Whether you want to become a goon in your field or a king in your field, it is very important to have awareness along with enthusiasm. In order to increase sales, Adal Qadri is stuck in a debt trap. When should I take a loan? How much to take, from whom to take it, and at which moment to take it? Unless one doesn’t know about it, a person gets trapped in a debt trap. Exactly the same thing happened with Adil Qadri.
Sales of Crores but Still Loss | Adil Qadri | Shark Tank India S3
Adil Ji came into Shark Tank Season 3. With a valuation of 200 crore Four judges rejected him. One judge supported, however, By halving the valuation and adding the condition of a term, Why did this happen to him? Because he was trapped in debt and because of the mistake he made If it continued for some time, the entire business could have ended. But hopefully, now it has an investor.
Maybe if the sharks pay some attention to them, then maybe they will get out of this crisis.
So, there is a lot to learn for you in this business case study. What should an entrepreneur be like? How should they brand their business? And when and how should rapid growth be achieved? And EBITDA, Burn, PAT, and ROAS Like these words were used in this episode, what are their meanings? You vinod, will tell you everything! So, by saying Janta Janardhan Ki Jai Ho.
About adil Qadri Business
Let’s start with the first case study of Shark Tank Season 3. First of all, let’s talk about the business. Brother, what was the business of the next one? I liked the idea of the business. It was a unique idea. He used to work on perfumes. Yes, sir, if you look at perfumes. It is a non-glamorous thing. It is available in small bottles. It does not have any good design, and its smell is very deep and pungent.
Not everyone likes it. Normally, elderly people or old people use it. Today’s youth use deodorant and perfume. What did Adil Qadri do? That old business, to which no one was paying attention He kept the same thing, brought a fragrance similar to others, created a modern fragrance, and presented it in modern bottles.
And by doing good marketing, they introduced it in the market, which is a very unique idea, and on this idea, I give them full marks because they did something unique, they got the first mover advantage that brother, There was no one in the market.
So, I am the way I am, so whatever is The rating of their product, They said from their own mouth that the rating of my product is 3.8. Now let’s see, there is no great rating, but even after that, he is the best seller on Amazon and Flipkart. Why? Because he is the first mover and no one is near him Now, let’s talk about the person after talking about the business. So, the guy was very good.
I saw three such qualities in this guy, which I believe every entrepreneur should have. First, this guy had a complete understanding of his business. How many orders are received monthly? How many orders have been received so far? What is the average order value of the orders? He knew the unit economics, that brother, How much is my gross margin in this? How much is the marketing? How much is the shipping cost? The next guy had complete knowledge. Now you will tell me.
Vinod Ji, what is the big deal with this? The businessman must have knowledge of his business. Not everyone has it. We keep dealing with MSME every day. What is their focus on? Our sales are only increasing; the focus is on that only. We don’t even know how much profit was made. Where did the cash come from? Where does the cash go? We don’t know about it. They don’t know about the basic things of business.
They just go to the office every day, solve the problem every day, and come again at night. It’s a daily routine. Once this month’s EMI is deducted, then it’s all about having a great time. The way Adil Qadri had business knowledge This is worth praising. It should be like this: The second thing was that the guy was a visionary. First thing, he brought a unique product. He made a sale of Rs. 5 crore in the first year.
He was not happy, though. Then he said, ‘No, we will sell more. We will sell more. We will make a big brand. He came with a valuation of Rs 200 crore. And with a valuation of Rs 100 crore and a takeaway stamp on the television The third one was a good salesman.
He started the pitch with poetry. WND was immediately answering whatever questions were being asked. And he was giving very intelligent answers. Due to this, the judges were impressed. He has an understanding of his product; he has an understanding of business; he has an understanding of numbers; he knows how to give presentations; he knows how to sell goods. So, brother, these are the three qualities that should be there in an entrepreneur.
About adil qadri and Qualities
Now that the business is fine and the guy is also fine, what is the problem? The problem is that, brother, The protector has become the eater, The company came in the top spot due to its marketing, and they got stuck in the same process.
