Friends the start up case study that I have brought today, you may find its name very funny but there is lot to learn from it, its name is Doodhwala. Jack Ma who is the chairman and founder of Alibaba and the richest man of China as well, he says Learn from other people's mistake. Means you should always learn from others mistake. This will always help you in life. Our lives are not long enough that we can .
Commit all the mistake & learn from them on our own. Friends I have talked about loss because the Doodhwala is actually a failed start up. Yes this start up has been shut down. This start up was established by Akash Agrawal and Ibrahim Akbari in 2015. And this start up shut down in 2019, means after four years. Now what are the reasons behind this? .
Was this start up actually a down falling? Was business not growing? No, it is not like this. But this start up was growing at a 250% annual growth rate. They used to deliver more than 70 types of milk and groceries. Moreover they used to deliver before 7 am to their customers and price was below MRP as well. And they provided free home delivery. .
They had received the funding of Rs. 210 Crore. But then why did they fail? I will discuss 5 major points behind their failure. First reason is Negative cash flow. Let us understand the meaning of this. See, a business has various types of expenses. Management has its own expense. apart from that logistic expenses are there, operations expenses, web development expenses, .
Web hosting, app management all these expenses, marketing expenses which are 80% for start up. Now in grocery business you need high working capital, very high working capital is required, you should have the cash. Secondly, High Customer Acquisition Cost, the cost of acquiring one customer is very high. The ideal profit margin is also very small it varies between 5 to 15% & zero customer loyalty .
Nowadays customer are quite price sensitive. Expenses were more than the revenue, always remember one thing 'Revenue is not equal to profit', your revenue is never your profit. See, let us understand this point. When you sell a product, that is actually the revenue of the company. When you subtract all the expenses from it, the cost of everything, means cost of land, building, .
Electricity all types of costs, when they are subtracted, then the remainder is called as profit. So revenue is never equal to profit. Now understand one point properly, in grocery and hyper local market, you can earn by two ways only, first is by Purchase in economies of scale means purchase the products in bulk quantity so that it is at low cost or the second is .
Sell in Economies of scale, sell in the huge quantity that your profit increases because of volume; or you can do both. Next point is no competitive advantage. Doodhwala didn't have any competitve advantage. The work Doodhwala was doing, that is of grocery selling and milk selling, this is done by other businesses as well; Grofers, Big Basket, Fresh to home are also doing it. .
Now see Doodhwala had comparatively less funding. when their funding was less then their customer retention was comparatively lowered. Because they were not able to offer enough discounts to customers, on the other hand Grofers, Big Basket had lot of funds. So they were offering discounts to customer again and again, and were able to retain the customers; now that was the difference. .
There is high competition in grocery business. If you have to succeed in any business then either you should become the first mover or you should become fast mover. Third point is Lack of planning. Now see, proper planning is definitely required. In businesses, businessmen should keep in mind from first day that where his profit will come from. You have to consider the profit from day one. .
Make this sentence very clear in your mind. Expansion without gross margin is committing suicide. Now see Big Bazaar, D mart, Reliance fresh, and easy day, all of them are in the grocery business in the retail business; but they are profitable from day one, now there are two types of expansions one is steady expansion & other is over expansion. I will explain the difference between these two. .
The steady expansion means you are expanding within the capacities of your business and not expanding uselessly. Over expansion means you are expanding more than the capacities & resources of your business, and when you do this then you are preparing for suicide on your own. Next point is Wrong hiring. They had done lot of wrong hiring, see the manpower .
Is a the gold maker of a business. They bring lot of money in the business. If you hire the right person for the wrong job then one day you will lose your job. First mistake they committed was wrong hiring. They hired wrongly, they brought wrong persons in organization, that was their first mistake. Then their next mistake was Over hiring. They hired those who were not required in the .
Organization; they did useless hiring with which their expenses increased so much. Now firstly there was inefficient HR management. They did not do proper human resource management. Then their was Lean forward kick backward. Run ahead and leave those who are behind. They didn't care about their old employees. Then they had wrong salary structure; expenses increased because of wrong salary .
Structure. Their last mistake was Over dependency. They were very much dependent on investor money. See the investor works as only a pinch of a salt to your dish. Means your food is business and they are serving as salt only. When you depend so much on investor then your situation is like a toy which needs constant .
Input. Then you keep on crying we need funds; and now investors don't give the funds. Your business is expense centric moreover you are burning the cash from investor funds; then you have zero sustainability in business model. So what is the result of all this at the end? The result is shut down written in bold letters. .
Which happened with Doodhwala in four years. They survived for four years only because they were able to sell and had funding as well. If you are watching this video till this point then do let me know in the comments about the video. Press the Like button if you really like the video. Subscribe the channel so that you won't miss any such videos; I will see you in the next video.