MoneYoga -Finance , Internet and other Ideas..

Yesterday i saw this wonderfull video which shows a person started a dance party in ‘Sasquatch music festival 2009′

The video shows how a dancer is enjoying himself throughly in his own weird dance sequence. The beauty of this video is that even though the dance moves made by him sound weird at the first glance .. the fact that the guy is throughly enjoying himself makes it interesting. In fact some people first check him out and then slowly but surely many people join him .. and eventually we see that the whole stadium joins into this dance revolution.

But the video does no show  that this person was dancing for more than 2 hours before he was joined by his first partner as shown in the video . So this guy really believed that people would follow him eventually hence continued to dance around for 2 hours !

I think this little video has a secret which i believe is the key to understand why some people are super sucessfull in their life. This has been something which i have always observed all my life whenever i meet or read about successful people.

The secret lies in the fact that if you are passionate of something and then they start working on your passion in a whole hearted manner , then success will be yours. I call this mantra as “Follow Your Passion”

Follow your Passion Explained

In fact most successful people start off like the dancer in the video which is attached , they start by working on things/ideas which they are passionate about . In fact when you meet these sucessfull guys they seem like ordinary guys , but what makes them stand apart is the drive with which they are putting efforts towards their passion/idea. Even though things may not be going their way in the initial stages they will put all their efforts on it . In fact they fight several rounds by self doubt by believing in their own ideas and njoying themselves along the way.

The dancer in this video also goes through this phase where he is alone (watch the full version) where he is just dancing by himself.. and then eventually he finds one follower who joins him and slowly we see that the whole stadium joins him..

So this video shows that if you follow your passion for a long time you will eventually find sucess in your life. Would like to highlight this with an example of Captain Gopinath .

Not many of you know that Captain Gopinath started off his career in the army and then after 6 years in Army he decided to do some unusual things.He took up farming in a barren land in Hassan: The land when he started was untenable and people thought he was crazy to take up farming. But Gopinath was passionate about his idea that farming can be sustainable and then over the next 10 years he made this untenable piece of land into an award winning farm. In fact not many know that he has won Rolex award for Developing new farming techniques ! See that he was sucessfull in making his idea a reality , but note that this was not achieved in 1 year , but took him 10 longs years to reach where he is now. This is what i mean by ‘Follow Your Passion’ and then eventually you will be sucessfull .. there will be moments of trouble but eventually u will be sucessfull.

Orginally published on my blog smellthecheeseblog.com was was hacked so reposting here !

Thanks for the wonderfull feedback both online and offline on my last Facebook note on my experiences with UPE (http://moneyoga.com/my-experiences-in-up-lucknow-other-india/)and in fact this new note is an outcome of discussion on the same topic and my own reflections.

In my previous note i wrote how low level jobs like those of labourers , delivery boys , cooks etc is slowly seeing “BIMARURED” (My version of “Bangalored” , but workers migrate from Bihar ,UP to down south BIMARU stands for Bihar , Madyapradesh,Rajastha UP  ). This is happening as we see higher education rates down south driving more and more people into white collored  and blue collared jobs creating a vast deficit in lower category of unskilled workers like labourers , delivery boys , cooks etc .  Now this deficit can be met in two ways i.e pay higher wages to get educated people to work for you else import workers from other parts of India   and loh we have our own version of being “Bangalored” called as  ”BIMARUED” ..

A deeper look at the similarties in what is happening here and what happened in west is a bit eye opening because on closer look one can see similar characteristics in IT , BPO and other spaces where rising costs of employees in the developed economies forced the companies to innovate and they found answers in India’s educated mass which was raring to work as the opportinties were less during those days . So companies first imported staff via Body Shopping outfits and then soon indian companies come up with the concept of outsourcing and offshore delivery centers.  All this was driven by the quest to control costs hence there was innovations which were thought about and these innvoations are the reason why we as IT professionals are existing today and reaping the benefits.  So at the core of it the drivers for this are “Quest for Lower costs” else IT Gaints from develeoped companies would never have ventured into Outsourcing market…. and we would not having been reaping this benefit of high salaries

Now lets consider the background , today driven by IT demands we have 1000s of Engineering colleges which have sprung up in all parts of India . Even UP now boasts for 200+ Engineering colleges . I read in the paper today that 2011 will be the year where we will have highest recruitments by IT and due to this competition for  talent we see that companies are paying more and more salaries to their employees . Slowly this is taking us in the higher brackets of costs and we are no longer as cheap as we were few years back. Given this scenerio  it is a matter of time when some innovative companies (next generation Infosys , Wipro)  would soon find a talent pool which is cheaper than India  and then it will lead to our jobs being “BANGALORED” to the new destination.

So we may be proud of our achievements in IT industry but we need to remember that this industry is born because of the basic economic need to cut costs after a “BULL run” in employee costs in developed economies  and there is every possibility of the same repeating here again  and then we will start undergoing the changes which people in developed economies went through…

I always love to quote the analogy which i beleive is true for almost all markets  whether it is real estate , stocks , commodities (in fact every economic activity) is when your nieghbour starts giving stock market tip daily then its is time to get out the the market as it is during the peak that we see almost everyone will start behaving like stock pundits and boast of gains made in stock exchange. It is precisely this momemt that one needs to bail out from the stock market as the markets will crash after hitting a peak..

To me it seems like we are into a similar situation with regards to IT industry in India , where we are seeing recruitments in hoards and hoards without looking into quality (how can one explain Infosys picking wup 180 students from a single college)  and combined with rising costs of employees we are headed into a double whammy  of  excessive optimism and new destinations for outsourcing emerging…

My point of writing this article is to highlight one fact “Be Prepared for changes” and we are not what we are only because of our capabilities it is also a function of outside forces.

