Tag Archives: Finance

Are We Over Protecting Our Children

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In our social system we tend to over-protect our children.   Protection and care to a certain extent up to a certain age is welcome.  But protecting beyond a limit and age, could harm their confidence.   A specific incident during my visit to the Scandinavian region was when I realised this.

I was driving with my wife in Norway.  That was the longest, continuous drive of my life.  A drive of 46 hours without sleep and just two small breaks for refreshments.

We were driving on a single, narrow, risky road in the Northern most part of Europe.  We noticed a youngster standing by the side of the road asking for a lift, pointing towards the direction we were proceeding.  We were happy to pick him up.  He was a 15 year old German, traveling alone from (then) West Germany.  He would travel by public transport if available.  We were in leanly populated areas where public transport was almost non-existent.  Wherever public transport was not available, he would rely on help from the passing by vehicles for drops.

Our destination was Nord Cape.  Soon he was friendly and part of the relevant conversations on the way went like this:

 Me: Where are you headed to?

He: To Nord Cape to watch mid-night Sun.

Me: Oh! We too.  We can drop you right there.

He: Thank you.  But I will get down at the next town. I will work for a couple of days in a restaurant or a shop there, earn some money which would take me to reach my next stop.

Me: But then why don’t you come with us as we can take you to your ultimate destination.

He: No.  I want to see and experience the places, earn myself and then spend.

Me:  Oh! How much money did your parents give you when you were leaving home.

He: What? …..pause….. just equivalent of an American dollar.

Me: What? Just a dollar, for you to go right upto Nord Cape and watch the mid-night Sun.

He:  Yeah.  Why should my parents give me money?  I am capable of managing and earning for myself to spend on my holiday.

It was an eye opener for me.  No doubt we are emotionally attached to our kids to ensure that they are comfortable, safe and secure.  But then, by providing all the emotionally dictated needs  are we depriving them of the experience they would gain otherwise?

This incident encouraged me to permit my son a month long vacation overseas by himself when he was about 15.  I am sure that must have helped him build his confidence, consciously or otherwise, in his hectic travels later in his life for education and for business.

Experienced and Written By: Badri Baldawa

Edited By : Meeta Kabra

 

I Almost Gave Up My Childhood Dream, But ……

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My target was trekking to the Mt Everest base camp.  It was the sixth day of an 18-day expedition. I was on my way to Dabuche.   Instead of the norm of going with a group of 8-10 people, I decided to experience the journey by myself, with a sherpa to help and guide me.

I had already had enough of the bitter cold. I was weak from a day’s worth of upset stomach to go with the steep climbs.  I had seen injured people being carried back and heard of quite a few who were being flown back due to severe altitude sickness. Along the way. I had seen too many bodies of trekkers who died in their attempt to complete the trek.

I almost gave up.

Usually, trekkers from both directions assemble in the evening at the dining area of tea shops at their night halt points.  Most people prefer to hang around closer to kitchen ovens because it is slightly warmer compared to the sleeping cabins.

Keep Climbing

Keep Climbing

At the end of that day, I was too tired and feeling depressed.  That evening, I heard terrible stories about the trekkers who had gone ahead. I was scared, worried and tense.  For the first time in the trip, I wondered seriously why I had left the comforts of home food, bathing and toilet luxuries, my own bedroom with controlled temperature and the great evening walks with my wife. Doubts started creeping in.

Things were likely to be tougher since the path ahead was more isolated.  Maybe, it was wrong to have come for such a tough trek.  I thought it wasn’t too late to go back home instead of facing the risk ahead. I considered telling the sherpa that we ought to return.  But I could wait till the morning.

I wasn’t hungry, I just had a bowl of soup with bread and stretched for a while on the bed.  It was already dark.  I felt slightly relaxed and positive.  I picked up the torch which was always handy.  I looked for the folder with the travel documents.  In the folder, I found two sheets of printed stuff.  I had carried with me some of the interesting and encouraging messages sent by friends and family, before I left.  I put on my glasses, held the torch in one hand and started reading them.  Each of the messages made my nerves tingle with positivity.

  • “you are an inspiration”,
  • “you are different”,
  • “with your energy, you can give people half of your age a run for their money”,
  • “nothing is impossible for you”,
  • “you convert ideas into realities”,
  • “you convert hopes into accomplishments”,
  • “You overcome fear into self confidence”,
  • “You are definitely one of those handful few”,
  • “You are equipped with spiritual health and strong will power”,
  • “Not many can visualize a dream and achieve it also”,
  • “I would have the privilege to tell to my friends, that a personal friend of mine has done this”,
  • “We are proud of you”,
  • “it is tough, but cake walk for you”,
  • “Fantastic, what a way to do the things man”,
  • “It is honour to know someone like you to look upto” etc.
  • One also read: “Height may make you feel a bit shaky at times, but I know you can reach the top!  With your courage and determination, you can go past all obstacles coming your way, you can do it, you can do it!”

