64 posts tagged with "business"

Petrol pumps​

Petrol pumps are rent seeking businesses typically owned by influential old families - politicians, business families and similar. You need a big piece of land, typically on the main road and earn a meager return per sale.

A fair & just petrol pump makes Rs 2.90/litre on petrol and Rs 1.85 on diesel. In other words the commission varies between 2%-3% and they make ~Rs 100 on every 40L filled (typically full tank).

Auxiliary services​

Things appear better in policies than execution. So, as per policy, you should get Washrooms and Free air on every petrol pump. But, in practice, you get neither - at least not consistently.

Typically you would pay Rs 10 for getting the gas filled. While meager, it is 10% of the margin and an astute petrol pump manager will solve for it.

Modern Fuels Gurgaon​

Around a month ago, I took the initiative of giving feedback to Bharat Petroleum about the lack of air facilities, especially in the morning. I had forgotten about it and of course, they did not act upon it. I was reminded about unprofessional retail business practices again this morning when no one was there to fill the air. At the end of the day, I will find an alternative that will be a bit more professional than the usual chalta hai attitude.

No where else to go​

Many a times, dealing with counterparts is impossible. They are willing to provide you the services but they charge exorbitantly. They do so with a smile and subtly communicate it to you. In other words, through their words or actions, they let you know that you have no where else to go. It can be because the business is a monopoly or that the business knows that you have high switching costs.

High switching costs​

High switching cost also happen due to moats or regulations in place. It is typical of financial institutions. Once in such a situation, it is a pure negotiation - where you are trying to minimize your cost and they are trying to maximize the revenue. In addition, they are aware that you have you have no where else to go.

I was squeezed today such an issue today with our bank for rolling our FX hedge. While, I am fully aware that my bank charges my corporate account more than what it charges a retail account. On top of it, it added a obscene fees and tried to justify it as "process" of the bank. Sometimes there's nothing much you can do in such a situation except pay up. I was able to negotiate the fees down to half of the initial ask but still got squeezed.

What happened to Silicon Valley Bank?​

Silicon Valley Bank (SVB) collapsed last week at a very rapid pace. Customers withdrew a staggering $42 billion of deposits between 8th and 9th March 2023. In simpler words:

• SVB was looking to raise around $2.25 billion
• There was a hysteria-induced bank run caused by VCs
• California Department of Financial Protection and Innovation closed the bank and started proceedings to protect the interests of depositors.

Why care about Silicon Valley Bank?​

Financial Institutions fail more frequently than we like. Silicon Valley Bank, as the name suggests, was geared more towards technology companies and related ecosystem. A few reasons will be:

• Many Indian startups (especially SaaS firms) have credit lines and/or deposits with SVB. Almost all SaaS companies with US presence will have an SVB account.
• Most YCombinator funded companies park their capital with SVB
• SVB has a office in Bangalore at Manayata Tech Park
• Banking is a lifeline of exchanging value. Your team members will not care about you if their payouts are delayed because of the banking partner.

Learnings​

I have never banked with SVB, but as they say Learn from the mistakes of others. You can't live long enough to make them all yourself. The following are learning from SVB:

• Managing risk is a primary job of an Entrepreneur. Always be switched on.
• Things do break and will break at a greater frequency in the modern world. Be prepared with a plan when you are on the receiving end.
• If a bank collapses in India, there's little to none immediate relief offered by the regulator vs USA. Always keep a rainy day fund.

There's no such thing as a free lunch​

One of the major learnings from There's no such thing as a free lunch for me has been that everything costs in either time, resources, opportunity. The person/entity that ends up paying for it may or may not be the inefficient person/entity.

Inefficient people cost double​

In my experience, working with people who know what they are doing is 5x better than people who are not. The reasons are:

1. Inefficient people suck time and energy
2. After a few tries, both the efficient and inefficient entities are frustrated from the interaction
3. Inefficient people make their work your work

Looking back​

I have enjoyed working with people who are organized, manage their work & calendar effectively. Typically anyone who maintains a workbook and has the patience to understand the problem/process on an atomic level becomes efficient. Typical examples of inefficiencies which have costed me are:

1. The member does not maintain compliance and you end up paying for it.
2. The member does not understand the process/task but claims to. It leads to misplaced faith in execution.