It’s been raining start-ups in India, with the country emerging as the world’s third-largest economy for new entrepreneurs. According to the figures on November 30, 2022, India is home to 84,012 start-ups, an exponential growth from a mere 452 in 2016. While the figures are staggering, not all of them may end up as success stories despite sheer hard work and relentless perseverance. One of the main reasons for that could be not doing the thorough homework one needs to do when launching a start-up. Let’s look at the most important aspects of this ‘homework’…
Getting The Fund-amentals Right
Money is the fuel that’s needed to get any business running. While there are many options to raise funds for a viable business idea, bootstrapping – investing your own money, at least to some extent – is considered ideal. To begin with, it reduces the pressure of being answerable to outside investors and allows you to reap profits.
As important as the money you are investing is the amount you are expecting your customers to pay. A good pricing strategy is key to attracting and retaining your customers. As an entrepreneur, ensure that you take into account the amount spent on producing, marketing and delivering your product while pricing it. Avoid underpricing and overcharging.
A case in point is the laundry start-up Doormint, which offered services in Mumbai, Bengaluru and Gurugram for two years before it shut shop in 2016. In their goodbye statement, the company co-founders Abhinav Agarwal and Naman Lahoty said that a “truly scalable and profitable business model” had eluded them until the end. They also admitted that it was tough to recover the costs of “processing clothes, pick-up and drop logistics, and packaging” through prices. This is a classic example of failure on two fronts – market research and the right pricing.
Marketing Maketh A Product
As a start-up, an effective marketing strategy is important to help you get your foot in the door and attract potential customers and good investors.
Let’s take the example of OYO Rooms. One of the biggest reasons behind the company’s success is its marketing strategy – attracting customers by providing them accommodation with excellent facilities at lower rates than a hotel’s base price. If you are a start-up, understand the USP of your service/product and communicate that in the best possible way with your customers.
Cut Through Cut-Throat Competition
The biggest challenge for any start-up is to get ahead of the competition. An example is Mr. Needs, a start-up that offered door delivery of grocery items and other daily essentials upon placing an order through its mobile app. Launched in 2016, it soon shut shop. Tough competition from ‘rivals’ like BigBasket and Grofers is considered to be the main reason behind its failure.
There are many tried and tested methods to survive the competition. These include differentiating your product/service, understanding your competitors and customers, constant innovation, exploring new markets and effective branding.
Quality Service Is The Key To Success
No matter how good your marketing strategy is or how much funding you have, the ultimate litmus test is the buyers’ approval. Nothing can save your ship from sinking if they don’t find your service/product worth their hard-earned money.
When Local Banya was launched in 2014 as Mumbai’s first online convenience store, it had received a whopping $5 million in funding. There was a lot of interest in the product, but eventually, it failed. Among other reasons, a poor grievance redressal mechanism is blamed for its debacle. It seems several customers had complaints about the quality of their products, which the company failed to address in time.
The Hazard Of Over-Hiring
Hiring more people in anticipation of future demand is a folly most start-ups commit. Tiny Owl, the food tech start-up that started in 2015, is an excellent case study. The company hired over 1,100 employees with an aim to meet its high growth target. Founder Saurabh Goyal says that there were around 1,000 delivery boys alone. However, when the business targets were not achieved, there was a massive layoff, and the number of employees was down to 200. The massive hiring affected all areas of their business, and it shut shop just a year later.
Overhiring is not bad just from a financial point of view. It inevitably leads to pay cuts or layoffs, thus having an adverse effect on employees’ morale, their job satisfaction and even the company’s reputation. If you are launching a start-up, always consider the current situation while keeping the future goals in sight. Hire a workforce that will support your present and future business goals. Take time and hire people you think will grow with the organisation and add value to it.
Make Failure Your Starting Point, Not The Finishing Line
Failure is a given, it has to happen at some point in some sphere of your life – personal or professional. But failing does not make you a failure unless you decide to be one. So, learn from your experiences, analyse your mistakes and start afresh. The one good thing about failure is that it’s not constant. Also, it usually fails against determination and perseverance!