Do you have it in you to become your own boss?

Many enthusiastic and active young people, including students, aspire to build start-ups, be self-employed, and earn more, rather than be employed on a fixed salary. Some of them even start planning early, take on some commercial projects, and get a feel for earning money while studying. They are highly influenced by media reports that claim there are over 6 lakh start-ups active in the country. Of these, 89 are reported to have become unicorns, i.e. they have attained a value of more than one billion US Dollars.

Initially, only youngsters in metropolitan cities had such dreams, but now it is estimated that almost 50% of the start-ups originate from Tier-II and Tier-III cities. Overall, it is reported that there has been a 300% increase in start-ups in India in the past 5 years.  As expected, the vast majority have been in IT services, with healthcare, life sciences, and education also popular. 73,000 start-ups are reported to have at least one woman director.

The companies that are moving towards becoming unicorns are those that pursue rapid growth, disruptive technology, and large amounts of venture capital. They are people who prioritise rapid expansion over profitability.

Earlier trends in entrepreneurship were mostly people who had worked for a number of years, acquired domain specialisation and experience, and then took the plunge to set up their own business.  One of the reasons for this was that before the IT boom, enterprises were capital-intensive, requiring buildings, machinery, stocks and labour. Also, bank loans were very conservative and rarely given to inexperienced people.

Today’s start-ups do not necessarily go to banks; they approach Venture Capitalists who invest either in interest-based loans or in profit-sharing equity.  Also, many IT and service-sector enterprises do not require substantial funds, as they do not need large offices or factories and do not need to carry stock-in-trade. Venture Capitalists are risk takers who put in money if they are convinced that the promoter has ideas that can be cashed in the short run.

Who should choose entrepreneurship?

Taking an early plunge suits those who do not need a regular income to meet basic needs and can withstand losses for some time. Those who are resilient, adaptable, and can handle ups and downs, unexpected challenges and setbacks have risk-management skills. They need to be visionaries who can visualise things that do not exist.  And they should be willing to work long hours, focus on strategy rather than day-to-day operations. They should be people who can not only sell products but also sell themselves.

People-management skills are perhaps the most vital, because all other skills can be obtained by hiring specialists.  A person who can analyse the thinking and attitudes of partners, employees, customers and suppliers will be able to overcome other hurdles.

Despite all the above, success will depend on how feasible the business idea is, what scale it needs to operate at, and how it can beat the competition. Those who understand their competitors’ plans and strategies can overtake them. Lastly, they should know when to take risks and when not to be foolhardy, able to make critical decisions such as closing down, changing the product line, or moving into something new based on market demands.

Before starting a startup, it is definitely advisable to gain practical work experience in similar organisations.  An MBA or PGDBA in entrepreneurship, offered by many reputed B-schools, can also give a boost.  Having a partner or two who complements skills is an added advantage.  Although entrepreneurship at the degree level is offered by some universities as an elective, it provides only a broad overview and may not equip the student to actually run a business. Nothing can substitute exposure and experience in the corporate world.

The flip side

Let us also look at some realistic data. Despite having the third-largest startup ecosystem in the world, 80–90% of Indian businesses fail within the first five years of operation. The reasons identified by experts include: poor financial management leading to a cash crunch, failure to keep up with technology, and, most importantly, not having the pulse of the people they need to interact with on a regular basis, i.e., their colleagues, employees, financiers, and customers.

Studying case histories of other start-ups, browsing biographies of both successful and unsuccessful businessmen, and learning lessons from even minor threats or setbacks can help prevent failure to a great extent.  Even then, an entrepreneur should know when to cut losses and admit defeat, instead of getting deeper and deeper into a financial mess.

An educational-tech company promoted by a charismatic Indian shot to fame a few years back, was valued in the tens of billions of US dollars, and was aiming to become the biggest educational company in the world.  It ran into trouble and is now facing lawsuits in the USA.  Many skeletons were exposed by former employees who claimed they were coerced into engaging in unethical sales practices. Studying such cases, and not just those who have been consistently successful, teaches you what mistakes not to make.

Among those who spiralled into millions and billions in a short span, many have tumbled, while others sold and got out. On the other hand, there are many others who have taken the slow and steady gait of the Tortoise and are making steady progress.  You need to choose between being a hare and a tortoise.

(The author is an education and career counsellor)