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.
