Start ups – A Talk of every town now!

“Start up” has indeed become a very fancy term now a days. Youth, today, are more infatuated by Startups in contrast to the previous notion of opposite-sex charming girls or boys. Every second startup has a dream to be the next “Flipkart” or “Ola”. But the question Is, does this new era of business economy allows too many flipkart”s” or Ola”s”?

This startup generation is Good because this breeds a culture of entrepreneurship in the country. This helps in solving many real problems prevailing in the society. It is Bad because the biggest question remains – Is it Sustainable?

While this Startup discussion is never-ending, let us have an overview of the difference between the conventional “Uncle businesses” and the new born  ”Startup gen”

Profit Definition: While Uncle Businesses define Profit as P= SP – CP ; CP = cost price & SP = Selling Price. The more profitable a biz is the better it is considered. However, Start ups , don’t believe in Making Profits rather they focus on making high revenue.  They simply focus on increasing their users even if they sell on a loss.

Business Expansion: Conventional Businesses reinvests their profits again in their business to expand and thereby make even more profits, On the contrary, Start ups raise funding to acquire more users by bearing more losses and thereby plan to expand and increase their Valuation.

Business Vision: While traditional businesses believed in “directors may come , directors may go” but the companies exist forever (long term- consistent growth). The start up philosophy is absolutely crazy. They have a short term vision. They usually look for a span of 5-8 years in which they simply keep on increasing their valuation by increasing the user base and then eventually get acquired by another company. They don’t want to exist forever(short term- aggressive growth).

Revenue Definition: While Uncle businesses defines revenue as : Price per unit times no. of units sold. They focus on price as well as the no. of units sold while start ups majorly concentrate on no. of units sold even if they sell it at a price lower than the cost price (in loss). But since their prices are too low, their no. of units sold increases (by the simple law of Demand & Price). Hence, they end up making more revenue even if they made loss.

Asset: Uncle Businesses used to focus on building their own assets like machinery, brick and mortar shops, regional offices, etc . while today`s technical start ups are asset light. They don’t believe in wasting resources in building something that they can get from outside. Eg: Ola hires taxis but owns not a single car. Similarly, youtube has millions of videos but not created by it. These start ups are also known as aggregators.

Sustainability: While the uncle business are a very sustainable and logical way of doing business. Start ups, are more on aggressive side and their sustainability is still a question.