We often see in news that every E- commerce is in loss,
Like sometimes snapdeal faced a loss of 500 Cr or Flipcart faced a loss of 100 Cr
What is the problem in their business model due to which every e commerce is in loss?
If you are planning to start your own venture so please consider all these 10 reasons –
- chose Right industry
- Faulty Business Model
- Marketing Myopia affects Business Model
- Week Feedback System
- Passion For Doing Business
- Skills for Starting a Business.
- Team Members
- Don’t know Cash Burn Rate
- Failed to raise funding for startup
- you are hungry for the funding in your initial days of business.
1. Chose Right industry.
Which ever industry we have chosen is that right for us or not?
For example, when i was working with an one E-commerce company, where i realized
That too many things are going wrong in this industry.
Like the cost of the product that we are selling is for suppose 4800
and the same products was selling on amazon is for 4100 on his platform.
Including all the taxes and profits. how is it possible?
Then i realizes that they are playing a big game. see, we were placing for 100 products
But they might be placing an order for 50k products.
Maybe that’s why they are able to sell their products in such competitive pricing.
There are chances that they have alot of funds that is why they are trying to destroy the market.
So that no other e-commerce platform would not be able to compete with them.
Another big reason behind this, they are considering their logistic cost to zero.
They consider their logistic as loss for now.There are so many factors
which make me realize that if i want to open an e-commerce store like Amazon or flipkart
So i wouldn’t be able to flourish. because i don’t have the same amount of fund that they have.
Or how long able to compete with them 1 or 2 years. After that i will be broke Like other companies.
2. Faulty Business Model.
Now come to the second point and that is a Faulty Business Model.
Most of the people think like if they do this business so they would be profitable.
But, if i do overall calculations so i will find myself in the loss.
Lets take an example, we open a factory, and product costing is suppose 90 rupees.
And we do next is we made all the plans regarding the selling price and all.
Then we decided that we will sell this product at a profit margin of 95 rupees.
Then we did all the packaging and branding of that product.
The we got to know that the price that the price of raw material frequently fluctuates.
In starting, the price of raw material was 6 rupees and now it is for 110 rupees.
So now can i increase the price of my product?
no, because we did the branding and marketing of that product for the pricing of 95 rupees.
Or maybe at the timing of calculating the total cost we made some errors.
We did not include rent and employees salary under that calculations.
In short, we have to make our strong business model.
If we do’t want to let our startup fail. There are so many businesses
Which are in auto- pilot mode in which money comes automatically.
Like i told you about Trivago.
3.Marketing Myopia Effects Business Model
Now comes to the third points and that is Marketing Myopia.
Let me tell you how marketing myopia affects business model.
Sometimes, we feel that our product is the most optimum product for the consumer.
For example- you decided that you are going to make pager.
That is used a long time ago for only sending the messages.
You are making pager in this modern era and telling everyone that your pager is a touch screen.
But the consumer needs a touch smartphone with a strong camera, display, processing power.
But no you have already decided to sell pager.
By doing things in this way business will comes to an end like Nokia.
4.Week Feedback System
In initial days every business product is going through the developing stage.
Right now even they don’t know what kind of problems customer’s are finding in their products.
We think that our product is good.
For example- suppose i have my protein business, we think that the quality and taste of our protein powder is superior.
this is what we exactly think. But until we asked the customer’s about our product feedback
And asked them how was our product? what changes consumer want in that product?
When we received feedback and work on it so the customers become loyal to us.
Ultimately my customer base will be increased.
So basically we have to build at least one feedback system doesn’t matter what kind of business we are doing.
So we can get in touch directly with the consumers.
And know where our product is lacking and what kind of possible change can be done.
If you are in the service industry,like a salon, or restaurants you should always your customer
About his experienced and his suggestions. Many companies use feedback from so that is also the part of the system.
5.Passion For Doing Business.
Now, let me explain with an example, suppose you do not have a passion for doing business.
you just got into the business because of the peer pressure.
Now,You have seen that go daddy makes websites for business for 100 or 1000 rupees.
And you will try to expand your father’s business by running ads.
