Interview with an Entrepreneur (Part 2)

[Continued from my previous blog post at http://udayshankarab.blogspot.com/2011/03/interview-with-entrepreneur.html]

Seizing The Opportunity!

[Image Courtesy: http://pixdaus.com/single.php?id=281651]

"the entrepreneur always searches for change, responds to it, and exploits it as an opportunity." Peter F. Drucker

He used to invest in a share fund locally run by his landlady for quite a few years. It was running all smooth and fine, as it was visible outside, until one fine day when hell broke loose and the landlady defaulted. She ran in to many people who did not repay the loan and hence as a ripple effect defaulted to all her investors. She very soon lost her face and hence stopped running the fund.

It was this time that he saw an opportunity, luckily for him very soon also supported by many friends and potential investors. He was a knowledgeable and trustworthy person among his circles and hence when this incident occurred, he rose up for the opportunity and claimed to run a new fund with better returns, favorable interest rates and loans terms.

Synthesis: “Keep looking for opportunities and the under-served/un-served segments. You see a market gap then that’s one of your opportunity window”

He ensured that he garnered people’s interest in his venture by reducing loan interest rates, and at the same time he also reduced his risks of having defaulters by allowing membership only to very close and trustworthy set of individuals. Soon, he had many people coming to him also because the segment was underserved. He rose up to the opportunity and seized it.

Synthesis: “Garner Support, Form Alliances, Have a Compelling Selling Point on why your customers should come to you”

Many may ask why he felt freelance electrical wiring was not scalable. I did that too! So when I asked this question, I very soon learnt that it was an intelligent and tactical decision, to not to scale up in this. To scale up and work completely on this it required a license to operate from the government (which was by itself fine) but the important thing was that he could not work in his factory on his full time job if he gets a license. He will then have to forfeit a job, which promised him a safety net and continual income. He realized that he could not take such big a risk since he had many people dependent on him, it wasn’t just him, he thought about lot more people depending on him.

I then asked if risk appetite was low then how come he was getting in to a business which failed miserably at the hands of an earlier owner, and in which financial implications are huge? What came out was something that had not run through my mind.

Though he did not want to take much risk he was aware that starting any business does require considerable risk taking, and hence he believed in calculated risk taking. In terms of calculated risk, the requirement to take a license and then quit a permanent job was an absolute NO for him and hence a very high risk activity. However, the running of the share fund did not necessitate quitting of his job. It also required less amount of time and was an intellectual function that could be done from his home rather than having to travel to multiple places as opposed to electrical work. In electrical contracting work he had to go to houses in remote places wherever they are being built, and as he scales up manage his own work force and also hunt down more and more customers in a segment that was already being filled with competition.

In running the share fund, he was aware that he will need to start as small as possible to reduce risk and test the waters, and with success have people come to him rather than he having to approach them for investment. It was a well thought out and deliberate plan.

Synthesis: “Risk is an inevitable element in any entrepreneurial activity you cannot eliminate it but can always alleviate it. Calculate Your RISK appetite before taking the plunge”

In my next and last blog in the "Interview with an Entrepreneur", Watch out for "Architecting, Growing and Transforming: The Second Beginning"