  • Another:

    “Follow your dream…..

    Take one step at a time and don’t settle for less…

    Just continue to climb….

    If you stumble, don’t stop, don’t lose sight of your goal…

    Press to the top, as at the top, we can have a vision to see something new….

    Press on, follow your dream, follow your dream”

These really boosted my spirits, when I needed them the most.  I regained my confidence.  It reminded me of my philosophy which, for a short while I had forgotten, ‘If others can do it, why can’t I”.  These well wishers saved my day and enabled me to move forward with full vigour to make my 50 years old childhood dream come true!

Therefore, let us put in inspiring words wherever possible. Let us not under-estimate the power of our positive words.   They work wonders!!

Experienced and Written By: Badri Baldawa

Edited By : Meeta Kabra

Trust or Written Agreements ?

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There were many suppliers of stainless steel glasses from India. In my first deal, since I had taken the samples from Mr. Vishnu Goyal, it was ethical on my part, to buy the products from him.

After executing  my first order of $84,000, I felt that I had scope to expand in this business of stainless steel housewares and was worth a try in this range of product whole-heartedly.   If I made sure of maintaining quality and price, it wouldn’t be difficult to take a lead in the Middle East in this trade.

In my initial deals, I found Vishnuji very trust worthy, honest and sweetly cooperative. When I brought up the idea of making stainless steel housewares products as a regular export range, he consented to be associated with me.

Normally the next step would be to sign a partnership agreement defining the business relationship between us.  But I wanted to try non-conventional method.   In many cases, misunderstandings come up because of interpretation of what was written in documents. These disputes start, extends to legal battles and aggravate to a level where the business cripples down to closure.  But if nothing is written, both the parties had to be reasonable and not greedy. Knowing that nothing has been written down, they figure out a practical solution together.

Yes, doing business without written agreements is dangerous.  The written agreements could be restricted to where there is slightest doubt on trust or if the Law  needs it.

This was one of the experiments I wanted to try in my business. We trusted each other and hence suggested Vishnuji that we would have an understanding and avoid a written agreement.  Both of us agreed willingly. We mutually understood our roles, financial arrangements and the nature of decisions each of us would take independently and those which needed joint decisions.

We were ambitious but not greedy.  Both of us believed “if I am destined to get something, it is bound to come? If it is not destined for me, how will I get at all?”.  It is now over 25 years since that arrangement. There isn’t a single word in writing till today. We have executed many multi crore value orders over the years. Touch wood, there have been no disputes. Of course, there have been differences of opinions very few and far between, for the good health of the organisation. When such differences come up, we have a lot of respect for each other’s opinion.

When friends in business ask me  what is your relation with Vishnuji in business,  I start thinking and I don’t get an answer even to myself.

We were able to maintain peaceful atmosphere between us. If Trust works, Peace prevails. And Peace brings better Prosperity.

Written Agreements can go wrong, but Trust always Cherish!

Experienced and Written: Badri Baldawa

Edited By : Meeta Kabra

Best Marketing Guru

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“Look, shops open at 9 in the morning and it’s fine if we leave for airport at 10 to catch the scheduled flight tomorrow.  We have that one hour.  Let us try to meet some buyers”. I had a quick talk with my agent in Riyadh late in the night.

I was on one of my business visits to Saudi Arabia in 1988.  As usual my trip was very hectic trying to book orders for my normal product range. I was to return to India the next day morning.  At night while I packed, I realised I had samples of a new product, stainless steel glasses, which I had forgotten to explore till then on that trip.

The agent said, “Normally 9am is the time when the shop owners (importers) discuss the previous day’s progress with their salesmen and make their marketing plans for the day. It is too early in the morning for them to discuss purchases.  We could pursue that business on your next trip.”

I said, ” never mind, if we are able to meet one or two buyers, we will get an idea about that line of business.  No harm. Atleast we will get prepared better for the next trip”.   He agreed “Ok, let us take a chance”

We left in time to catch as many importers as possible.  The first one was not prepared to discuss purchases at that time, as expected.

We went to the second Saudi buyer.  He was busy cleaning and setting his table right, and on our offering the stainless steel glasses, he very casually asked,

He: What price?

Me: 72gms a piece, 7.5 cm dia, 2dz to inner and 12 inners/ctn, non-magnetic stainless steel, 90 days L/C though we may ship in 60 days, $3.75 a dozen

He was still busy cleaning his table, duster in his hand.  He said casually, not even looking at us, “$3.50”

Me: No, 3.50 is slightly below my cost.  Can’t go below $3.75.

