Sunday, 20 October 2013

Aspects Startups Miss Out

Ideas are dime a dozen; People who implement them are priceless
                                                                                ~Mary Kay Ash
The world is full of incredible ideas that never go anywhere because great ideas are useless without someone full of passion to implement them. I realise that most of the people I come across have a lot of enthusiasm while running their businesses. They are the ones who try to “implement” their ideas. They know what it takes to run a “successful” enterprise. They know how to draw business plans, cash flows etc. However in most of the cases I have observed that two of the most vital aspects are not addressed properly or they are totally ignored. They are: The Employee Compensation Plan and the Product/Service Pricing Plan.
Shockingly these aspects are not given their due justice and I share my views and the importance of these in running a successful enterprise.
Every startup makes business plans, power point presentations, executive speeches, interviews, org charts, website, brochures, videos, blogs etc. If you are an entrepreneur I am sure you have covered most of the things I have mentioned. They are vital as well but my observation is these activities may sometimes lead the investors astray and impede their ability to really understand your Company. This could delay fund infusion or in some cases may also lead to the deal being called off.
I have worked on both sides of the investment cycle i.e. the investor side and the Entrepreneur’s side and it is my observation that having a detailed Employee Compensation Plan and a pricing strategy is the quickest way to gauge any business. A considerable amount of time and efforts need to be put to draw an acceptable strategy. These two aspects can make or break a deal.
It is very important for start-ups to understand that financial incentives are one of the key tools to implement any strategy. A startup should have a plan to give incentives to not just its employees (read sales team) but also to its customers.
The entrepreneur should imagine himself to be an employee or a customer. I feel questions like these need to be answered by these plans:
As an employee
ü  Are my earnings capped?
ü  Do I get more if I close deals or am I being forced to wait till next sales period?
ü  Is my work recognised on selling to existing clients or on getting  new clients?
As a customer:
ü  Do I get incremental benefits if I continue to place orders with this firm?
ü  Is my loyalty to the product/service being recognised and rewarded?
ü  Do I get rewarded for buying single service or a combination of services?

In quite a few cases I have found that:
·         These documents are non-existant
·         If they are drafted then they reflect views exactly opposite to that of the publicly stated strategies.
Aligning  both these plans with the overall strategy will help the entrepreneur to convince potential investors. I firmly believe that business plan and other documents are usually very well scripted but an experienced investor will always check these two aspects before investing, therefore due importance needs to be placed on the facets of an investment deal.
Like I said earlier this could make or break your deal, after all Employees and customers are supposedly the most important aspects of any business.

Ashutosh Muglikar

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