But why would you do that? because your friend are doing the same business.
People do not know about the industry and they do not have any experience but still, they do business.
Then after some time,if business got fail they fell demotivated.Ultimate the company got wasted.
So, in short you have that passion and knowledge for doing and running the business.
6.Skills for starting Business.
The other problem is we don’t have enough skills for starting a business.
For easy explanation let me give the example- i want to open digital marketing and a web development company.
But i don’t know anything about both of them,But i feel like i am a good manager.
So i will hire an employees who know these skills.
And i will manage all of them and will make money by doing these.
This is not like that, okay? In order to do something, you have to learn that skills first
Otherwise anyone will make you fool, your own team will make you fool.
They will tell you it will take around 1 month to make this website.
But if you have knowledge about that you can tell him that no it will hardly take 1 week to complete the website.
If someone is doing digital marketing so maybe their strategy will be different.
So at that point you can also add up your strategies which will work.
Because as a boss it is totally your responsibility to do the project in the right way.
None of your client will blame your employee, they will blame you for anything which goes wrong.
Ultimately, all the clients will go away and the company will shut down.
There is a huge blunder for any startup which is lacking necessary skills.
Even if you don’t have a passion still you can do business by learning it,
But if you don’t have the required skills for running a business then you are going to face a huge failure.
Now, the next point is we have a wrong team members.
Now what people do is they hired some of there cousin’s and best friends and all.
Just because they think they have a good understanding so that they can do great business.
Yes, i know the understanding between team members is necessary but there should also have some skills set.
For example- I know about digital marketing but doesn’t have knowledge about sales.
Because of that, i can’t pitch my services to potential customer’s okay?
Now, do i need someone in my team who knows digital marketing or knows about sales?
Second example- I have all the knowledge about digital marketing but i need a guy knows about finances.
who can file my GST and handle all the other things related to finance and tax.
Because no one knows about everything
So what mistake we made is we hired our siblings and friends.
And think we will learn while doing the work.
Ultimately this thing will lead us to waste of time, money and resources
And at the end, the company will come to an end.
So we should make a team of those who know different skills set.
So by doing this thing altogether, we can become an idle team and grow our company.
There is no doubt that understanding between members is also important so don’t avoid it as well.
But the most important thing is to complement other’s
8. Don’t know Cash Burn Rate.
The next ting is the cash burning rate. cash burn rate is how much money i need in a month to run my company.
It should be a total of all the expenses like marketing cost, rent, the salary of employees and all.
Foe example- we have a 10 lakh rupees and the rate of cash burning rate is 1 lakh rupee per month.
So it means we can run our company for just 10 months.
So we have to keep this thing in our mind with the purpose of making it profitable within 10 months.
Otherwise, after then we will have to shut down it.
Or if you have already start a business without knowing your cash burning rate.
Or you think you will decide your cash burning rate after a few months.
SO it means your company is going to close soon and all the money will be wasted.
9.Failed to raise funding for a startup.
And the last point is which includes two sub points.
First one is you failed to raise funding for your start-ups.
You have a good business model but you always failed while pitching your business model in front of the investor.
And because of that your business usually fails.
You know funding to investors is also a kind of art.
You have a good business model and burning cash rate is also low and you may also cross the break- even- point.
But in order to grow your business to a big level.You need some funds.
Along with that, the second point is –
10.You are hungry for the funding in your initial days of business.
Equity of your company gets dilute by receiving quick funding.
In the starting days of business, you have to dilute 30%-40% of your company equities for some funding.
And because of that , all the power you had earlier is now shifted to the investors.
For example- if you are able to cross break-even point within 8-10 months.
It means your company is in profit.In this stage,
You need to work on your company 1 year more to make it more profitable
And capture some more market share after then you can go for funding if you want to.
There are many companies who shut down just because they all were just running behind
The funding and then had some issues with the investors and because of that, they didn’t give any funding to them.
And the entire Askme group was destroyed overnight.
So these were the top 10 points which you should consider while starting of any kind of business.
if you want to start your new business but you don’t know how then you can check out this blog “How to start a business from scratch?
It will really going to help you alot.
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