He said firmly: $ 3.50…. pause..….. I could have started with $3.00 and you would have given at $3.50.   But I don’t waste time.  You are the first one I am seeing this morning, hence don’t want to disappoint you nor get disappointed.  If no $3.50, then no interest”

Me: Quantity?

He: One container.

I was expecting the first order to be around 5,000 dz.  One container equaled 24,000 doz.  For this quantity, I would save some freight and other expenses and my cost would be around $3.50.

Me: Fine. Accepted. We want to start business with you so that you can test our quality of product and services!

He: Proforma banao. Usme Bank details mauzood.  Bank L/C details bukra mazboothan. (Make the proforma with your bank details, I’ll arrange and advise you the Letter of Credit details by tomorrow).

I prepared a proforma invoice for US$.84,000.  He signed and said in Urdu-Arabic to mean, “Without knowing you, I have placed an order because somehow I felt you are genuine.  But make sure you surely dispatch and ship right quality.  Don’t let down my judgment”

We concluded the deal and I left for the airport.

By the time I reached Mumbai, the cost of raw material had reduced by about 2%.  By the time I exported the goods, the exchange rate went 6% in my favour.  By the time I completed the order, I had made a decent saving of about 10%.  The value per container was high and the profit margin for this product ultimately turned out to be quite satisfactory.  I was tempted to expand my product range to stainless steel housewares!

After executing the order, when I met the same customer on my next visit, I was curious to know what made him place the order with me without knowing of me.  His reasons were interesting.

He said something to the effect that, “We have 3 major problems when we place orders with exporters from India.

One, they normally give a price and sometimes show a sample.  Intentionally, they do not give full details of the products unless we specifically ask for each of the details.  They try to keep an escape route ready for them.  In case, later, if the cost goes up, they compromise on the details missed out, and give an inferior, smaller or cheaper product.

Two, when we tie them down in the L/C with all specifications, in many cases they opt not to ship at all when the cost goes up.

Three, when the price increases, they divert the order to our competitors at a higher price. They might supply to us later when they have excess stocks.   Sometimes they even fail to supply which is a double loss to us as we lose our customers to the competitor to whom they supplied products meant for us.

But in your case, while quoting the price, on your own, you gave all the details of weight, size, packing, grade, delivery and price which I needed, without my asking for it.  This built my confidence that you are honest.  So, I took a chance and placed the order with you!”

I was completely got carried away by his reasons!  It enlightened me “If I could take care of these worries of the customers, it would make a difference to my business”.  I made these as guide lines.  Never did I compromise in quality.  Never did I fail to supply.  Never did I tried to take advantage of the situation.  It worked.   It gave satisfaction to both, me and my customers.  Within 2-3 years, we had around 60% of the Saudi Arabian market in stainless steel housewares!

I thank the customer, who was my best Marketing Guru

Experienced and Written By: Badri Baldawa

Edited By : Meeta Kabra

Every Activity Has Inbuilt Opportunity – Explore !

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“Badri, we need stainless steel utensils in bulk for Bellary’s Ganesh Temple. They are produced and marketed in Bombay. If I come to Bombay, can we get reliable quality at competitive prices?” This was a call I received in 1988 from my cousin, Bhagwandas who stayed in Bellary, my home town. I had moved out of Bellary twenty-three years before that.  We were all very active in maintaining our town temple and celebrating traditional functions at the temple.

The stainless steel dining and serving dishes were required on dinners organized during festivals.  The temple’s hall was also rented out for wedding and other functions. Having dinner sets ready for such occasions would attract more people to have their family celebrations at the temple, thereby increasing the funds available for the upkeep of the temple.

“It would be a pleasure.  Though I don’t know anyone in the stainless steel trade, I will get some contacts by the time you come next week,” I said.

At this time, I was settled in Mumbai and running a business in exports.  We were merchant exporters, mainly dealing with spices and imitation jewelry.  Dubai and Saudi Arabia were our main markets then.

I contacted a neighbour who I knew was in the steel business.  It turned out that he was dealing in steel products used in the construction industry and not in houseware.  But he introduced me to Mr. Vishnu Goyal (Goyalji), who was a manufacturer of stainless steel glasses and had his wholesale outlet at C P Tank in Mumbai.

I visited Goyalji with my cousin.  Since the products were for a temple, he volunteered to supply his products at cost and to arrange for other items from reliable sources at a competitive price.  In no time, he arranged for everything.  In fact, while I was discussing how to pack and dispatch the utensils to Bellary, he overheard the conversation and asked me to give him the address. He’d get them packed properly to avoid damage in transit and send them over.

We were relaxed and happy with the purchase.  It went out smoothly and was quick too! It was a time to celebrate!  We were offered biscuits and tea. As the trend prevails in the market, it was just half of a tiniest cup!  We had to ask for more!  Tea and biscuits go well with small talk and we had a casual chat.

He: Baldawaji, what do you do?

