Monday, February 4, 2013

AC rooms and OC (free) Coffees

A few conversations, dialogues from movies and anecdotes just stick in the mind. For me, this is one such. Apparently, my boss's ex-colleague (let us call him Mr. X) had started his business a decade or so ago and was going through the grind of setting up a company. In the early days, one of X's well-meaning friends had a telephonic conversation with Mr. X regarding various business plans. In his infinite wisdom, said friend had given some advice/gyaan/inputs/ideas on running the business, reacting to which Mr. X apparently lost his cool and said "AC room-la OC coffee kudikara ___ laam advice kudukaraanga." (Dudes sitting in AC rooms and sipping free coffees have taken it upon themselves to provide guidance)

Awesome stuff. And so apt.

A great many people do not understand the travails of the entrepreneur  And so friends, I have tried to outline a few points about entrepreneurs that one should know before talking to them. Most of these are based on my interactions with entrepreneurs and my own mini-stint as a quasi-entrepreneur.

1. Entrepreneurs are less receptive to new ideas: Entrepreneurs will be incredibly patient with taxmen, might positively grovel before their auditors, and might be really accommodating of requests from other government servants. At the same time, or perhaps because they take so much cr*p from these sources, they will be less responsive to your genius recommendations. Not because they are really that busy, but your genius recommendations are usually cr*p. Please remember this.

2. Entrepreneurs have giant egos: If you do not understand this, you are in trouble. All other things being equal, most entrepreneurs will accept it if you say you have bigger brains than them; but purely by dint of having started a business on his/her own, every entrepreneur believes he/she has something employees can never claim to have - Cojones (described with a word describing spherical object more colloquially). Key take-away from this. Never, never talk to an entrepreneur about risk, risk appetite, risky venture, etc. if you are among the salaried class.

Now, moving on to what phrases/conversation strands you should avoid while talking to entrepreneurs.

1. What is the end game in this business?: Only someone bred in AC rooms and OC coffees can ask some entrepreneur this. The business survives through the bad weeks, inches forward in the good weeks,  and improves largely based on incrementalism, a concept alien to "big idea" guys. Should it survive a couple of cycles and should the entrepreneur want to bank it, he/she will then speak your language. But the same pseudo-intellectual babble that can make you look the big-picture guy in investment offices will classify you as exhibit A in entreprenuer-land.

2. Reverse engineering a firm's revenues: What is your turnover? is an ok question. Ask it if you must. But if you do not have the cojones to ask that, don't do the other thing.

How many units do you sell? What are your per-unit revenues, per-unit variable costs and overall fixed costs might all seem like great questions, especially spaced over a 30-minute conversation. But if you do this, you are just taking a short-cut to the place ear-marked exhibit-B in the clueless-ness fair. When you are smooth-talking your way into the numbers, and crediting yourself for your guile and back-of-the-envelope genius, the entrepreneur's inner voice is screaming "Give up on this guy"

3. Are you guys thinking of raising capital?: This is a big no. Unless you can cough up $10m+ no questions asked before the entrepreneur moans "Oh, oooh Yes", you do not ask this question. No, it does not matter if you have worn a tie to office for 10 years in a row now. You still cannot ask that question. Especially if the entrepreneur's business has NO requirement for capital.

Work-life balance, recruitment plan, and other such strategic gems are to be avoided as well.

I read this somewhere about new businesses - New businesses suffer from gluttony of ideas, than a starvation of them. There have been few truer statements. Entrepreneurs agonize over their ventures. They probably shoot down 15 ideas a day because they want to focus on the 3 they have going.

If you can take up a small part of the execution component of the strategy and take some cr*p out of a friend's lap, chip in. If a friend says he wants to shoot the breeze and discuss things about business be a listening board. Do not try to live down your inability to quit the boring job by being an uninvited board member.