Business in India
I am Aarihant Aaryan! Welcome to the Iron Sharpen Iron newsletter,
I share my weekly homework from my startup journey, learning about human behaviour, and sometimes decoding industries and business models for fun.
I can’t control my curiosity :) )
If you own a small or mid-sized business,
Please think 100 times before accepting government contracts and have contingency plans ready
Assume that any government contract or plan you receive is only valid for 5 years or less
If the administration changes your contract could go berserk and policies could change overnight. what happened to L&T in Hyd is a great example, one policy change of giving free bus access to women disrupted their business
Your payments will likely be delayed by quarters and years.
you have to pay a 1-4% commission on every payment released or a certain % on the total value of the contract to government officials
India is a socialist country, most hate capitalism and most policies are crafted against capitalism - so ideally no one or the govt wouldn't care if your business is going under the drain
Sometimes the government can cancel your contract stating the deficit of funds - you and your employees and their families are bearing the loss again :(
In govt contracts what is supposed to take weeks will take months, and what is supposed to take months will take years
For the very fact I know, few businesses do markup quotation since it's a govt contract but the higher the markup, the lesser the higher the chances of things going south
Ps: Views are my own, I don't support Congress, BJP or any state party. I'm a core capitalist, who only supports businesses and my heart goes out to such struggling businesses :)
So far these are businesses that have worked very well in India:
Ultra convenience category: Zepto, Blinkit
Lending: All categories of lending have worked, but needs ultra discipline to crack it
Help people make more money: Marketplaces like Swiggy, Flipkart, meesho
Hope-based businesses: Education-based businesses, astrology, Dream11, Rummy circle, real money gaming, upskilling courses W/ placement
Mating success ( these also come into the category of hope): Aisle, Bumble, Tinder
B2B Businesses: Ofbusiness, moglix
Status amplifying businesses: cosmetics, branded clothing, iPhone, Jordans by Nike
How Indian’s buy:
How Indians buy is different from the West, it’s unique but also very expensive for companies
Most purchases in India 1 are done without any assistance, ideally, assistance happens if the average value of purchase increases i.e car, jewellery
95% of purchases by India 2 are assisted by a seller, counsellor, account or relationship manager
Think of this, right from buying stuff in the supermarket, getting a loan/insurance, or buying an educational course - consumers need someone to talk to
To onboard a merchant on payment apps, marketplaces, or e-commerce platforms - some executives have to reach out to onboard them
This is a very different behaviour when you compare it with the India 1.
In the West or any progressive country, most sales are self-assisted - only enterprise-level or high ticket-size transactions have humans involved.
Tech companies are supposed to be tech-led but in India,
most big tech companies are partly operations-led there are many reasons:
What happens when a tech business needs sales executives or any human effort to acquire a user, margins shrink to a certain extent - conversions could improve a little but quality, miss-selling opportunities, and average response time increase
You are in a disaster business if you need human effort to acquire a user and make them perform their key activity again ( basically your activation cost becomes super expensive)
Please add any more points if you want to in the comments and If you found this insightful.
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