Me: I am a Chartered Accountant, but I don’t practice.  I am in export business.

He: Oh, Bahut Achhaa! Where do you export?

Me: Middle East – UAE and Saudi

He: Are Wah!  Even steel glasses are exported in large quantities.  Why not try?

Me: Goyalji, it is not in my range of products; but I will let you know if it interests me.

When we were about to leave, Goyalji gave me six glasses with specs and said, “These are the ones which were being exported there.  Please keep them with you in case you decide to carry these as samples on your next overseas visit.  Price is xx per kg.”  I accepted the glasses, hesitatingly, as he was giving them free of cost.

I had a suitcase in the office to collect samples of new exportable products as and when I got them.  I worked the pricing on a cost sheet and dropped those glasses in the suitcase.   Later this business developed to the extent that we had almost 60% of Saudi Arabian market.  An opportunity sent by Lord Ganesha, when explored, proved to be one of the Turning points in my career.

Lesson learnt:  Every activity has inbuilt opportunities.  Look for them and Explore!

Experienced and Written By: Badri Baldawa

Edited By : Meeta Kabra

Business With Strangers:

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“We are large importers in Sultanate of Oman and have an procurement office in Mumbai. We know you export spices to the Middle East. We have substantial orders on hand. If you pay a 10% commission to our Mumbai indenting office, we can place these orders with you.” A welcome call from a unknown prospective customer Harish Gupta on a Thursday morning!

Me: “It is too high a commission”
He: “You can cover the cost in your product rates and we will still get you the order.”
Me: “Who will guarantee payments?”
He: “This is for supplies to the Oman palace. You will be covered with a confirmed L/C (an export document that carries guarantee). If you are interested, please send us a Proforma Invoice for all the products you have, for the trial order.”

I was certainly interested. I sent the Proforma on Thursday evening and got a call from one Mr. Harish Gupta on Friday morning stating that it is their normal practice to visit the supplier’s office before placing the order. Mr. Gupta, visited us the same day. Since, he came in hurry, he said he forgot to get his visiting card.

Friday evening kept me happy as I received an order for US$ 85,000 from a new customer. Gupta called me on Friday evening to say: “Even though your prices are high, we will confirm the order to test your services. Before we establish L/C on Monday, Sethji, our boss, would like you to meet him.”

Saturday morning, I was at their office in a building opposite Jaslok Hospital, Peddar Road, Bombay. The front room was a large, dim and dark hall of almost 20 feet by 30 feet. It had a well-used sofa in one corner and a table and chair for the receptionist, at the other end. Nothing else. Dirty walls and confusing, uncleaned balconies. The moment I entered, the main entrance door was closed and quietly locked. I handed over my business card to the receptionist and asked for a card of the boss. I was told that the cards are with the boss himself. I was told that the name of their boss is Mr. Rajesh Agarwal. Until then, it was a secret.

After about 10 minutes, Mr. Gupta took me to Mr. Agarwal’s room which was a decent executive office. The room also had a relaxing chair for boss to stretch and relax. Mr. Gupta mentioned that Mr. Agarwal is delayed at the Mahalaxmi Race course and would be at the office in a few minutes. He also mentioned that the boss was crazy about horse-race betting. Anyway, delays have to be tolerated when one approaches customers!

While I was waiting, a dhoti cladded decent middle-aged gentleman came in to offer daily prayers with agarbattis (essence sticks) to the deity photo in the office. After his prayers, he introduced himself as Abhishek Pandit, sat next to me, and started gossiping. Within minutes he got pretty friendly and gave me a lot of information about the boss. Boss had a lot of investments in real estate and luxury farm houses and he shuttled between the properties in his own chopper. He was cash rich by hundreds of crores. Most of this he had accumulated from betting in horse races and Mr. Abhishek was the retainer for the boss and helped him win.

He said he was not referring to the horse races which are played in the racecourses but which could be played in any room. He took out 6 symbolic horses in the form of conches and 52 sea-shells. He kept the horses in one line and told me to select any one. He played a few games and challenged me that the way he played the game, the horse that he desired, won, not even 1% chance of failure. He went on to explain how he played this game. Mathematically, I was convinced, that there were no chance of going wrong.

Then came the secret of secrets from Abhishek Pandit, “In fact, boss doesn’t even know how this game is played. He makes a lot of money because of me and I just get a token monthly retainership fee. I don’t know why, I feel you can be trusted. I suggest you play against boss, the Sethji. Of course, I will play on Boss’ behalf, I’ll allow you to win and we can share the amount you win. Even if he loses a Crore, It wouldn’t bother the boss, it is insignificant for him. You contribute Rs.10 lakhs which I guarantee, you will not lose and we can earn about a Crore and share the loot.”

I teased myself. “Look at my good luck, I came to get an export contract and I am being lead to gain Crores effortlessly!”

