Home > Startups > Lessons from a start-up which shut shop..

Lessons from a start-up which shut shop..

I started a small distribution business sometime back in a small town called Salem in the southern state of Tamil Nadu. I had a decent run with the business but had to close it down due to multiple reasons like the business was not able to scale, I started having cash flow issues as the receivables were spiraling out-of-control, etc.

I ran the business for about a year and a half and these years taught me more about running a business than any amount of reading or teaching could. Yesterday, I was asked by someone about my experience during this period and what did I learn from the experience. This got me thinking and the result is this article.

I sat down with a cup of hot and steaming coffee and thought about the lessons I learnt and tried to jot down the most important of them.

  1. Manage cash flow: One of the most important reasons why start-ups or even established businesses crash is due to cash flow issues. Cash flow is like the blood in our body. So, the first goal of any business is to generate positive cash flow. Profits and profitability can follow. Sustaining a business with a negative cash flow is not a viable strategy unless you are able to infuse funds every time you face a cash crunch.
  2. Plan: I have seen and experienced that in the hustle bustle of running a business, it becomes harder and harder to set time aside to plan. Your list of tasks is never ending and you are always running short of time. You always move from one situation to another and act as you go along. This ability to think on the feet is very crucial to keep running the business but is not enough to either grow the business beyond a certain level or even avoid an imminent crash.
So, it is very critical that you set aside specific time slots to planning almost every quarter, ideally one day at the start of every quarter.

First half of the day, you can look back at the quarter and see if you have achieved what you had planned, to see what worked and what did not.

In the second half, decide what you want to achieve in the next quarter, set yourself some SMART one minute goals.

  1. Create a team: One of the most important lessons I had learnt from my experience was the importance of building and nurturing a team. No one ever succeeded in business alone. It is absolutely critical that you build a great team. Teams can be a combination of employees, business partners, etc.
The most important thing to remember when forming a team if you are a start-up is to ensure that everyone in the team buys-in to your vision.

Let me repeat this.

“Ensure that everyone in the team buys-in to your vision”.

This is absolutely critical to take your business to the next level.

  1. Define and follow processes: When you are in the growth phase of your business, you easily fall in to the trap of getting busy in your day-to-day activities. It is absolutely critical that during this phase of your business, you define business processes. This one act will alone give you the capability to scale and take your business to the next level. Well-defined processes will enable your business to scale to higher levels. This also means that you will have to give up some control on the business. This is also required if you want your business to grow big.  
  2. Use technology: Identify the technologies that you can use to automate business processes and improve productivity.
One of the most important things that you need to do is to identify a good CRM system and implement the same. All businesses have customer interactions and a good CRM system can help you track your customers through their various phases and also help automate defined processes in the sales cycles.

So, go out and search for a good CRM system that can help you in managing your customers better. Do keep in mind that you need to decide on the best CRM system based on your current and future needs. So, it is very important that you know where you are heading (your plans).

Also, as you grow big, technology will start to play a big part in either enabling your businesses to grow or will emerge as a bottleneck. Do keep your eyes open for this stage and then course correct as required.

  1. Get out of the way: As your business grows, it becomes more and more important for the business leader to move away from the day-to-day activities and concentrate on planning and stock-taking activities. Well defined business processes and good use of technology can provide you the opportunity to do so. This is also one of the reasons, it is important to define processes and using the right technologies.
In hindsight, these look like common sense, but as someone said, common sense is not so common anymore.

When you are in the middle of running a business, it is very much possible that you miss out on these activities. But by being aware of these, will ensure that you have a good chance at succeeding at your business.

Please do remember that nothing can replace the importance of a good value proposition for your customers, good customer service and a big enough market for your product or service. If all these are in place, adding the above learning improves your chances of taking your business through an amazing growth period. 

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  1. Anonymous
    January 5, 2011 at 4:56 pm

    this is the best post by far!
    – Imran

  2. January 6, 2011 at 8:52 am

    Nice article 🙂

  3. January 12, 2011 at 7:13 pm

    Good translation of experience to knowledge.
    Trust you have lot to share……………

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