Continuing with our round table series, read what our five panelists — Saurabh Khullar, Ideacts; Jiby Thomas, Quikr; Hrush Bhatt, Cleartrip; Saurabh Gupta, Phonethics; Naveen Tewari, mKhoj — had to say about their experiences in drawing up their business plans.
Drawing Board – The Business Plan
Nikhil Pahwa: Hrush (Bhatt), how did you go about crafting the business plan?
Bhatt: Creating a business plan was fairly easy. You had to do a lot of research and digging around for data, etc. It is after the plan, when you start getting ready to launch that things get much harder. The plan pretty much, most people in this room will tell you, is subject to change. Nothing really plays out the way you planned.
Pahwa: Was there anything you decided to take out while at the planning stage?
Bhatt: To begin with, we had a pretty blue sky plan. It was after we got funded that we decided to take some things out. We took out, for instance, the entire concept of offline sales. We didn’t launch with a very big call center. We still don’t run a big one. We don’t encourage people to call us for their transaction. We want it all to happen online. When you start implementing the plan, you start to take the hard decisions. You’re in the middle of the reality of it.
Pahwa: How did you go about identifying the costs you would incur, the revenue streams, etc?
Bhatt: When we started out online travel was an emerging opportunity. It has grown tremendously in the last 2-3 years. So it was quite easy to define what we would go after. Domestic flights were the start of the opportunity. It was quite easy to identify, didn’t take much homework or guesswork. We knew we had to have a low-cost base. The idea of growing into a 1,700 people call center, making sales calls and all for 15% margins just didn’t make sense. It still doesn’t.
Pahwa: Saurabh (Gupta) what did you learn through the planning process?
Gupta: We went in with the thought that if someone thinks mobile phone in India, they should think of us. That was the plan and we thought we had it all covered in terms of ground activation. We actually went out and spoke to 3,000 mobile users in New Delhi and looked at retail activation. But it was when we were trying to implement it that we realized that going through telecom operators is not such as bad deal. They would set up their own distribution channels with 30-40% margins and it would save us the pain of managing it ourselves.
Pahwa: What did you identify as costs at the plan stage?
Gupta: The primary cost was distribution and discovery of the content. On the distribution front the technology was a huge challenge. Today there are kids out there who can build WAP sites. To build a WAP site and integrate it with the operator’s complex billing setup was a big challenge. When you try to integrate it, you realize that your WAP site, which is your destination, becomes obscure. Then you need to spend money to drive traffic to your site.
Pahwa: What did you identify as revenue streams and risks?
Gupta: In terms of revenue streams, the largest we thought would be through telecom operator revenue share. Because the cost of content was so low for us, it worked out on a cost-to-revenue model. The risk that we found was that typically the market was cartelized. Each operator had its own favourite people that it went through and even if they were simply aggregating stuff, we were told, “Why don’t you come through aggregator XYZ, etc.” That’s when we decided not to go through the operator or the aggregator and see if we could do this ourselves.
Pahwa: Jiby (Thomas) why did you decide to go with the same company and rebrand instead of starting from scratch?
Thomas: Well it was as good as starting from scratch. The product had to be built again from scratch, we were a two-member team, so that had to be built ground-up and the brand had to be built all over again.
Pahwa: What did you take from the previous company (Kijiji)?
Thomas: What we had was a community of users, which was valuable. That’s what we took with us when we built Quikr.
Pahwa: Naveen (Tewari) what made you choose the mobile space?
Tewari: I think that’s primarily because there was an interest and the macro factors supported that interest. 600 million handsets and that’s just India. We could build a model that is slightly global.
Pahwa: So what risks did you identify at the planning stage?
Tewari: We basically looked at one thing; “Can I scale this business to a stage that gives me enough entry barriers that other competition cannot necessarily come in?” That’s the risk we hedge all the time. In the SMS thing we figured that there is no technology base barrier that we’re building. We’re building scale. To a certain extent it can easily go away to a large player because they have far more number of relationships with advertisers. I don’t have anything that people would come back for. So all the time we make sure that the business we do is scalable and sustainable.