The moment I entered the office, it all sounded fishy. I could have tried to return, but I smelt it might not be a safe move.   The door was closed and any attempt to get out may invite huge risk.  They might hold me back as hostage for ransom. If they were convinced that I knew it was a trap, they might want to get rid of me forever instead of allowing me to leave and complain to the intelligence authorities. Yet, I felt this could be my negative way of thinking and they could as well be genuine businessmen. But one thing was sure, I had to be careful.

I realised the safest thing for me was to stay calm and try to be deceptively genuine in my moves. I told Abhishek, “Look, we are strangers to each other. I cannot take full risk. Though I have no problem in putting in full stake, it is fair that if you share profits, you should also share investment. You bring in 5 and I’ll put in 5. I assure you I will never disclose this deal to the boss.” He hesitatingly agreed.

Abhishek explained, “I have never done this type of cheating with my boss earlier. To get his confidence, we should initially lose a couple of games with small stakes. Once he wins a couple of times, he will go for bigger stakes and then we can have our kill.”

Just then, the boss arrived, holding a mini suitcase like briefcase. My friend Abhishek whispered to me, “we will speak about this later” and walked out.   In fact he said he was waiting for Sethji and when the Sethji arrived, he walked out!

Mr. Gupta, the guy who visited our place came in and introduced me to the Boss. While making himself comfortable to sit, boss told me “I am not feeling well. I have that damn BP problem. I have already called the doctor and he should be reaching any moment. Give me 5 minutes till the doctor is done.”

The boss pressed the call bell and asked the guy “call Vermaji” (guess, their accountant). Just then, the doctor entered, Boss lied down on the relaxing chair and started checking his blood pressure. Just then the accountant came in. Boss says, “the bag has 12 ‘peti’ (12 lacs). Keep it in the safe.” Verma asks what he should do with the 30 ‘peti’ he has received from the other guy. Sethji told him to keep that amount also in the safe and that a payment of 1 ‘khoka’ (1 crore) had to be made on Monday towards some real estate he had purchased.

At this stage, Verma picked up the briefcase and put it on the table very close to me. He opened it in such a way that I could see the currency and then took it away.

I wondered, “Would I expose cash in the presence of strangers?” No. I got the answer for my doubts. A reel of observations flowed. No visiting card so far, deserted office, intentional showing of cash, sequence of entry and exits of people and above all, this bait of 100% win to a stranger by cheating one’s own Boss. I was now convinced, that it was a trap. Export business was just an excuse to get me in to that place.

If I try to walk out or protest, they would not allow me to go out and would most likely harm me. I had to be extremely careful in my moves. Now, surely, my primary aim had to be to get out of that place convincingly.

Since the Boss was not well, he had to leave. He ordered tea for me and requested that I have the tea. By then, Abhishek, the retainer for playing games, entered. He said, “We are lucky, inspite of his not keeping well, Boss has agreed to play the horse race game. Before boss changes his mind, we should play with him, preferably today itself.”

My strategy was to get out of the place convincingly. I replied, “why not, let us play today itself. Such opportunities are rare. I wish I had known this earlier, I could have brought cash with me.” He proposed that let us make a start with whatever money I had with me at that time. I said it is my nature that I don’t I carry money with me except where necessary.

He said, “I can send someone to your place to get the money for you while you can relax here.”

I told him that I don’t keep 5 lakhs at home. I would have to withdraw from the bank. In the meanwhile, I proposed to him to contribute on my behalf and deduct it from my share of the win.

He said in a filmy style “I am a man of principles. In betting partnerships, it does not work that way. Everyone has to put in his stake. It’s okay, if you don’t have 5 lakhs, we can start with 2 lakhs each.”

I said, “I don’t have even 2 lakhs at home. I have no problems getting even 5 lakhs, but I have to withdraw from the bank. Unfortunately, today is Saturday, the Banks are already closed. Why don’t you fix Monday morning for a game.”

He: “okay, 11 in the morning?”

Me: “No. No. Why not earlier, at 10? Banks in suburbs open at 8.30 and I can reach here by 10. I am quite excited. I don’t want to delay any more than necessary.”

He: “Fine. We will play a major game on Monday. But why not start today evening with one lakh?”

Me: “That is possible. I may not have one lakh ready, but I can accumulate from my wife and friends. It is a good idea to play today; else I may not be able to control my excitement during the weekend. I will revert by 5 in the evening and you get this confirmed with your boss.”

He spoke to the boss in my presence over phone and meeting at 5pm was fixed.

As I was leaving, I asked him to check with Guptaji, when I was to expect the L/C, so that I could start working on the order. He said, “Don’t worry, Guptaji already told me. We will get that formality done next week. For you, earning from that order is negligible compared to what we are planning together.”