Let me tell you how. See, the guy is doing very good marketing. There is no doubt in this: in the first year, there were sales of 5 crores; in the second year, there were sales of 10 crores; in the third year, it was doubled; there were sales of Rs 20 crores; and now, with those Rs 5 crore sales in a year, Now, that person is doing sales of Rs 6 crores a month. And he will now close this year at Rs 70–80 crore. So, brother, the growth of sales is tremendous.
He also has knowledge of SEO. He (the company) is the best seller on Amazon and Flipkart. So, he did good work every day. So, where was he trapped? He is trapped in that place where an ordinary businessman is trapped. He did not have the financial knowledge.
The matter is about money, brother! He lost his senses in the excitement of marketing. He became so crazy after sales that he forgot to earn a profit. In the first year, when there was a 5% margin In the next year, there remained only a 3% margin.
Now, there is only 1% left out, and now, brother, And they are burning (from a business perspective). He is using money from his pockets. Now that the profit stopped coming, the company went into a loss.
So, what mistake did he make? He understood that for the money he is spending on marketing, the results are very good. If he is investing 1 in marketing, he is getting 2 and 3 out of it. So, invest a lot of money in marketing. And if you invest a lot of money, then a lot of sales will come.
The problem Start Now?
Now, that business was not generating profit for marketing. So, what did they do? I took a loan of Rs 2 crores; it is over. What did it do? It took a loan of Rs. 4 crore. What is it doing now? Waiting for it to end As the profit is not coming So, brother, always listen carefully to one thing.
What I am telling you now is that business is a machine that either gives money or takes money. In order to grow faster, in order to increase the speed If anyone tries to spend more money than necessary to move forward and does not keep an eye on the profit, that individual falls into the trap of debt like this.
So, if you have an investor who is sitting with a bag of money, and he is saying, brother, you do spend a lot of money, Take money from me and do marketing. No matter how much you lose, I want you to increase sales. Focus on increasing sales. Forget profit; make a loss for 4-5 years. Then, we will see in the 5th and 6th years if profit occurs.
If this is the mentality, like those of the start-ups, if you have that same mentality You are thinking like Zomato, Ola, and Oyo. Then, it is okay. If you have investors, have bags of money, and are not stressed, then do it, sir. However, if you are a common businessman, You are working with pocket money. You don’t have investors.
Significant way to grow
So, brother, there is no need to fly so much. Then, what should I do? When you do not have investors, if you are growing with pocket money, then do not increase the speed of growth too fast. It is better to grow as fast as your profit allows you to.
Rather than growing by 100% by taking a loan, it is better to grow by 50% with your own pocket money. That too is fine as well. “Zerodha, Mankind Pharma, Zoho.” I am doing a case study. What did all these people do? They make it big by reinvesting their own money. They didn’t take a loan. He didn’t fall into the trap of being an investor.
So, normally, either don’t take out a loan, and if you are taking it, then notice the amount of interest that will be charged on the loan. You should earn more than that. For example, if you took a loan of Rs 6 crore and are paying Rs 72 lakh interest on it, then you must earn at least Rs 1 crore in a year from that loan money. If you are earning money but are unable to pay the interest, then, brother, never take such a loan.
Otherwise, you will be ruined. Whatever you have earned to date will also be lost, and you will fall into a debt trap. So, this debt trap, i.e., the person falls into a debt trap, There is only one vaccine for this virus, ‘Profit’ How the loan will be repaid? If you take a loan again to repay the loan, it will be difficult to be repaid. You will bring someone in as an investor to repay the loan. Will sell the goods, it will also not be repaid.
The loan can only be repaid with a profit. You, brother, should concentrate on earning a profit, control your costs, pay some attention to your margin, and earn money. That money will help you pay the interest, repay the principal, and come out of the loan. And as Vineeta tells them, why is he working on a 5% burn? You, brother, do one thing, like reduce the speed if you want. But at least work on a 20% margin.
