Today is a special day. Verinite will be celebrating its 7th anniversary (1st June is our Foundation Day). I knew that it was going to be one roller-coaster ride but didn’t expect it to be so satisfying and fulfilling.
This entire journey of 7 years can be easily divided into two phases. The first phase was focused on only one thing – “Survival”. The two best outcomes from this phase was that: we survived and also established a strong credibility in the market space. The second phase was focused on thriving. It was all about relentless focus on getting our execution right and opening up new avenues/opportunities.
I have penned my thoughts on the first phase in my earlier blog while this will focus on some of the key takeaways during the second phase of this wonderful journey.
- Build great services and products – This is one non-negotiable according to me. We started as services company and then later created an entirely different department focused on building products. The only mandate for delivery department in “Services” and engineering department in “Products” should be to build a great service and product respectively. A great service or product goes long way in empowering sales and marketing as establishing value proposition becomes easy. You cannot build a sustainable business based on shitty service or product.
- Hire awesome people – This is one thing I thought we were good at but then growth took its toll as we ended up making mistakes. We learnt this the hard way. It is extremely important to be surrounded by colleagues that are hungry to grow, bring focused skills to the table and enjoyable to work with. Do not compromise on this principle for any reason.
- Hire slow – The tempo of hiring has to be right for the stage of the company. We remained small for longer period of time to ensure our objective of survival was met. Once we crossed that phase, it was time to be aggressive with hiring but then it ended up with we ignoring certain key behavioural aspects over technical skills. Again, we learnt this hard way. Now we are okay to compromise little bit on growth and hire slow. Think long term and build a sustainable business. Don’t be in mad rush to grow at all costs.
- Celebrate small wins – This I believe is our strength and something that we have been doing from Day One. Starting, running and growing a company is extremely hard, tiresome and draining. So, we decided to celebrate our small wins as they boost morale and give that much needed surge of energy. In your short-term plan, identify small wins to celebrate. Avoid the whole thought that says you need to reach fantastic landmarks before celebrating. We have even celebrated “deal loss” as “small win” as there was immense learning that we gained in the bidding process which only made us wiser for future.
- Stay Curious – This is one thing that has helped us immensely in our journey. By keeping mind open to new ideas and embracing novelty, you make opportunities for yourself. We have uncovered new possibilities and opportunities just by being open, curious and aware about the trends. There are 2 new service lines we created just by observing the way emerging markets operate, prevailing skills gap, client pain-points and these new service lines have now become differentiated feature of our value proposition.
- Seek right mentor to help guide your growth – As a founder, there’s a natural tendency to assume that grit and hard work are sufficient to drive the growth. But what we tend to ignore is that journey of founder is lonely, taxing, full of apprehensions and emotionally draining. Having co-founders definitely makes the journey easy but having mentor is the actual solution. I have two mentors and they have helped me immensely especially in motivating me to push the limits and encouraged me to take risks. A mentor that comes from your industry has that knowledge and can condense wisdom required for you in a few lines. The key thing is to find a right one.
- Right Investors – We were lucky to get good investors who are fully aligned with our way of thinking. They are our cheer and support us. Thanks Ashwin and Salil for all the help over the years.
So many people ask me this question “Should I start a business?”. It is such a simple question without a simple answer.
Starting and building a company requires ridiculous amount of passion, focus, commitment and hard work. Being an entrepreneur is an experience like no other. Running your own successful business probably won’t turn out exactly how you imagined — but that doesn’t mean it can’t turn out even better than you imagined!
Remember that if you put your mind to it, anything is achievable & I hope my experiences of my own entrepreneurial journey will help you on yours
“Revenue is vanity. Profit is sanity. Cash is reality.” – Who knows better about this other than an entrepreneur? Anyone who runs business will know that cash is like oxygen.
Over last 4 years, I have been running Verinite as a lean start-up and one of the key focus areas has been maintaining a healthy cash flow that not only supports current operations but enables growth as well.
Start-ups and small businesses often struggle when it comes to cash flow. It is intertwined with a number of challenges, which make it extremely difficult to manage. We faced same issue when we started off. One of the biggest contributor to the problem was ineffective management of the account receivable collections from our clients.
Upon review we realized that we couldn’t continue in the same manner and needed to make interesting changes to the A/R collections process. Here’s what we did:
We became authoritative
According to the norm, in the ITeS industry, you offer a payment term of 30 days. However, that’s not carved in stone. You are well within your rights to negotiate those terms to favor you. We decided to be aggressive about payment terms and honestly tell them about the terms. Being resourceful and innovative helped us to a great extent in this endeavor. We did not hide anything including the fact that we are a budding startup. That showed them clearly that cash flow was a very important aspect of our business. We were authoritative when we asked them for 15-day payment terms as opposed to 30-day terms. Even though it seems like a risk, we are proud that we took this decision because thanks to this simple step, a great chunk of our clients (60%) pays us within 20 days! To accelerate cash flow even further, we made use of incentives. Clients who paid us within 10 days were given 2.5% discount. Two of our clients now pay us within 8 days. Both these clients are also startups and just like us, they know how important every penny is!
Be aggressive while negotiating
Our invoicing process was clear and accurate
The invoice is a crucial part of cash flow. A lot rides on the clarity you provide in your invoice. Go through the entire contract thoroughly before furnishing the invoice. We did that and went to the extent of having it reviewed in a 3-tier process. The perfect invoice has no ambiguity or loophole. This detailed review process ensures that. We also gave account managers the responsibility to release the final invoice and to collect the payment.
Go by the contract
Have a detailed reviewing process
Give the responsibility to account managers
We built a strong internal collections process and system
We realized that only when we have a strong internal collections process and system could the cash flow process be smooth. Hence, we started working on it. We created an AR aging report and gave the finance department the responsibility to follow-up with the account managers every week.
We mapped the client payment process
Having a clear process internally is just one part of ensuring clarity. The other part is to understand the client payment process. Now, this differs with the client. That is why it is essential to dig deeper. Understand how the payment process works in the client organization. Also, mapping the stakeholders involved within this process and building healthy relationships with them helps to a considerable extent. We always made it a point to stay in touch with the project owner so that he pushes the payment internally.
Understand payment process in the client organization
Build relationships with key stakeholders
Have the project owner push for payments
Special Case Scenario: In case the client is facing cash flow troubles
While some clients are inherently troublesome, other clients have genuine reasons. They may have cash flow problems themselves or there may be hindrances. One of our clients faced a similar issue. They were not able to pay us since they were raising a Series A. We came to a mutual agreement with them so they could pay us only a percentage of the total due within the agreed timelines and the remaining after Series A. This support that we gave them lead them to pay us within 10 days henceforth. Plus, the loyalty that we managed to build with them was a huge bonus.
You can see that simple, innovative steps helped us improve our cash flow while keeping our client relationships in tact. Being a startup is a difficult but the road can be smoothened with authoritative steps and transparency.
Remember a sale is not a successful sale until you collect the money from client. Do share your thoughts or innovative ways that have helped in boosting A/R collections.