Doing business in Pimple Saudagar

Pimple Saudagar seem to have become an area with possibilities. No wonder you can see a lot of new generation businessmen around here. And this is also a place where you can meet the unlikeliest of the people doing businesses.

IT professionals who spend daylight talking about boring things like Oracle and Quality Center can be seen taking orders of chicken Rara in the later hours of the day. I have great respect for all these souls who take this leap and plunge in the murky waters of business.

Traditionally, a small businessmen/shopowners were the people who could not get a good job and lacked education. They were just a notch above the plumbers and welders and electricians of the world. In brave new world of Pimple Saudagar, you will find that even small businessmen have soaring ambitions.

This article is about the things to consider before starting a small business in Pimple Saudagar.

Definition of small business varies and is dependent on what you are selling. So a franchise jewellery shop needing investment of Rs 1 cr is still a small business and a restaurant that needs investment of 10 lakhs is also a small business.

Step 1 – What are you thinking???

Tell everybody! Don’t assume that your idea is unique and only you know the potential. Never do that. Just tell everybody who can lend their ears about what you want to do. Count the positive signals. If at least 60% people think that this business can do well, start thinking deeply. (If 100% people like your idea, then you should better get in marketing and business development than starting your own business!). And to people who do like the idea, ask whether they can be your partner. Hopefully somebody accepts. While not getting swayed by the praise and enthusiasm is essential, it is also important to not worry too much about the criticism. When a business minded person who did not get such opportunity for most of his past life thinks about his new business, he is bound to get emotionally invested in his idea and may take praise or criticism to heart. Try being a bit aloof.

Step-2 – Write down your business plan.

A challenging task. Especially when you are enamoured with the idea.

Most new age businessmen are good at crunching numbers and proving to themselves how profitable their business can be. This can be very dangerous. Traditional businessmen start a business based on their experience. So if you talk to your neighborhood hardware shop owner, you would realize that he knew all about pipes and adhesives and nut/bolts even before he started. However, our new-age shopowner is a clueless guy. This is NOT to say that the knowledgeable guy is any better than our clueless guy. Actually, quite the opposite. A new perspective and new wisdom is a by-product of such cluelessness and that will enable you to become far more successful than the traditional businessmen.

So do not get bogged down by this bogey of ‘experience and knowledge’. Both are highly overrated and anybody with reasonable aptitude can learn the ropes quickly. (Remember we are talking about business model that already exist and not some business that needs extensive research).

Having said all that, create your business plan. As carefully as possible. The business plan doesn’t need to have words…just a plain Excel Sheet with expected expenses and incomes will do. It will take some time as expenses keep on mounting. Don’t fret and sweat. Assume that you would spend 10% more than what you had expected to spend.

You will find that most of the expenses are difficult to gauge. But give it a shot nonetheless.

Step-3 Find the vendors

Talk to everybody who can supply you the stuff that would become part of your fixtures. See if you can find the used stuff or the brand new is better value for money. Always ensure that you include transportation and portage when you estimate the price.

Additionally, you will have to find source for the stuff that you want to sell or the source for your raw material. Internet is a great place for this. Almost all reliable vendors have the presence on the internet.

Step-4 Scout for the place.

Now, this, byfar, should be the most difficult part. Finding a place to rent is an uphill task. You will take a walk-around in the area, look at quikr, 99acres and talk to many real estate agents. Be prepared to get disappointed. You will like many places but will find rents as unnaturally excessive. You will find shops in not-so-great places demanding very high rents. You must make a checklist off things that you would need in a place and the rent you can pay. If your expectations are 70% met, you are in luck. Finding the dream place at dream price is impossible. That doesn’t mean that we cannot dream…but its best if you compromise. No business is possible without a compromise. However, give far more weightage to the location than the rent. A good location will improve the business by minimum 50%. Rents for a road facing shops are around Rs 100 to Rs 150 per sqft per month. Rents for higher floors can be from Rs 30 to Rs 60 per sqft per month. Deposits are usually equal to six months rents. Everything is negotiable. Real estate agents typically ask for 2 months rent as their commission but is highly negotiable and don't pay them in lumpsum or as soon as the agreement is signed...give them it over next 3 months. Minimum.

Another important thing to decide is how much rent you should pay? Remember that on-paper you should be getting at least double than the land-lord. If your calculations do not show that kind of profit, then you are walking in the danger. Your business must pay YOU better than land-lord and your employees if everything goes as per the plan. And your projected income from the business must be with the immediate business model and not with the business that you are envisioning to be after a couple of years.

