Most Retail Startups in India who have raised millions of dollars from Investors haven’t been able to scale their business. This applies to startups across verticals but I am going to stick largely to Retail in this article. Despite elaborate workings over hundreds of cups of coffee and tea, thousands of manhours and dozens of group meetings, why do B-Plans go wrong? Why are businesses unable to actually achieve the proposed numbers? Let’s take a look.
Unreasonable Assumptions: One of the biggest mistakes Retail companies make is to have unreasonable assumptions while building a B-Plan. Either their assumptions are unachievable or unrealistic, but both ways they cannot be undone once the plan is finalized. For example, if a business presumes to grow at 200% month-on-month, despite the ripe and raw market opportunity, it is not always possible because there could be certain market restrictions or natural issues that could come up. The 2015 infamous Chennai floods is a case in example. My own start-up commenced operations in Oct. 2015 and had grand plans for December but it was a white-wash not just for us but across businesses in Chennai. Never in my dream would I have thought that a city like Chennai could be stumped and go down under for over three weeks. Therefore, while it is important to have aggressive B-Plans, it is important to include such emergencies if not in detail, atleast as a back-up.
B-Plan for Investor Happiness: This is another mistake that many startups in Retail make, which is to basically satisfy their Investors, atleast on paper. This should never ever be done because the business must be built for customers and not the Investors. While it is imperative that the B-Plan shows profitability at some stage, it should be built keeping in mind the realistic impending opportunity rather than a positive pitch to the Investor.
Decking up the Excel Sheets: Most often, the B-Plan makers build one to make the Excel Sheet glossy and attractive without considering ground realities. In such cases, what will be revealed as RoI and Profitability will completely depend on the inputs given by the one building a B-Plan and not really the actual outcome keeping in mind the various adversaries the start-up may have to face.
Real Vs. Virtual Markets (Consumers): Many a time, start-ups building B-Plans go over the board in their assumptions of customers, including first time and repeat customers. For Ex., it is assumed that the cost of acquiring could be Rs. X, but what is not considered is retaining the same customer for the next 3-4 transactions. If a freebie is offered with every subsequent purchase to retain the customer, then ideally that should be included in the B-Plan as well.
Going overboard on Expenses: Many startups do this; they go overboard in their spends, especially capital expenditure such as buying a Macbook instead of a Dell which may not be necessary at the initial stages at all.