[Editorial notes: Easy money is a sin. Here is a guest post by Srikanth Ch, Cofounder of RecommerceHub (a platform to sell second hand mobile phones) on the benefits of bootstrapping and why the decision to NOT run around investors helped them in building a business]
After sipping in a not so costly whisky one evening, my co-founder asked me “What is the best thing that ever happened to us in these 7 Months of building business?”
“Customers?” I said. After he nodded a no in the Indian style, I came up with other answers – Good advisor, Our margins, Our vendors. All of these were greeted again by the No-Nodding.
“We never had money to build this business and that was the best thing that ever happened to RecommerceHub till date” he claimed.
This got me thinking. Do we really owe it to having no or very little money, for all the lessons learnt? Did having no money help us in paying more than Rs 12 lakhs to customers till date and that too on time?.
This really got me thinking.
No alpha, no beta but a few hundred customers
We started looking to hire a techie as both of us couldn’t write even a break line in html. After a month or two passed, we got a call from the friend who earlier promised to put in 5 lakhs in the venture. He dropped the idea of investing. We dropped the idea of hiring. We realized we didn’t have money even to pay a month’s salary. Having left with no money, we decided to get our hands dirty rather than waiting till that techie and the investor smile. We’ve set up the website with a simple form in 13 days and started helping customers to sell their used mobiles to us. By the end of the first month, we had a repeat customer, referral customer and a total of 10 customers.
After a couple of months, we also started giving out instant price quotes to customers i.e. as soon as the customers give the condition of their mobiles, a price quote is instantly displayed.
All this was done using a simple wordpress site and by spending less than Rs 5000. We never had an alpha or a beta version (actually we really were that ignorant) but managed to acquire a couple of hundreds of customers.
Not having money forced us to learn, build and launch things quickly. More importantly it taught us ‘The importance of doing’.
Cash, customers and composure
Context: how RecommerceHub works – We pay customers in cash for selling their used mobiles to us.
Btw, we didn’t tell you how we paid out to customers on time, is it?
Okay, here it is!
It’s no joke. We did this, several times. And gradually, with the profits we made, we were becoming more stable and borrowing less. The increasing numbers combined with the not so great bank balance forced us to strengthen our disposition channels. The inventory had to be cleared sooner. We were out on the roads again for more tie-ups and we managed a few new ones. We get stressed less these days instead started thinking with a clearer mind. We keep saying to ourselves “There should be a solution” whenever we face an issue. Btw, a big shout-out to all those friends who helped us (Beer would come later!).
The office and the Circus
Our customers were often afraid to sell mobiles to us as we pick-up the mobile from them and then make the payment after inspection within 24 hours. A good number of people were worried as they would be left without the device and the money for a day. This prompted many customers to ask if they can drop the device by themselves at our office. Well the truth is there was never an office. All we had was a single room which was office by day and bedroom by night or sometime vice-versa.
We really were worked up when a customer for the first time said he’d like to visit the office. We jumped, did some yoga, drank coffee to get an idea which would stop the customer from coming to our office but still make him sell the mobile to us. After this incident, we put better things in place which improved the trust factor significantly. In the process, we developed better sales closing skills. Had we had an office, instead of bettering the trust factor, we would have simply asked the customers to visit the office. And it would never have been a hassle-free experience to customer as it is now.
Sometimes it appears as magic to us – the whole journey. We, building a business enabled by tech was unimaginable 8 months ago. Many advised running this business model without any working capital is impossible; now we smile and say really?.
“Every great magic trick consists of three parts – The Pledge, The Turn and The Prestige”.
During the pledge, you have a setup which is ordinary and start with it.
At the turn, you try to make something extraordinary with that ordinary setup.
And the final stage – The Prestige, you would show the effect of the illusion.
What are your thoughts?