This is extremely important. Never ever get into a business that doesn’t promise to pay you more than everybody else. I see many small restaurants in Pimple Saudagar that pay rents as much as Rs 40-50,000 (2 to 4 lakhs deposit). I don’t understand how and when they are going to make profit. You are in the business to make money for yourself first. Landlord and your employees should only get a small portion of your income.

Yes, I know that today finding a decent place in Pimple Saudagar has become very difficult. Part of the reason is that most landlords have very good holding capacity and don’t depend on the rent. However, you should shortlist all of the shops that you liked and give offer to all of them. And then wait. Patience is the key. If nobody agrees with your rent proposal, probably that means you need to revisit your business model. Assure your prospective landlords that you want it for long term, although always keep the exit with 2 months notice exit route open for you. Landlord is your true well-wisher and would want you to make money and continue to stay for 5 to 10 years.

You get what you negotiate and not what you deserve. Rent negotiation is the first step that must go in your favour. As this is going to be your primary burden, make sure that you read your rent agreement well.

Step-4 – License and Permit raj

At the least, you need Shopact. You are better off going thru an agent. Remember, now that you are starting a small business, you are a chicken in the eyes of govt servants. Animal who must produce eggs. Or they will cut it and eat it. Although in principle you can go to a designated govt office and get a shopact done, but nobody does that for reasons that we all know. Anyways, stay away from the govt officials as much as you can. All govt offices have agents. You are required to use them.

If your turnover is below 10 lakhs (per year), you won’t have to worry about any other taxes. If you are starting a franchise business or a business where you can expect revenue above 10 lakhs, you will have to get some more certificates and numbers (VAT, LBT, Service tax numbers). Again, find a tax consultant and pay him/her for services. It is not complicated to get all these certificates/numbers but its best to not get in direct contact with the govt employees.

Step-5 - The actual setup

As until this point you have not spent any money (if you exclude your phone charges and petrol charges). However, now onwards all the hell will break lose and you will spending money like there is no tomorrow.

Hire an interior decorator/consultant. Don’t spend time in running around carpentars or after plumbers and electricians. Get one person who will do what you want. This will cost you 20% more but will keep you from running crazy. And if this is your first venture, this will be your period to doubt yourself and if you stress yourself out over the finer details, you will end up spending more time fighting with your husband/wife. So take it easy and spend this time in hiring some people and talking to your suppliers.

Step-6 Advertising

Advertising can take multiple forms. The best form of advertising is always a word of mouth publicity but may not happen with the speed that you want it with.

Another popular way is to distribute pamphlets. Either in newspaper or in person or in people’s mailboxes. Putting them in newspapers means waking up at 3:00 AM and going to those agents. Yes. You have to do it yourself or you will spend money for the pamphlets thrown in the garbage. It costs around Rs 50 for 1000 pamphlets. And as there are multiple vendors for different societies, you will lose your sleep for many weekends. But it is still the best and most cost effective way. Distributing in person would mean standing in front of Rainbow plaza and handing it one by one to disinterested people. Putting them in mailboxes costs around Rs 200 per society.

Printing multicolour pamphlets would cost around Rs 6000 for 4000 pamphlets.

Yet another way is to put up hoardings. Either one large hoarding at some vantage point for a month (would cost around Rs 50,000) or putting small hoardings all over the suburb (for Rs 350 per hoarding and you will need minimum 30 hoardings to make any impact).

Yet another way is to advertise in local newspapers such as CityPlus which would cost you around Rs 30,000 for 10-12 advertisements. I am not sure about the impact as not many people read the free newspapers.

I know that many new-age businessmen just want to start small to test the waters and without any expectations of profit and they imagine that they would be changing business model once they are confident about the business. Not going to be easy. New businesses are like babies. They may be small but the trouble is big. If you are not expecting a good profit when it is small, you will not be able to make it expand.

When businesses don’t run profitably, they bleed you to death. It’s not like a regular job which, at worst, will make your income zero. Even a small sized business can drive you nuts if it goes bad. Average business has minimum Rs 1 lakh per month outgo (rent, employees, electricity bill, maintenance etc). If you are not recouping it within first 3 months of existence, start getting worried. Don’t assume that you can improve upon it with a lot of advertisement and word of mouth.

We will talk about how to improve the sales in already running business in the next article.