fbpx

How to Minimize RISK Factors in Your Business

How to Minimize RISK Factors in Your Business

Hi, I am Rajat here from Startup Frat, and today I am going to talk about RISK. Either you take the risk of failure or the pain of regret. Only one of two things, and in today’s market, unless you are in the market yourself, every single day, dealing yourself, putting your trademark out there, putting your name out there so that people deal with you directly rather than through your employer through your end buyer or something.

Most Indian businessmen have a business where they’re supplying their end suppliers to somebody who already has a brand in the market, right? They are the nameless faceless people. A lot of people are Amazon suppliers. They think they’re in business. That’s not true. Nobody. None of your customers knows you care about you. Amazon controls your income, right? So you want to have a personal brand-driven strategy where you are the person. Out there, people deal directly with you, etc.? Now a lot of people think that hey man, you know that’s very risky and you know I don’t know if I could do it. It’s much more comfortable if you have one big buyer, that one big client, you know that can totally make a life for you, etc. But the one big client in today’s market doesn’t come like that just because you have a business house just because you have a degree or a professional or whatever it is, right? It doesn’t come like that. You need to spread out your wings and spread out your risk so that you have multiple streams of income coming in so that no single client can control your destiny as so. If you’re a business owner, you probably realize what I’m saying.

What is the Risk?

Now, what is this risk that we’re talking about? There is no entrepreneurship without risk. OK, so anybody who tells you? I mean there is no risk in doing it. It’s a slam-dunk deal. You know. Don’t kind of believe that because there is a risk in everything you do. In fact, there is a risk in everything you don’t do as well. So we’re going to talk about the structure of risk and we’re going to break it down into two or three segments. And we’re going to talk about. How do you minimize the risk?

How to minimize the risk?

Let me give you an example of Reliance Geo. OK, I don’t know if it’s the most appropriate example, but I’ll just give you the example of Reliance Jio. The telecom market is a very difficult market to be in. Very thin margins and all of that and you know it’s a constantly changing market and everything and every single customer is worth like 500 or 600 bucks. You know it’s not a whole lot of money, so you need to be extremely sure about what you’re doing. What Reliance Jio did was, they said in the Internet market or in you know in the unified communications market there’s all these different players and all of that and everybody has a small fragmented share of the market.

What can I do to minimize the risk of getting into the market? First of all, they didn’t play it at the same level. They went underground with oxygen tanks and for five years they planned every single part of the game, Which is what technology am I going to bring to India? How I’m going to get the customers, how I’m going to make sure that there is no disruption? What is disruption? Does the road get dug? Your Internet line gets cut, you know something. Happens, you know the power lines get cut. There’s a power cut in town. You know your Internet line goes off and things like that. So how do I ensure I provide the best possible connectivity? The best possible service? And then I know, how to make my money back. You know I have a hold on the market. Otherwise, with two 5% profit margins nobody is really you know you see all these companies going bankrupt because the margins are so thin. So what they did was they went inside. They went underground and for five years before launching the service they studied every aspect of the business. Then they brought fiber optic technology and the fiber optic technology was not entirely drug. It dug into the ground. It goes through your existing, you know the wiring in the society of connected to that and then the Internet. Can be delivered from there. Then they said, well, you know what do we do to make sure that people try our service and believe in our service? They gave a record one-year free service and when you use a service for one year for free, you realize there is no downtime. The customer service was pretty good. I called them. They always pick up the phone. You know they always help me out.

By the time the customer realizes that, OK This is a good service. They also have their cable integrated with it. They also have a bunch of services integrated, which is called ecosystem-based marketing. OK? Now you have your cable, you have your YouTube, you have your Netflix, you have your Internet and you have a phone coming in through that one line that never goes down and the charges are pretty. Reasonable, right? What they provide is the speed that is 20 times the speed of the next best provider. When they first brought fiber optic into India. The speed was twenty times the speed of the next best Internet connection that was possible for the same price, right? So that’s why I’m sure they have other dealings and also make sure that everything stays ship-shape. The laws don’t change to suddenly become anti-reliance or things like that or whatever it is. But they went underground and they minimized all the risk for themselves before making such a bold and big move.

I have another video that talks about Amazon how they focused on the smallest possible market that they could serve to the best of their abilities, which is a book. readers, Ok?. To the best of their ability so that they become the domain or the supplier of choice for anybody who wants to read a book today. And then they expanded their services separately. So how do you minimize the risk if you’re a small business owner? If you’re an independent professional or corporate professional who wants to set up their own brand and you’re like, Oh my God, you know it’s too risky. Let us break down that risk into different points. Then we’ll talk about, you know how that falls, how that makes sense to us.