Hence, even though the speed will be reduced, the money will be withdrawn gradually. I am giving you a formula; copy it and print it in your mind. The first way to grow is through your own profit. Reinvest your own profits and move ahead. The speed may be slow, but there is nothing to worry about. Compounding will come, and gradually, you will become a big Another way, like you are telling me, sir, is that I want speed and my pocket money is falling short.
Should I take a loan? Yes, take a loan. If the money you are earning from that loan has the potential to repay the interest and principal, then, brother, take the loan too, and there is no problem with it. Third, sir, I am not able to cope with the loan either. Should I become an investor? Take investors only when the investor has faith in you, stands with you for the next 4–5 years, and does not point a finger at you in case of loss.
TOPIC FOR NEXT Blog ?
Brother, you go ahead, and we will find some reason later on. Then only you take the investor’s money. So, I hope that you have learned a lot in today’s case study and episode. Next, on which topic should I do the next blog? On which episode should I do it? On which company should I do it? Tell me in the comment box.
On the company that will get the most likes, if at least 2000–3000 likes are received, then we will think of making a blog about it. What is the meaning of less than that?
SEO, ROAS, ARR, AOV.
Yes, one more thing, The most important, as I go Let me tell you the meaning of those terms which are mentioned in this episode One term they used was that, I became an expert in SEO, sir, I am learning SEO.
What is SEO?
SEO means search engine optimization. When someone searches for you on Google, do you, brother, come up at the top and on the first page? Or whether you come at number 8 on the 10th page, that is decided by the SEO. So, suppose you have a restaurant in Delhi.
And I type that: the best restaurant in Delhi. Then, if I get you on the first page, in the third and fourth lines, it means that your SEO is very good. And if you are not getting it on the first page, you are not getting it on the second and third pages. That means, brother, you have not worked hard.
Second, they used the word that my ROAS is better than that of the other influencers.” ROAS implies ‘Return on Ad Spend’ Like, brother, how much money am I spending? And how much return am I getting from that? Like, I ran an ad for Rs. 1000 and got Rs. 3000 from it. So, this is the ROS of 3. They also said that, sir, my last-month turnover was Rs 6 crore. And, according to ARR, this year we will make 70–80 crores.
So, ARR means ‘Annual Run Rate’ Brother, according to this run rate, my monthly turnover is 6 crore. If we run on this run rate, then it will be easily 72 crores in 12 months.
what is your AOV?
My AOV is 800. AOV means ‘average order value’ Some of my things are sold for Rs 500. Some of them are sold for Rs 1500. If I calculate the average, then the total sales revenue is divided by the number of orders. Hence, my average order value is Rs 800 (he said). Like, I sell the goods according to Rs 800. This is called AOV. Whatever food companies or D2C companies are there, their valuation is seen, and AOV is a very important factor.
One more thing was said: I am doing BURN, sir. I am doing BURN, sir. BURN means that I am investing money from my pocket at this time. BURN is basically a technique to speak happily, though technically, they are facing a loss. Money is being spent from the pocket. However, speaking about losses and looting money, it doesn’t sound good. Right?
So, they feel good by saying ‘BURN’ One thing that came up was that this 3.5% is your PAT or EBITDA. PAT means profit after tax. It means, brother, that all the expenses have been deducted. Everything has been written off. The government also took the tax. Now, you are taking this money home. It is called PAT, i.e., profit after tax. So, he said, I don’t have any PAT. There is an EBITDA.
EBITDA What?
‘Earnings Before Interest, Taxes, Depreciation, and Amortization’ It means, brother, that till now, I have not paid tax on this, and I have not even paid interest on it; this is my earnings. Brother, he was telling me about his EBITDA. This year, EBITDA is 1%. Now, EBITDA is 1%. Now, he is paying interest on it.
Then, if there is anything left, tax has to be paid. And currently, the story of depreciation is different. So, brother, it means that it was a very poor company, but the way their speed was good, it can be made profitable (via profit margin) by controlling it. So, according to me, Vineeta’s investment is fine. If she understands what she said on stage, implement it and execute it.
Then, this company will be profitable and can give manifold returns in the next three to four years, okay? Today’s case study now ends here. We will meet again for the next case study. Thank you, Jai Hind!
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