Being a first time entrepreneur has its own good times – and not so good times… it is a tight rope walk – the excitement, exhilaration, energy, enthusiasm and the fear; that can make or break you.
The power of inexperience and lack of mentoring to set the right directions helps one in learning life lessons the hard way – and when there is a downtrend in one line of business, I always looked at other opportunities and felt they were all interesting and do-able.
One such opportunity that came to me was via a common friend down South in the area of manufacturing and trading of Sago and Starch. Research into the business opportunity opened up amazing opportunities. I discovered that the B2B list customer list was mind boggling and amazing. Sago and Starch was literally used everywhere – food industry, adhesive industry, beverages, paint industry and so on… it was used as a base in many products.
This product is produced from tapioca and interestingly; there is an Exchange for this commodity. This is produced largely in Salem. I made many visits to Salem, studied the production process and visited the exchange. It was easy to conclude that if I had enough funds for a few loads, then it is a simple matter of rotating the funds continuously and profit margin swells…
I found a very interested partner who moved his home base to Hosur and jumped in along with me enthusiastically. We invested more than Rs. 15 lacs and started our business. The trading concept that was presented seemed very simple – go to the market, select the product and quote for the same. Once we have the contract, we can connect with prospective clients, agree on the price, load it in trucks and send it. The client payment will reach us in 30 days. I was clearly convinced by many knowledgeable people in the industry that the client is willing to pay much more than the market procurement price. What a wonderful opportunity for an emerging entrepreneur!!! Excellent business model, isn’t it? I thought so too.
As the first month went by, reality set in. So many problems started cropping in. I discovered that the trucks waited outside the client factory for more than a week for many reasons – this led to delay in payments. During the same time, the market prices also soared up. So the imaginary huge margins became slowly invisible.
The lessons learnt about the market
- The Sago and Starch market is strictly controlled by few traders – the rest get the leftovers.
- The strategy was to buy when the prices are lower, store it, and release it when the market is good. But if we do not have a godown/warehouse facilities, we have to pay for each bag on a per month basis.
- Most of the big contracts are entered with the clients are on an annual basis.
- The client payment cycle is three months – and our exchange payment cycle is one month, and the truck contractors do not accept credit. L
- The amount of deposit payable to the exchange is directly proportionate to the quantity that we order.
- And anyone who gets into the business without knowing this reality will see the capital disappearing real fast.
This is exactly what happened to me. I left the investment to my friend as there was no space for more than one to survive there. I heard that my dear friend did operate in a small way in the market till about 2013 – and the money he had made was very negligible compared to our initial dreams.
I lost interest as I burnt my hands; I cut my losses and moved out. As always I ended up with new lessons learnt
- When entering into a traditional industry, it is imperative to know the working of the industry and its key players.
- To make a breakthrough into an established market space, you need to go with a deep pocket and should have enough resources to be accepted as one of the key players.
- It is always important to find something different within the same space, or find out a customer problem that has been left unresolved.
- Only such experience would result in good learning – and this learning is today helpful for me when I mentor budding entrepreneurs. J
This experience gave me enough learning, and I went into a period of deep research and introspection. I had to get into another stream quickly to ensure to earn my living, and then came a new opportunity!! And this time with the backing of investors!!! It was the mid 1990s and IT industry was beginning to gain a strong foothold. The opportunity to be involved in being a franchisee for computer training emerged. But I wanted more… I did not want one center… I wanted to run a whole brand. The negotiations and discussions became hotter and hotter.
On the other side, the stocks and shares were not behaving the way I wanted them to… yet another loss…. The going started getting tougher… and my search for a successful venture continued…