Primary Risk Factors

Risk comes from primarily three factors.
1. The risk of losing money
2. The risk of losing face
3. Risk of the unknown.

What is it that I don’t know that everybody else probably knows because they are in business? Or what is it that could potentially go wrong? And this goes back to the old Indian economy back before the 70s 80s. Then so many things could go wrong like they were corruption at every level, everybody is out to get you because there was not enough abundance in the economy. So everybody was trying to, you know, cut each other’s leg and all of that stuff, right?

Cutthroat, competition, people try and do all sorts of things to bring you down. But today we are an abundant economy. Those old thought patterns need to be changed. OK? There is hardly I mean as compared to the 70s. There’s much less corruption today. You know, a lot of people are not trying to bring you down. Everybody is running their own race. You need to run yours too. And of course, there is a lot of knowledge that you may have that you will get along the way that you may not know. Everybody does not know Mukesh Ambani for example, right? So a lot of things you will learn along the way.

How do we minimize the risk of losing money?

What is the risk of losing money? See in the old times before you went into business for yourself, you had to invest a lot of money. You needed to have a factory. You need to have employees because money was involved in producing goods and money was involved in delivering goods. You had to have the tempos to deliver your goods. So you need to invest a lot of money like lacs of rupees and crores of rupees upfront to set up your business which would start supplying products or services you are trying to supply. If you risk losing money

 

How do we minimize the risk of losing money?

 

If you didn’t know, what was going wrong? What was going on? Either right at the time of launching the business, business would go down, which is why they said 90% of all the businesses shut down within the first year, and then in the next five years when you started to scale the business, you have to pump a lot of money into it to scale and grow the business.

At that point, if any of the equations went wrong then you basically would be left in debt and then you would have to call for bankruptcy and everybody would be after you. This is why they say 10% of businesses that survive for the next five years, 90% of that 10% actually, do not survive after five years, so we’re talking about a 98% or 99% failure rate in those times. Because the money involved was so upfront that unless you were, able to cover all of those expenses. you would have to file for bankruptcy. Risk of losing money.

What does the risk of losing face?

What does the risk of losing face? You tried something and then you know everybody would come to know. And then if you didn’t succeed, you know then everybody would say man what a foolish person. What a foolish person you should have been. You know how to do a job. You have educational qualifications. Whatever, just get your degree, go to a job. Don’t try to get into areas that you don’t understand. A lot of ridicule is at risk of, and that’s only in India. There’s no know where else it is applicable. Then you have the risk of the unknown, which is what information I don’t know because what we have traditionally we have associated subconsciously that the people whose family this business is running. They only know how the business is to be run.

The people who have had law practice for the last three generations, they’re the only ones who can have a successful private law practice. Otherwise, everybody else goes to work for a corporation or something.

The people who have run successful retail businesses, It’s their family that knows all the secrets. I cannot get into it. I cannot be a first-generation millionaire.

So how do you minimize this risk? You minimize this risk using three little techniques that we use in the lean start, First of all, losing money. We don’t invest a lot of money upfront. This is something we call rear-loaded risk. What is a rear-loaded risk you? Do you follow the Jeff Bezos model and you do the smallest possible action payable chargeable action or chargeable product. You really the smallest possible chargeable product to the smallest possible audience where you’re likely to have no competition.

Where you’re likely to have no competition. What did Jeff Bezos do? He says nobody supplies book readers because there is not a whole lot of profit in books and be less than two percent of people on the planet actually read books. You’ll be surprised less than 2% on the planet. People on the planet after they finish their graduation degree and all that, nobody wants to read after that. So less than 2% of the people, so he said that’s the market I’m going to go after, and then he made sure that you could supply the book from anywhere on the planet to those people, and one of the big things he had in his control was there is no customs duty or import duty applied on any book that travels from any country to any country. They have a global understanding that books do not attract customs duty and import duty. So what you are doing right now is. You’re doing rare loading of risk. You are providing the smallest possible service to the smallest possible person where there is no competition. There is no competition because hardly anybody reads books. so there’s a lot of risks you know, people don’t want to get into it. The second thing is that there is not a whole lot of profit margin on books, so a lot of competition is not likely to get in. What we do is, we provide the smallest possible product to the smallest possible market and we test it out and we see, I need to put in ₹10 in here to make ₹30 out. Now, this is something that works for me. So can I try putting ₹20 tomorrow and get ₹60 out. On the third day can I put ₹90 you know and get 270 out. That’s a rare loaded risk, which means the cash injection happens towards the end.

