March 2012

When we build a business, we build an entire eco-system. Of owners, employees, customers, suppliers, partners. That puts an enormous amount of responsibility on the owners and managers of the business. We become responsible for the well-being of our employees, customers, suppliers and partners. And their families too. Hence, we need to build the business model and run the business in a very serious manner, so that the business can absorb shocks – of lower demand, market shocks and possibly, even acts of God.

What I am saying here is that businesses should be built robustly enough so that we do not run away at the slightest sign of a slowdown in economy or capital markets. We need to have enough holding power to withstand such low phases and not react by asking bunches of people to leave…to be re-hired when the markets recover.

But this means hard work !!! What does this take to be in such a position ? Build only that much fixed cost which can be covered by contribution from a basic sales force. Keep part of profits for “rainy phases”. Do not build excesses in times of boom…so that you do not repent in times of gloom. Keep a tab on the number of families directly and indirectly dependent on your business. Meet with them and be more empathetic.

Be innovative on costs in such times of worry. Tie up with other businesses, so that fixed costs can be shared. Tie up with re-sellers to sell your products without incremental effort. Check your “properties” which can support some form of advertisements – sell the space. Integrate teams when team leaders leave. Increase span of control for even senior people. Firing half of your Salesforce is the easiest thing to do. Re-building the capabilities after times improve is not so easy. And more importantly, please become aware that you are responsible for giving stability to the people in your eco-system. Do not let the frontline employees suffer for the strategic mistakes that we make.