Any one watching the price of a barrel
of oil dropping will be amazed not just at the speed at which the
price is falling but at the fact that just a few months ago, it
looked like oil prices could only go up. The very fact that there is
not a single story off any entrepreneur hay or any analyst predicting
this amazing fall, shows once again the glorious uncertainties of
being in business. Business it seems is a lot like cricket, you have
to keep your eye on the ball all the time.
Rising oil prices put nearly all
business in a spin, transport costs spiraled. This meant imports,
exports local buying or selling would take a hit in terms of
transport, this automatically pushed prices upwards, and sales took a
hit with dampened demand. Nobusiness that would have been laughing
all the way to the bank except petrochemical companies. It looked
like they were on a roll that was never going to stop. However, today
the situation is simply the opposite, oh yes transport costs are yet
to come down and no finger pointing to Goa's tourist taxi's, no one
is reducing their transport cost, in effect now the shoe in on the
other foot.
This brings me to the point that I want
to make, every business undergoes these cycles and every entrepreneur
has to make a judgment call. More so when the tide is turning against
the business. What kind of call. Take and example of a manufacturer
of black and white TV's, if he looks at his falling sales graph and
believes it is the effect a slow economy he is only fooling himself.
This may be very straight forward, but consider the example of a
bulb, is the falling sales graph a result of a slow economy or is it
the effect of substitutes like CFL or LED lights?
Alternative energy sources would have
seen a lot of activity in terms of R&D, setting up of
manufacturing facilities for say solar panels and also sales of these
products would have zoomed as the cost benefit or payback given high
oil prices would be pretty good. Now, that oil prices have cooled
customers will relax and defer decisions to buy or replace
conventional energy sources. Should entrepreneurs here sell out, shut
shop. No, but they will have to be innovative and ride this slump
because we do not know when but we know it will happen, oil prices
will rise again.
We started selling SHAKTI water tanks
way back in June 1996, we had just missed the boom in the real estate
sector, added to that was the fact that for the next 4/5 months we
would be in the traditional lean season, better know in India as the
monsoon. It was only later after spending many a day sad or
despondent that we had missed the high season that we realised that
it was a good thing.
Missing a high season and good? Well
imagine our launch coinciding with the start of the high season
(Sept to May) . Within 2/3 months we would have had orders pouring in
and the teething trouble that all entrepreneurs have to go thru would
have kicked in. Once that happens, and a Company fails to deliver
right at the start it is a recipe for disaster. By starting at the
fag end we were able to ramp up our production, take control of
teething issues and deliver consistently what was ordered. We were
battle ready when the next high season came along.
Every business cycle comes with its pro
and cons, like a surfer, the important thing is to figure out how to
ride it safety to the shore and then head out again to catch the next
wave.
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