The other thing is the business house in this lean startup, the business houses are not your biggest investment, which means you can buy the product from somewhere and sell it to a person. So as long as you can get the order, we first figure out how are we getting the order. At what price we can get the orders and once we figure out that price and that customer lobby, then we reverse engineer from there and say how can I get this particular product in 40 rupees without making it myself without setting up my own factory? Can I get it from somewhere at 40 bucks and supply it to the buyer? And if the vendors are saying OK, no no, the minimum you’re going to get is 60 bucks. Can I do a bulk deal? can I do something to make sure that my cost of the acquisition comes under 40? All the while I’m using all of that money or all of their profit to scale the business. This is something called a rare loaded risk, which means you don’t need to put the money upfront now. Is there any money to be made without putting money at all? Because a lot of people over here you know may not have had experience in the business.

When we are talking about some serious income that is upwards of 1 Lac rupees a month. If you want to make this kind of money consistently, you will have to put money into the business. So I’ll just give you one example. The smallest possible market that can possibly buy my product. I can talk to some of my friends and neighbors and maybe some people start buying my product or start making a small profit. But now I need to have at least 5000 people know about me. At least 5000 people know about me, So what do I do? Either I can go house to house like election campaigning, people go house to house and say this is what I do. It said I will take me half my life or I can catch hold of a newspaper vendor and say I’ve got these little pamphlets. I want you to put one in every newspaper and distribute them to the 5000 households where you have distribution.

The person will say, OK I’ll charge ₹1 per newspaper. That means 5000. That means you give me 5 grand upfront, that is fine, so I’ll give him ₹5000 upfront. Maybe the pamphlets fallout or some other newspaper. Maybe only 3000 people see it when last did you see 3000 people that know about you and your product within the space of one or two hours? One or two hours? OK, 3000 people know about you now. The chances are not all 3000 are going to do business with you. Maybe a minority. But then maybe less than 500 will do business with you. But how fast can you get 500 sales? Otherwise, if you don’t put money in?

If you just know you can have people hitting the phones. I have employees who basically sit on the phones and hit the phones. That’s how I get all my corporate contracts because the corporate contracts are high tickets so I cannot expect Facebook ads. You know people start spending a thousand $1000 on my service. On Facebook ads, right? So have people who actually collect the leads and then they call the leads. But I have to pay them OK, these twenty-thirty thousand rupees salary every single month. So money will make money at some point and you don’t want to make all this money yourself, because then you’ll just be an employee in your own business. It will be an expert employee. So yes, you can test the market. Yes, you can make some money. I would say maybe your first one lac rupees you can make without the use of any hard investments. But if you want to scale then at some point you will have to come. You will have to invest all that money back into the business. So that is what we call rear-loaded risk. There is no scenario on this planet where you have zero risk, but we have something called managed risk or rear-loaded risk.

What is losing face? We use something called laser target marketing. What is laser target marketing? Usually a lot of people like in India you have this old system of marketing. Let’s get the word out. Let’s do the pamphlets and then the business will automatically come to me. So scatter marketing has been the mantra and that comes from the old times. If you set up a business, you were the only game in town, because nobody else can set up a business because nobody else will get a bank loan. So you’re the game in town and know what you’re going to spread the word left, right, and center. Hey man, this is what I do. I have opened a new restaurant. Please come there’s a new restaurant please come that works very well in a supply-driven economy. But in a demand-driven economy where the oversupply of every possible thing you can think of in the market and that doesn’t work because your word gets spread out, it dissipates and people don’t act on it. Nobody acts today on one good idea.

So you give me an idea, how would you like to put one Lac rupees and make three Lac rupees? I’ll say yeah. And then I forget about it. I’m not going to think about it online when that guy told me I can put one leg and get three as no you’re competing with Facebook. You’re competing with YouTube. You’re competing with the newspapers. You’re competing with the IPL. You know, that’s the first thing in people’s minds. Those are the people you’re competing with your little. Idea your bright product ain’t gonna make a dent. Not an actionable dent. So what do you want to do is you want to have laser target marketing. Laser target marketing is you find the people who have the first thing in their mind. The first problem in their mind at the beginning of every morning. Can be solved by a product, They have a problem that your product solves and these are the people who are so committed to solving the problem. That is the only thing they can think of all day.

Now there’s a procedure to find the demand generation model which I won’t go into today, but you do laser target marketing and you send your message only to those people. Now I did a live experiment on how you do laser target marketing back in April and May.

