Most people that I meet these days are pessimistic about the short-term future. Believe me, I share their concern – the days ahead are not going to be easy. Companies have already been hit by the downturn, and many companies have started to begin consolidating their resources and streamlining their organizations.
All non-essential expenses are being curtailed; this, unfortunately, has also resulted in some job losses, as organizations struggle to survive and attempt to tide over these low times.
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| Anurag Batra |
I know a lot of friends in well-paying jobs who are jittery about their futures. Fresh graduates are looking for opportunities to enter the workforce, with few avenues in sight. The outlook on recruitment is bleak. However, this presents an excellent opportunity for an entrepreneur to start and incubate a new venture.
I know it sounds like an oxymoron, so let me explain. Any new enterprise requires a significant amount of capital while being set up, and the business environment today presents an opportunity to set up an enterprise at a substantially lower cost than, say, a year ago. Cost of renting office space in the metros have come down substantially, even in prime locations. Since many offices are now shifting out to cheaper locations, it is possible to even get a good place with modest fit-outs at the cost of a bare-shell location. Staffing today is much easier, as the expectations of employees have been tempered to a significant level. People are content to receive their salaries in time and work in a secure environment rather than jumping from one job to another in search of a higher salary.
For the next few months, the magnitude of business will remain low, which presents a perfect opportunity to set up your enterprise and streamline the system to take care of any problems. The revenue steam may take some time to start flowing, but let’s not forget that rarely in a business does it start flowing in from day one. As time passes and things improve, the new business will get a chance to adapt to the situation and scale up with the environment, rather than jumping in head first into a roaring business environment.
This is a good time to look at franchising as an option, both for existing entrepreneurs wanting to expand their business, and for new entrants looking at starting their entrepreneurial journey. Franchising is an effective way of expanding the business without significant capital investment and getting healthy returns. The franchisor makes money on signing up a new franchisee (upfront cost), incurs no additional cost on capital expenses, and has a sizable portion of the operating expenses taken care of by the franchisee. In return for sharing the brand equity of the product in a controlled manner (both the product and the services associated with the product are delivered in a predefined manner), the franchisor takes away a handsome percentage of the profits, while at the same time getting someone to share the risks with him. In return, the franchisee gets to start a business of a known brand, which has substantially higher chances of success vis-à-vis a fresh startup. Given that some banks are now extending unsecured loans to franchisees for starting up a franchise (reputed), it is a good option to start one’s own business.
All businesses have associated risks – franchising is no different. The franchisor must risk sharing his brand with someone else who might be an efficient person, dedicated at growing the brand equity and the business. If the selection of the franchisee is poor, it may lead to closure of the outlet, which significantly impacts the franchisor as there would be opportunity loss, and also the brand equity of the product would be eroded in the area. The franchisee, on the other hand, must evaluate the business plan carefully to understand if it is a viable option – it may look good on paper, but the real world is an entirely different setup.
Still, if the entrepreneurial bug has bit you, then it is time to jump into the fray. A friend of mine recently told me that if any organization was caught this year by the slowdown, it was bad luck and unfortunate. However, if someone gets caught in the slowdown next year, then it is bad planning, simply because all business plans should take into account recessionary trends while planning for the future. So if your business plans take into account the effects of the slowdown and still manage to show a profit, this is the perfect opportunity to start your business.
Anurag Batra is real life, first generation entrepreneur who is Much Below Average (MBA) from the prestigious Management Development Institute, MDI. When he is not busy writing such columns, he can be reached at anuragbatrayo@gmail.com. Anurag is the co founder and editor-in-chief of exchange4media group which includes exchange4media.com.
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