On a recent trip to Goa, I decided to stop spending and start investing for a change. My father quickly made an appointment with his financial consultant to help me chalk out a good tax saving strategy before I changed my mind. When I strolled into the consultant's office, I was surprised to meet two young guns instead of a middle-aged veteran.
Suraj Betkikar, 27, and Arjun Rebelo, 25, manage Milestone Financial Consultants in Margao, a small town in south Goa. Before setting up shop in January 2005, Suraj worked with ING Vysya Bank in Goa, while Arjun was with ING Vysya Mutual Fund in Mumbai. Both completed their MBAs in marketing and finance from the Goa Institute of Management in 2003.
The former classmates proved to be an enthusiastic duo, suggesting several combinations before we finally zeroed in on what to do with my money. As neither Suraj nor Arjun come from business backgrounds, I wondered what prompted the two to swap a regular paycheck and job security for the hassle of launching their own enterprise.
Choosing the right business
My first question to them was, why? Their reply: "We make the rules, we decide when to break them."
I asked them to elaborate. "During our MBAs and working days, we regularly thrashed out business ideas," they said. "We were both connected to the investment sector and realised the time was right to set up a consultancy. With the economy growing, the broking and investment services industry was just beginning to boom. We identified Goa, which didn't have too many organised and professional investment service organisations. Most people were uneducated about financial products; the concept of financial planning was alien to them."
Betkikar and Rebelo wanted to offer a services approach instead of a product-based one; i.e. they planned to offer financial planning and advisory services -- to become a one-stop shop for all investment needs of the average middle-class person. They also have a private limited company called Money Factor Financial Services, a franchisee for India Infoline Securities, through which they provide broking services.
Choosing the right partner
The duo believe that the main reason for getting into a partnership, as opposed to setting out on your own, is to make doing business easier. It is lucrative to join hands with the right person, provided you and your partner share a common goal. They say you must also be equally confident of your ability to deliver.
Ideally, your expertise must lie in different areas so you balance out your partner's weak points. For instance, Arjun handles 70 per cent of the marketing and PR because he is good with his communication skills. Suraj manages 70 per cent of operations -- back office management, the company's risk management, accounts, paperwork, etc. However, Suraj also has his own client base. Both chip in when the other is absent.
They add that you should get along as friends, and that communication on every level with your partner is a must. Arjun and Suraj communicate on a daily basis, so both are completely in the loop about any developments. "Does it get competitive between the two?" I ask, out of curiosity. " Not at all," says Arjun with conviction, adding on a lighter note: "Someone told me that, as long as the moolah keeps rolling, there's nothing to fear."
Which brings us to that all-important word: M-O-N-E-Y.
Money matters
Every aspiring entrepreneur wants to know: What was the initial investment? How did you get funding? Arjun says the initial investment was Rs 25 lakh (including the cost of office space). They coughed up the amount by digging into personal savings and borrowing from their respective families and relatives. "This way, we didn't have to provide collateral for a bank loan and we had the flexibility, in terms of time, when it came to paying back the money. This reduces costs and pressure considerably. We could have gone to a bank but, since our capital requirements were not too much, we decided to keep that option for expansion at a later date."
Most of this money went into infrastructure, i.e. office space and equipment. A lot went into regulatory requirements (deposit with Indiainfoline, licenses, etc) and working capital (salaries, bills, office maintainence, etc.). "Initially, you may have to wear the hat of a peon, cleaner, office boy and secretary to keep costs low. Secondly, you need to have a budget for everything and stick to it," advises Arjun.
"We broke even on monthly operation costs within seven months. We are still recovering our capital expenditure though. In terms of profits, we each take home a fixed salary from the firm. Anything that remains stays with the firm for future investment."
Top hurdles
Suraj says he has already crossed the biggest hurdle -- making up his mind to take the plunge. "We had to resign ourselves to not getting a paycheck in the first few months," he says.
Cutting through the bureaucracy was also a major hurdle. This involved getting permissions from local authorities, finding a suitable business premise, setting up the office, getting registered as agents with various mutual fund and insurance companies. "The local authorities and infrastructure are not very conducive to setting up an enterprise. Things that should have taken a week took a month. For instance, getting a phone line took lots of time and several follow-ups," says Arjun.
Yet another problem: finding good people. "We have been trying to expand and want to look for the right people because, ultimately, our staff will project who we are," he adds.
The duo maintain that attending B-school paid off. And they swear by Porter's 5 Forces Analysis and SWOT Analysis.
Clients and competition
Personal contacts and references were what brought in the first clients. Even today, 90 per cent of clients come through references. 10 per cent come through advertisements placed in local newspapers. All clients are salaried or individuals with a business in the age group of 23 to 70 +. "Servicing corporates is a different ball game; they require a lot of servicing and it is not as rewarding. We do not wish to be in this space currently," they tell me.
How does one cement the customer base? "Think long-term. Keep your customer's needs in mind, even if it is not immediately profitable," they say. Know your customers, their families, their businesses. When equipped with this knowledge, you can relate to them and understand their needs better. You can keep your business professional, but never lose the personal touch. In other words, genuine customer service is received much better. When customers trust that you are doing your best for them, they respond with more business and also pass on referrals. "Our best advertising is through our own customers. In fact, we have customers who have made an entire sales pitch for us, " says Arjun.
Since the launch of the company, the competition has become stiffer. When they first set up shop, there were about nine brokers in Margao, and a smaller number of agents and banks. Now, there are more than double the number of brokers, agents and banks offering with the same services. However, according to Suraj, many of these companies are target-oriented. "We prefer to grow slowly but steadily, by building up a rock-solid client base," he adds.
As they say, the client is king. And these young entrepreneurs adhere to that mantra religiously.
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