On my way out of the premises, I was nervous about what might happen till I reach home. For the time being, it looked like I had a temporary lease of life. They looked really dangerous. Every well-built person passing by was looking like a spy following me!

I was pale when I reached home. I narrated the entire episode to my wife. She was worried too. Right at 5 pm, I got a call from Abhishek that they were waiting for me. I said, unfortunately, I could not accumulate 1 lakh. He asked if I had at least accumulated 50,000. I hadn’t. But I promised we could certainly meet on Monday with full 5 lakhs as my stake.

My biggest worry was that they had already marked my home. On Monday, I got the dreaded call. I said, “Look, I was feeling humiliated and that’s why I told you that I have adequate funds. In fact, I am starving for funds. I do not have any balance in the bank to withdraw cash. I was expecting the bank to sanction me a temporary loan on Monday. But they did not oblige.”

I answered their calls for next 5-6 days, each time giving them similar story – that the bank would probably approve the loan the next day. I even told them that, it would be easier for me to get a loan if I had the L/C for their order!

After a week, I told them that my loan application was rejected and hence have no funds. I did not go there. Right or wrong, I did not lodge an official complaint about them.

I have been waiting for almost 3 decades and the L/C for that order is yet to come!

I did mention this incident to people I knew, so that they wouldn’t fall prey to such calls. When I narrated this incident to one of my close friends at Napean Sea Road. He said “You are saved. Once they mark you and your place, be careful. One of my other friends had the same experience with similar guys, but at a different location, a month ago. They snatched his money. My friend complained to the relevant authorities. He was asked to lodge an official complaint the next day and was kidnapped the same night. I have not heard from him since.”

I decided, I would be more careful before I do business with strangers and extra careful, if I had to visit them.

Experienced and Written By: Badri Baldawa

Edited By : Meeta Kabra

Support, But Do Not Spoil

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Just like I was  looking for moral and financial support when I started my career, many youngsters need support from people who are established. I have been an active participant in trying to provide similar assistance and support, to the best of my means and limitations, for the last 20 years.  It is a pleasure to share a couple of experiences I learnt out of my experiences on matters of financial assistance.

Majority of the people who seek help come with genuine repayment plans and fulfill their commitments on time.  It is always a pleasure extending support to persons with such an attitude. If the loan is for commercial purposes, there is nothing wrong for the lender to have a fair return, as the objective of the loan was to earn money.

If the loan is for an essential nature, I consider providing assistance ‘free of interest’ as getting them out of the financial strain is an adequate satisfaction.  But the borrower should realise that the lender has given the help depriving himself of the earnings that he otherwise would earn on that amount.

However, I have experienced that this ‘interest free’ tag has a  negative effect.   In such cases, the borrower instead of being grateful for receiving concessions, unfortunately, feels that it was his ‘right’ to have received that assistance.  In certain cases it was taken for granted as a gift.  Besides the borrower conveniently takes the repayment of interest-free loan as a last priority, as it doesn’t cost him to delay the repayments.  In most of the cases, the borrower avoids talking to lender as he considers it is the duty of the lender to ask for money.  In some cases, because of the relationship in question, the lender does not talk about it, converting “good money” to “bad money”.

Who is responsible for this?  The borrower?  No. My experience says, it is the me the lender’s fault, for very many reasons.

  • First of all, the loan given was emotion-based and not merit based
  • Secondly,  I mis-judged the borrower, in his attitude
  • Thirdly, I reduced the value of money, by giving the loan interest free
  • Fourthly, if the loan was given for non-essential purposes, I helped the borrower in  investing the funds for non-productive purposes.

Thus I was the one who spoiled them.  I could have been wiser in taking the borrower in confidence by explaining that I value my relationship with him and wish to avoid misunderstandings in future citing Shakespeare, “neither a lender nor a borrower be.”

Had I said a firm “No” and avoided getting emotional, I could have saved them and their deterioration in quality of attitude.  Above all I could have retained my relations with them!

Written: Badri Baldawa

Edited: Meeta Kabra

Expanding Business? Take care !

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Expanding Business?  Take care

Expanding a medium size business needs to take care of certain tricky problems like expanding business vs infra-structure for increased activities and safety of capital already earned.    .

Any business is run to make money, of course, in a fair way.  Once a business starts earning money, the owner wants to make more money!  He realises soon that expansion or diversification of activities are the solutions. This invariably needs infrastructure which in turn needs further investment.

Expansion of activities also means a bigger uncertainty in revenues. Any unnecessary investments in infrastructure might eat up on the profits and liquidity, including that of the current business.  While, without taking business risks, it is close to impossible to expand business, an expansion without proper infrastructure is suicidal.  Therefore the owners have to adequately balance strategy between expansion of business and additional costs of larger infrastructure.

