hire a hacker whose job is to cut the code into 50% to perform the same amount of work.

In terms of code, lesser the better.

2016-03-06T15:49:28+00:00February 11th, 2015|Categories: Startups|10 Comments

Delegation or Passing off your work ?

there is a major difference between letting other people do you work and delegation. Passing off your work means you are not responsible of it anymore. Delegation means that you are now more responsible for the work.

Doing things your self is easy and teaching is difficult. Delegation brings the best of your self, because whenever you are teaching you are more concerned about the quality than ever before. Want to try ? Teach some one driving 😉

During delegating, you have to write down the process and keep on iterating them based on best practices. Never ever expect or force people to do it your way. I recommend that you give them the deliverables and expectation and let them find a way to do it. If they do it better way, you have learnt some thing. If not, you share the way you do it and expected a better result. Delegation is an iterative process and not linear. You delegate, check back improve and then delegate again.

Bottom line. Delegation is teaching people how to perform better than you !

2016-03-06T15:50:39+00:00February 10th, 2015|Categories: Life, Startups|11 Comments

Types of fear with any opportunity !

Whenever there is an opportunity, it comes with a risk. There is a time limit in which you have to take a decision to spend specific amount of resources to achieve desirable result. Flip side is your result might not be desirable or not even close to that resulting in wastage of resources and possibly other damages that could not be predicted while taking risk. In addition there are some intangible losses and gains. These include but not limited to emotional & morale loss.

There are 2 big fears

– Fear of missing out

– Fear of loosing

When the fear of missing out overcomes the fear of loosing, you become Entrepreneur.

2016-03-06T15:49:35+00:00February 9th, 2015|Categories: Life, Startups|9 Comments