During a general chat last week one of my friend (Colleague ) told me that  he is frustrated with the daily routine of the jobs and would like to start a business of their own. Have heard this familiar ruse for umpteen number of friends and relatives over the last 10 years. But i guess people have not really thought of the what are the risks and sacrifices one has to make  to start some business of your own.

Let me share with you an analysis which i made with one of my friend on starting a small restaurant (size of a small Dharsini ). The idea of the analysis was to analyze how easy/ difficult it is to  setup a business at a later stage.
Hope this example analysis will sensitize the readers on the costs / risk / sacrifices one has to make to take up the route of Entrepreneurship. Intention of the article is not to scare you , but to sensitize you to the risk involved in setting up your own business by giving up your cushy jobs. One of the reason why am writing this is because of my relative took upon a business venture without realizing the costs involved in it and is now facing big losses. So lets get sensitized  to the costs/risks involved.

Note : All Data used here is actual data collected 2 years back and are not assumptions
Dharsini in Malleswarm :

The intention was to start a Dharsini for my friend (small quick service restaurant )in Malleswaram Area keeping in mind the daily traffic around 8th Cross – 12 th Cross Malleswaram. The intention was to offer things which are not normally available in a dharsini along with the regular fare at Dharsini

Cost of Real Estate :  Upon an extensive survey we hit upon a really good place in 10th Cross Malleswarm . This place was available to a rent of  36k/ month with 11 month advance and was right on the main road .

Cost of Setup for Cooking & Serving : Once the real estate is taken we need around 2 months before we can start offering food. During this time we need to work on the interiors , cooking setup for this place. This costs on an average of 3 lakhs for a small dharsini.

Cost Of Employees : On discussing and visiting an existing hotel  of a close friend  of my dad realized that to run a small scale dharshini  we need to have 5 full time employee with + 1 head cook.  On an average  head cook would charge around 8-9k / month and the 5 employees need to be paid 4k + accommodation. Even after this it is difficult to retain people with employee turnover being highest at the lower levels. Apart from this we need to provide accomdation of the employees which costs around 5k/ month.  So the total costs of employees is  9k+ 20k+ 5k = 34k
Monthly Costs :  Apart from cost of employees you need to factor other costs  like GAS , Electricity , Mamul to Food Inspectors  and daily cost of rations to cooking food.  This on an average comes to  15k/ month.

All the analysis is fine , but the most important aspect is that you don’t make profits from the day you start your business . This is the fact where people who are starting off on their own make the biggest mistakes. They stretch themselves up  to start the business , but  no business is profitable from day one  because it needs to achieve a critical mass before the fixed costs of operations are supplemented by profits from selling goods.   On visiting and discussing with existing owners of hotels/ dharsini’s   we realized that on an average it takes  5 to 6 months for regular visitors to start coming to a joint and the critical mass of only reached after 18 months (optimistic assuming that u are serving the best food fare).

To make an analysis of costs involved we assumed that during 12 months we will not be able to break-even (i.e start earning enough profits from sale of food to recover fixed costs like rent , salary). Let’s now see the over all costs involved .

Upfront Investment ~ 7.5 lakhs :

1. 4 lakhs for Advance of Rental
2. 3 lakhs for Interiors & Cooking setup
3. BBMP License , Cooking Gas , Electricity connection – 50k

Running Costs Till Break Even period ~ 10.8 lakhs:

1. Salary Costs -  34k * 12 Months ~  4 lakhs
2. Rental Costs -  36 *14 months   ~  5 lakhs( 2 months to setup place)
3. Monthly Expenses – 15*12 months ~ 1.8 lakhs

Thus we need to have   around 19 lakhs of capital to start a small dharsini of your own.

Now to give an idea of the amount of customers who have to visit your restaurant to make it profitable assuming 1 single customer spends Rs 25 in your restaurant  and that your gross profits on this is around 15 Rs (i.e you spend 10 rupees to serve an item which costs 25 Rs). You need to recover Fixed costs of Salary + Rental from the profits we need to serve 4700 customers ~ 160 customers/day.  If you imagine this is  quite a lot of customers to serve on a daily basis , so you breakeven only at this point.
But wait wait … what we are missing something!.
All this does not include your costs , BECAUSE you cannot continue to work with your cushy job  while trying to start a business on your own. ADVICE which i got from several restaurant owners  is that this sort of business cannot be made sucessfull without  fulltime involvement of the owner  because trusting others with management of a business is suicidal . So you need to quit your cushy job (would have done any way right ? remember you are frustrated with ur corporate routine). Now here comes the most difficult part of the equation which needs to be solved. The moment you decide to quit it means that you monthly bank balance will no longer recieve that nice salary cheque of  xx thousand monthly. But starting a business does not mean you starve right ? So u need to keep money aside for your daily expenses which we can safely assume is at-least 30k (remember kids education , house rent , EMIs. Could be higher if u have burden of a big house EMI).

So you need to keep aside money for the same. Assuming an optimist view that business will breakeven in 12 months and you spend 2 months in setting it up  and keeping a good buffer for another 12 months to cover up ur costs we are looking at 26 months * 30k of expense ~ 8 lakhs . So start you need to have a corpus of  19 lakhs + 8 lakhs.

Surprised !  -> BTW i am talking about a small dharshini only here. You may extrapolate this example to any other business which you wanted to get into.  Basic idea of this article is to sensitize one that we are all njoying the benefit of assured salary every month and it is easy to forget about that one . As they say grass is greener on the other side  , but it is not always so as the grass on other side may have many more thorns that one can imagine from here.

So the next time you make a lose statement that this 9 TO 5 Job is frustrating i want to start some business of mine  , keep in mind costs involved.

Reproduced from my blog SmellTheCheeseBlog, my previous blog which was hacked !