4-5 decades ago, our family business went through a similar balancing act or lack thereof.  The reasons stand good even today.  My dad owned iron ore and manganese mines.  He was as good at looking for and selecting remunerative mines as he was at obtaining Government permissions to operate those mines.  He started with a small mine of a few acres and expanded to 9 mining leases. From the records, I found out after his death that just two of them were as big as 1064 acres!  These could have been sources of unimaginable and unlimited revenues.

He was the lone manager of this enterprise.  Infrastructure for expansion was not planned.  We, all his sons, were still students.  Management was not adequate and therefore the controls on the resources were inadequate.  If controls are missing, the funds would go missing too!  The entire business turned out to be unremunerative whereas it should have earned multi-millions.  It was all due to inadequate infra-structure.

My son Anand, who earlier was in UK, took over operations of my business over a year ago. He wanted to expand and diversify the business.  His first thought was about infrastructure.  He spent almost a year in planning and building additional infrastructure for future activities and wisely limited it within affordable means.  We occasionally felt that the business could be managed without additional infrastructure, but learning from my dad’s experience, I was very happy to support him.

I have seen some not-very-large businesses that they were very successful when they were small, but failed miserably when they expanded.  On analysis, it was clear that the main reason for their failure was that only the value of fixed assets was taken as investments and funds for expansion were arranged accordingly. The need for working capital for day-to-day activities and transition costs were ignored.  This is extremely important and is a significant amount in most businesses.

A businessman I know, failed to notice another significant problem. “When one heads towards the top at top speed, he had to ensure that he doesn’t drop down”. At whatever height one is, it is a human tendency to assume that the peak is yet to come.  But one cannot judge when one is at his peak. Therefore, to be safe, at every stage of climbing, one should secure themselves from a fall.

How do we secure that?  Simple, set aside a good percentage of earnings for a rainy day, a saving for safety from failures.  Do not put entire capital at risk. For any reason, if expansion investment is lost, at least you are left with a base capital to survive for future.

These are some of the lessons learnt while analysing the reasons for failures of some of the prosperous businesses while undertaking expanded activities.

Take care!

Written: Badri Baldawa

Edited: Meeta Kabra

 

 

Mother’s Ring Speaks

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75 years ago, my mother got married.  She got a stone studded ring as a wedding gift from dad.  Both the families were well-reputed and reasonably placed economically at that time.  But luck has its own agenda and things changed. My parents wanted me to study but ran short of funds. Around 1963, they pledged the ring, for a loan of Rs. 450 against it, at a rate of 3% monthly interest cumulative. That’s how I could complete my education. I wasn’t aware of this loan. I accidentally found the pawnbroker’s note a couple of years later.

I completed my education in 1968 and got a job at a handsome salary of Rs.720 per month. Over a period of 5-6 years, the loan with compounded interest accrued to Rs.2,200. A new ring like that one could then be purchased for about Rs.1,100.  My parents must’ve even forgotten the matter by this time.  Anyway, financially it did not make sense to release the ring from the clutches of the moneylender.  However, from my accrued initial savings, I got the ring released, as it was invaluable for mom.  When I surprised mom with the ring, she could not believe it, tears rolled down and she sobbed for quite a while, probably for the unexpected surprise of getting back an invaluable item of sentimental value.

I lost my mother on Akshaya Trithiya, 24 April 2012, exactly two years ago.  When her ornaments were distributed to her children, I preferred to retain just that stone studded ring my dad had given to mom at their wedding.

I was holding that ring today. The Ring started speaking. What the Ring said could hold true for anyone.

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“Parents try their best to bring their children up, within affordable means and facilities available to them. They disciplined, gave pleasure, taught culture according to what they thought was best for you, from their point of view.  It was all selfless and nothing was expected in return.”

The Ring continued to speak:  “Forget not, you are holding your present status mainly due to the support of your parents, for which they pledged their wedding ring and even mangalsutra.  They preferred to remain hungry to ensure that you are fed.

To value the care they had taken, wasn’t it your duty to have spent some more time with them to share and talk about things of their interest? Did you not deprive them of the respect and facilities they deserved, forgetting that they sacrificed all their life for your development?”

The ring was true. I lost my father early in my life.  While my mother was alive, every day, I thought I would shortly be free; retire from my business and spend some time with her.

Occasionally, I probably considered that spending time with parents was unproductive, boring, waste of time and even disgusting.  Sometimes, I probably thought the parents were rigid and argued on matters irrelevant to the present environment.  Why did I get these types of feelings about the people, who spent their whole life to bring me up, educate me and support me in building my career?

They were the ones who were next to me whenever I was ill; they were the ones who sacrificed their desires, just to ensure that my desires get fulfilled.