Which is how this community got started later. But for the first three months, while I was collecting one Lac rupees a month from a digital product line that I launched, my wife didn’t even know what I was up to. Wouldn’t that be a cool man? Yeah, now the reason is not that I wanted to keep anything secret from my family or something because as compared to my traditional income, this seemed like a wild idea. Why would you waste your time? Especially family time etc. Doing something that makes you one Lac rupees when my traditional income is much more than that. Let me just try this out. It’s good fun.

Let’s do this and I used and tried this laser target marketing on the first, in 24th or 25th April, and later we have taught this to many, many students who the number one problem that they have is I’m in a job. I want to start doing some business but I don’t want my boss to know. I want my colleagues to know I don’t want everybody to know that I’m trying to do this because that’s going to affect me in my career. My job, That is the number one issue that a lot of people have and we have helped hundreds of students to do laser target marketing where nobody even knows what they’re up to till they’re ready to resign or whatever it is you want to do. There are many people who don’t want to resign. I said this is good money. I love doing it and I want to keep doing this my passion or whatever it is that they do. I wanna keep it paying me but I want to quit my job. That’s fine too. That’s awesome, But you do something or laser target marketing.

What is fear of the unknown?

What is the third thing? The fear of the unknown? The fear of the unknown my friend. How do you? How do you minimize the fear of the unknown? First of all, you get all the information possible you possibly can. In the old days, we used to call it the BTM formula which is books tips and events. I say books and audio which are audiobooks or YouTube premium. I have YouTube premium. I listen to two or three hours of YouTube every day in one single topic which is how to do Facebook marketing better, you know how to do better graphics, how to tell a better story, and things like that? The third thing is events. You can get to learn a lot from webinars and then you can get to learn a lot from the paid products that people are selling.

 

Fear

 

A lot of people in the webinar they’re selling paid products. We also promote our own lead generation services in our webinars and the number one thing you will learn from is buying the service and learning from the person who’s supplying you the service. Now for my example, I’m not a technology gram, not a digital guy at all, but the first time I got a taste of Internet marketing was when I had hired a company to promote to do ads, SEO, marketing for me and then I got to learn a lot about how this game is played and I got an annual contract with the company. I said what do I need to do to be able to come and sit in your office and watch your personnel doing this stuff for me and they said we don’t allow that, but if you give us they were, you know they need money. So they said if you sign a one year contract with us will be happy because we know you’re a loyal customer. I said absolutely. I paid them upfront for one full year and then I would go travel all the way across town and sit over there for one or two days a week. Just watching and learning and asking the people how do you do this. You will teach me how to do this etc and today I know a lot about SEO marketing and a lot of the digital stuff.

Although I’m horrible with the computer and I prefer paying somebody to do it for me. That is the way you’re going to learn this stuff. So you’re not with a lot of money, but go out if you buy books, that’s a very small investment. If you have a YouTube Premium subscription or buy some audiobooks and all the very small money upfront, if you go out and buy somebody’s product and learn how they do this stuff, there’s not a whole lot of money.

You need to build your skillset so that the fear of the unknown goes away and the real fear will go away when you try to do things, you get some results. You get some failures and then you’re like. This is what I need to improve. All of this can be done without spending lacs of rupees. But you do need to take the first step and one of the things I say is you need to get organized in your life. Get your time organized, figure out what are the hours of the day that you’re going to do all of this to help learn and get conversant with the idea of what it is that you want to do to take you to the next level. This applies even two business owners who already have a successful business just like the jobs of today will not exist five years from now. I think it’s 78% of the jobs of today will not exist in 2013. Because the world is changing so far. Similarly, businesses and big industrialists are going bankrupt because they failed to learn the skills that are important in the new economy. You have industrialists going bankrupt worth hundreds of thousands of crores are now worth only a hundred crores, which is like bankruptcy for them.

You see these stories every day because they fail to upgrade their brain to match the speed at which this planet is moving my friend. So you need to do this not only for yourself but for your next generation also. What do you want to teach your next generation? Yeah, go get a degree, do a job that’s not going to work. Go read that other story that this author called Guy De Maupassant had written, which is the story of the necklace I published two days ago, and then you’ll find out what is the pain of regret. What is the pain of regret doing something for 20 years that ain’t going to serve you, my friend? So losing money, losing face, and the fear of the unknown. These are the three big risks and these are the three ways that you can actually know, minimize this risk, and make sure that you increase the chances for your own success.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>