I took some time to write this post as it covers a very important part who I wanted to be going ahead in my entrepreneurial journey.This is a story about two entrepreneurs I have observed over the last few years and have been instrumental in shaping my beliefs on some crucial aspects of entrepreneurship styles which I would like to share later in the post.
I have their not mentioned their actual names as I would prefer them to be symbolic representation of the characters types I later want to explain. I am sure you would have encountered these traits among entrepreneurs around you.
Mr. Malhotra from Mumbai.
My friend’s dad Mr. Malhotra has been running his own business for the last 20 years. Though not from a business family, he had to start one to support his family. With sheer determination and hard work he established his business from scratch. His family saw very less of him, as he worked relentlessly for 18 hours during the initial few years to ensure he succeeds in his business. I have seen them stay in a small 250 sq ft house when they moved to Mumbai and as their business grew they kept moving to bigger places and he created enough wealth to afford a decent lifestyle and good education for his family.
There was only one problem; he just could not spend any time with his family. For 20 years he never took a Sunday off. Their family never had any outings. He could not risk it. His business depended on his physical presence. He worked with a team of unskilled labors who used to work under his guidance. Despite 20 years in business he still had to be physically present to ensure his business operates. Even today, there is no weekly off for him. Only now, he is older and health deteriorated He used to personally oversee each and every aspect of the business himself. He liked it that way. His customers love his attitude towards his work and he ensured that his service record was intact even at the cost of sacrificing his family time. Even when in was admitted in the hospital briefly when he fell ill, he used to coordinate with the office on phone despite strict warning not to do so. His family was very worried about this. They tried to convince him to slow down and take a break. But he mentioned that if he went on a holiday his business would be shut.
Mr. Vinod, from Hyderabad
I met Mr. Vinod during one of my official trips to Hyderabad when I worked at an automobile company. He was a first generation entrepreneur; after working for a few years in the corporate world he decided to take a plunge into entrepreneurship. His family too had no background into business. But for Mr. Vinod it was more of a passion, and something he wanted to do always. Of course it was not easy initially as he failed in a previous business attempt before he stabilized his second venture. I had met him first time in 2007 when he had completed 2 years in his venture. He too put in around 14 hours of work every day and was building the foundation for the long run. He was enjoying but it was taking a toll on him. He told me that his wife had been constantly complaining for the lack of time he devotes for her and that he wanted to improve on it. Post that meeting I did not meet him for the next 5 years and hardly kept in touch with him. Earlier this year when I happened to meet him at a friend’s party I was surprised to learn his progress. He told me that he is working on his foray into a new business. I thought his earlier business must have closed down and was hesitant to ask. But to my surprise he mentioned that it was doing very well and had grown over 100% rate over the last 5 years and he no more runs the business. I was a bit confused. He said that he has a team in place to handle that business and now he is no more involved in day to day business operations. But yes he spends an hour daily to review his business. And in fact that business has given him enough profits to enable him work on this new venture in real estate. He then explained his new business venture. I was mighty impressed. I reminded him if his wife still complained of not giving enough time and now especially with talk of a new business. He laughed off and said that now she does not complain that much as he comes home on time and they go for an international holiday once every year for 2 week. Also he added that now he is much more free than earlier and can plan life better
I liked what Vinod did and was thinking why Mr. Malhotra could not replicate the same. Both were first generation entrepreneurs and had similar background, both worked hard to set their business and it was on the same growth path for the first few years. Then what made the difference. And more importantly what learning there is for me going forward
In fact when I started to compare these two cases and look at other entrepreneurs around me they could more or less fit into one of these two cases. For me Mr. Vinod’s journey presented an ideal entrepreneurship growth case study. To help explain my thoughts on the concept I put down both Mr. Malhotra and Mr. Vinod’s entrepreneurship growth journey on a chart with x y and z axis. On the chart x axis showcases Time (years in Business), on ‘Y axis is the amount of time the entrepreneur invests in running his business and finally ‘Z’ axis tracks their growth of business. The following is the chart representation
Disclaimer: The diagram below is just rough sketch to visually illustrate the point i am trying to make. There is no intention to be scientific with any aspect.
A Type Entrepreneur B Type Entrepreneur
Now with this diagram I could see clearly two types of entrepreneurs emerging
A Type Entrepreneur: He is the business. His physical presence is a necessary condition for the business to exist. He is the primary source of revenue. His income and his results are totally dependent on his physical presence. If he off work for a few days his business suffers. Everything is really dependent on him and that puts him at more risk. Therefore in the chart you see from the day he starts his business his hours spent on business remains almost constant over the years. But later on due to health issues his business growth slows despite him putting same if not more time than earlier, thus wasting a great opportunity to build on what he started. That is the problem with Mr. Malhotra today.
B Type Entrepreneur: Starts off as A Type Entrepreneur but then create a system where the business operates and thrives without his physical presence. His physical presence decrease as time passes but the business continues to grow. In fact after a certain point the business growth breaks into a different league compared to A Type Entrepreneur. This is the creation of true wealth As can be seen from the chart B Type Entrepreneur starts to earn more than A Type as he is not the primary source of revenue but actually has others to grow the business for him. He may not even be physically present. So a B Type actually become more free as his business grows, which he can then choose to invest his time more wisely as Vinod did by investing in real estate
There is no doubt that most first generation entrepreneurs need to start off as an A Type Entrepreneur as seldom one can afford a huge team, lots of money for creating a system like B Type right at the outset. Everything has to be personally taken care of by the entrepreneur from Marketing, Sales to HR. More importantly his vision needs to be embedded in the company culture. One spends most time in this phase and probably earns the least (relatively to B Type with respect to time invested). But this is a solid foundation which is being laid for future success and hence most important
But over a period of time the entrepreneur needs to have an action plan to migrate over to B Type as that is the real purpose of getting into a business. As it’s when he becomes B Type, that business starts growing exponentially as it no more depends on the entrepreneur’s physical presence. So not only does the entrepreneur free himself in the stage but business grows faster thus creating more wealth. So in reality the entrepreneur freeing himself from business and the business growing is a great sign.
For me, this was most important knowledge as i started my entrepreneurship journey. To migrate to a B Type Entrepreneur by developing a business that is self sustainable and can grow faster without his physical presence all the time. This allows more time to the entrepreneur for his other commitments, be it his family or other personal hobbies or a new business he may want to explore
Of course like I mentioned it’s an ongoing process to move from A to B Type, you don’t just jump from one type to other overnight. In fact if done wrongly can create a mess. But there is a definite plan to work on. And also that this is relevant for any business whether a one man show or a 500 to 50000+ employee company (where this is a must).
In our business at this stage we are A type entrepreneurs, as we begin our journey but most importantly are aware that we need to migrate to becoming B type Entrepreneurs as that’s the real purpose of business and it is here that true wealth is created. Some experiments have worked well, some have to be improvised. But the effort is always on
Of course one may ask here the million dollar question now is how one actually moves from A to B? What needs to be done?
I must admit we don’t have a step by step process but we have a broad plan which we worked out by observing successful B type Entrepreneurs, we are working towards making our business not dependent completely one or two persons. We will share our process in the next few post
However the awareness of the fact that one has to work on a business model that is sustainable and can grow faster without ones physical presence is the most important step before the next step to execute it. As they saw awareness is 50% of job done.