I probably failed to understand that as my parents were advancing in age, their level of energy and enthusiasm would reduce and they might not catch up with new lifestyle.  I probably failed to give credit that they were more mature, better experienced and have higher understanding, without which they could not have guided me all through my life. I probably failed to appreciate that they had right to feel proud for whatever they have gone through to shoulder the family responsibilities so far. Silly, that I confused that as their ego. I probably had forgotten that they had already proven themselves while I still had to prove myself.

What a wrong notion I carried that I am extra smart.  In fact, my parents sacrificed everything for me and still they honoured and appreciated me for whatever little I did.  Alas, when my turn came to serve and honour them, I missed the golden opportunity to avail the win-win situation. Had I done that I would have lost nothing.  I repent today.

Oh, my dear Mother’s Ring.  Thank you for speaking out.  Let me see whether I can at least express gratefulness to the living elders “for whatever they have done” and show them that “I care for you and your feelings”.

Author: Badri Baldawa

Editor: Meeta Kabra

Don’t Mix Business With Social Pressures :

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Pre-independence my family was in the tobacco business in Bellary, mainly dependent on consumption by army. Post independence, the soldiers were moving out of town. This reduced the demand for tobacco products drastically. Our neighbours produced a competing brand. Now, though the demand had plummeted, fearing that we may lose the labour force to the competitors, our family continued production at full capacity – suicidal. Obviously, stocks started piling up.  Hoping that suddenly better days would come, excess stocks were stored in a warehouse located just behind the manufacturing unit.

Bellary is well known to have only two seasons a year – hot and very hot.  Normally it doesn’t rain much in Bellary and ‘heavy rains’ were not heard of.  However, on one of those days around 1955, there were very heavy rains, so much so that the roof of the warehouse collapsed.  Tobacco products become unusable once they are wet.  The entire stock became worthless.  There was no known storm insurance concept at that time.  It was a heavy loss and the family could not bear this loss. At the same time, our business partner expressed his inability to bear his share of the loss and backed out.

That rainy night was the biggest setback to the family.  Imagine, just one incident, changed the entire fate of the family. The family, which was considered one of the richest in that locality was on the verge of collapse.

If we analyse the reasons for this collapse, there were a few management blunders.  The most obvious one – though demand had dropped permanently, production continued at same pace.  The production continued just for the fear that the competitor would take away workers.  On top of all, the most damaging reason was the feeling that if production drops and we let go of labour, society will look down upon us, a fear of loss of face.

If the social pressure had not  influenced the business, the history of the family status would have be different.

In a “guidance program for the youth” where I am a mentor, I have observed that even in today’s  independent and forward-thinking age, young entrepreneurs are trapped with similar problems.  In one specific case, though the profit margins were good,  expansion was being made to impress customers and competitors.  Collection of outstanding was ignored, stating “that delay in payment is okay, as long as I get business”.  They somehow considered that demanding the payments was unsocial from the people of high status. These so called high status guys took full advantage and effected the payments at their own will and wish.

On scrutiny, it came to light that though the customers were very happy with the socially-rich vendor, it led the business to cash starvation so much so that the business was at the brink of closure.   After studying the figures, I had to advise the owners, about 8 months ago, that for the sake of survival, they had to come out of this “social complex”.   Luckily they heeded to the advice.  On their path to recovery, they had to offer hefty discounts to get outstanding dues. Certain debts turned bad and led to legal recourse.   They closed all their unprofitable wings, stopped dealing with the late pay masters and concentrated on the healthy portion of business.  Though it was a painful process, atleast they survived.  They are now about to turn the corner, within 6-8 months.    However, had they continued with the “Social ego” problem, they would have definitely closed down by now.

Whenever we have problems, we start getting influenced by what the society would think. After I qualified as a Chartered Accountant, when I was in the Middle East, I had the opportunity to study the reasons for many loss-making businesses internatioanally and suggest corrective measures.

I observed, particularly in cases of businesses owned by high profile owners, that though they knew where they were making losses, they were not willing to take action. And in most cases, the reason was for fear of society.

The business normally have activities which give decent profits as well as loss-making activities.  Profits generated by certain activities are eaten up by by loss-making activities.

In one of my assignments, I had to face a severe ego problem.  They were very hesitant to close down the loss-making units just because when the owner would be in his social circles the next time, someone would say “oh, you have closed down so-and-so business”.  They sound sympathizing but are actually sarcastic. This was a case of ego clashing with business decision.

I then had to argue: “One, are they going to come forward and help you if you start going down the drain. Two, how hurt would you be in the social circle, if you had to close down the business completely, which is likely to happen if you continue to lose this way.  Three, those who are real businessmen, would appreciate your decision as an aware and sensible one. Please ignore society on this matter and do what is best for you”.  He ultimately listened, his business survived.

For the sake of our own survival, let fear of society not influence business principles.

Author: Badri Baldawa                                                                     Editor: Meeta Kabra