In this series of A to Z of Entrepreneurship, I have been sharing thoughts and inputs for wannabe entrepreneurs. So far I have shared 4 blogs on this topic and this is the fifth one. So far I have covered below alphabets in this series.
A- Attitude B- Business Plan C- Capital D- Discipline
E- Enthusiasm F- Failure G- Goals H- Honesty
I- Idea to Execution J- Judicious Decisions K- Knowledge
L- Leadership M – Mentors N- Networking Works
O- Out of the Box P- Profits Q- Quality
In this blog, I will be covering the next 4 alphabets i.e. R, S, T, and U.
R- Return on Investment
Return on investment, or ROI, represents the financial benefit received from a particular business investment. In other words, it measures what you get back compared to what you put in. Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. In simple words, we can say that ROI is the profit per year divided by the initial investment.
Let us consider below scenario to explain ROI:
Scenario – 1
Suppose you want to make an investment of Rs.100 Lacs to start a gym and you are expecting a profit of Rs.15 Lacs after all the expenses. In this case, ROI would be 15%.
Scenario – 2
In this case, suppose you want to start a coaching institute with the investment of Rs.100 lacs and you are expecting a profit of 10 lacs after all the expenses. In this case, ROI would be 10%
So comparing ROI in the above scenario, investing in the gym will be an attractive proposition. However, how things can be changed in case the capital is borrowed.
We consider the example of gym again but this time capital is borrowed at 18% annual interest rate. Initial capital is 100 lacs and the expected profit is 18 lacs. In this case, Return of Investment will be negative 3% (18 Lacs Interest minus 15 Lacs profit )
Scenario – 4
In the case of a coaching institute, you are getting loan at a subsidized rate of 6%. Initial Investment Rs. 100 Lacs and the expected profit is Rs.10 Lacs. In this case, ROI would be 4% ( 10 Lacs profit- 6 lacs interest )
S- Self Development
Stress has become an inseparable part of our everyday lives. For an entrepreneur, stress and pressure are part of the life and he has to keep is mind focussed and calm under all the circumstances.
Successful entrepreneurs achieve hero status in our culture. We idolize the Mark Zuckerbergs and the Elon Musks. And we celebrate the blazingly fast growth of Oyo or Flipkart or Zomato. But many entrepreneurs before they made it big, they spent sleepless nights in anxiety and despair. It is of utmost importance for entrepreneurs to strike the right balance in work and life. He needs to spend quality time on himself. An entrepreneur may engage in the below activities to relieve stress and anxiety :
Yoga and Meditation :
Without the proper state of mind, it is near impossible to be a captivating leader. Entrepreneurship is all about leading an idea or plan in a projected thought and practice into the real world to create a service and work towards success. But in the same phase, the busy life of being an entrepreneur leaves an individual away from mandatory activities like exercising and health care of self. This is why Yoga and meditation are the best activity one can engage on a regular basis, which not only focuses on good health or healthy body functioning but also leads to inner peace and happiness where this energy helps to optimistic decisions and determination.
Walk and Excercise :
Being an entrepreneur isn’t a cakewalk. Between running a business, juggling personal life, and dealing with unforeseen obstacles that come your way, many entrepreneurs, unfortunately, end up sacrificing their health for business goals and profits. An entrepreneur must understand that exercising, walking, sleeping, and eating healthy is important. Maintaining a healthy lifestyle is beneficial for the mental, physical, and emotional health of an entrepreneur.
As an entrepreneur, it’s not uncommon to devote every hour of your life to building your business. The idea of taking up activities ‘for fun’ sounds like a waste of time or a luxury that most entrepreneurs cannot afford. However, no downtime can end up draining you both physically and mentally, which can severely impact your productivity and creativity. That’s why you need to pursue a hobby that challenges you, fuels creativity, enriches your life and in turn, helps you become a better entrepreneur. Hobbies improve vital skills such as memory, creative thinking, problem-solving, and productivity. As hobbies are something we enjoy, they are quite rewarding and help us recharge. The new perspectives and experiences that you gain from a hobby enrich your life and help you be a better entrepreneur and a leader.
Remember the “Kodak moment”?
The ability to capture memories into a picture using a personal device was what Kodak gifted to the world. Unfortunately, Kodak decided to cling on to analog cameras far too long, and eventually lost the game.
Nokia too has a similar story.
In 1979, Nokia created the first cellular network in the world. By the 1990s, Nokia was the leader in the realm of mobile phones. When its competitors started focusing on data and the internet, Nokia didn’t care. The company instead continued to focus on its hardware. Nokia did have great hardware. But the smartphones took over the market with better software features.
Generic brand Xerox too failed
Another one of those big business examples of failure is Xerox. Xerox was actually the first to invent the PC and their product was way ahead of its time. Unfortunately, the management thought going digital would be too expensive and they never bothered to exploit the opportunities they had. Xerox failed to understand that you can’t keep perpetually making money on the same technology. Sometimes technology fails too.
As companies turn successful, one or more of the following things can happen
1. The urgency of innovation and Technology up-gradation die.
2. Leadership and the management team go into their comfort zones.
3. Within the company, minds with new ideas are silenced
4. Company starts to view innovation as a threat to the existing system
In this cutting-edge era, an entrepreneur needs to embrace technology very fast and innovate at a rapid speed. If you look at the organizations that truly stand out from the pack today as clear leaders within their industries, it would be clear that all have one common factor: They all are driven by innovation and Technology. Companies like Uber and Amazon disrupted the status quo by changing processes at the core of their industries. Microsoft and Apple, big global brands have been around for decades but owe their continued success to constant reinvention and innovation. An organization cannot expect to maintain a competitive edge if innovation is not part of the overall business strategy.
Robotics, Cloud Computing, Internet of Things ( IoT ), 3D-Printing, Machine Learning, and Artificial Intelligence, etc. will prove to be the game-changer in the future and entrepreneurs will need to keep themselves abreast with changing Technology and Innovation.
Upgrade your Skills
If you are considering becoming an entrepreneur, there can be several essential skill sets that you should develop to increase your entrepreneurial success. Hard skills like technical and financial skills can be extremely important in managing a business. Additionally, soft skills like communication, presentation, and critical thinking skills can also ensure, you develop as an entrepreneur.
The ability to present and persuade is crucial for entrepreneurs to sustain success within their businesses. However, with each presentation, there is a lot at stake. During the startup phase, being capable of attracting potential investors and team members may be crucial, during the growth phase, attracting customers, business partners, vendors may be of prime importance. Having great presentation skills will definitely give an edge to the entrepreneur to send the right message to the target audience.
For successful entrepreneurs, being able to communicate their ideas and messages in an effective and desirable fashion is key to spreading their knowledge. Communication also helps them develop fruitful relationships with their co-workers, employees, and collaborators. Good communication skills have to be spread across multiple media channels. People who can understand what you try to communicate are more likely to catch your ideas; to be receptive to those. Ensure that you develop sturdy abilities in the following spheres.
· Written Communication
· Spoken Communication
Critical Thinking Skills
Critical thinking skills, like analytical skills, can be necessary for developing your overall entrepreneurial skills. Being able to look at problems, situations, projects, and operations from different perspectives can help in decision-making and solving problems. Critical thinking skills can also be necessary for strategic planning and evaluating the approaches you are using so you can make changes or improve your business strategies as needed.
This is the last but one blog of my A to Z series on entrepreneurship. If you find it useful please share the link in your network.