Well, it is no brainer that honesty and transparency are building blocks to businesses. But when one gets to experience the value of these principles early on, in hard ways along an entrepreneurial journey, they cease to be a cliché. Rather, they begin to impact and drive every action, every communication and every relationship. The vulnerability of committing oneself to the power of honesty and transparency not just begets trust but it fosters a high level of credibility and builds lasting relationships with every stakeholder in a business be it the Investor, the Employee, the Vendor or a Customer.
What exactly are those experiences and key learnings that led to such a profound impact on me and led to “Honesty and Transparency" being a non-Negotiable principle in all my business dealings?
Well, there are countless business examples I can give –
To me, experience with lies and non-transparency has always been painful. On the contrary, every time I have been honest and transparent in an unpleasant situation, I have felt lighter and the situation is resolved quickly. I have been following this principle in various forms throughout my working life and this is how Honesty and Transparency crystalized as a Business Principle Numero Uno over time.
This is how my close friends put it – “There is no filter in Pranav's words. His principle has two parts to it: Honesty and Total Transparency. The reason they are together is because these principles go hand-in-hand. If you are not completely transparent with someone in an unpleasant situation, you are hiding something. Could there be "Partial Honesty?"
Like any other entrepreneur, I have had my share of sailings through rough weather and phases of success along my journey. The rough times taught me to introspect and elevate my thinking about how important it is in business to be credible. I credit My success to this important Second Principle – Accountability for Words and Actions that I am thoroughly committed to no matter what it takes.
Trust is created when we say what we will do, while credibility is built only when we actually do what we said we will do. And so, I consider it my onerous responsibility to make sure that I commit only what I know I can follow through with action. I would rather not promise than promise and not deliver.
I am fully mindful that my inactions from false promise can impact stakeholders severely not just financially but also in terms of loss of reputation. On the other hand, Consistent following of the rule Accountability for Words and Actions builds credibility over time. As Warren Buffet would say “It takes 20 years to build reputation but takes only 5 minutes to ruin it. “
A sneak preview into why this principle has been a pillar of success to me on several occasions along my journey? Imagine a creditor calling over the phone looking for an answer. Here is the easiest thing to do - give him a date in the future that we are not sure of adhering to for the payment. On the date if we are not able to make that payment, we lose credibility with the vendor. Same thing could happen with a customer when we over commit a delivery date or with an Investor where we over commit returns.
One thing I have realized over the years, just like money, credibility compounds. Loss of credibility compounds faster which could lead to disastrous results in business. So, what is the best thing to do - Stick to words and actions I am 100% sure of delivering. Else do not commit.
With financial discipline, success is not a probability, it is a certainty!
Way back in 2014/15, even as I put forth baby steps into the world of Investing, two words that I uttered rather spontaneously during an accidental encounter with an Investor, became a defining moment, so to say to my financial journey and the way Investee and everyone I associate with run businesses going forward. Little did I realize then that these two simple words: Financial Discipline and the circumstances in which I uttered them, would one day become a key driver for various businesses I associate with.
While financial discipline, in the common parlance of accounting, would cover generic aspects such as getting numbers right, accurate forecasting, metrics monitoring and corrective actions it goes beyond that when it comes to a borrowing landscape and would revolve majorly around:
Have you heard of the fable – “Chicken is involved but the Pig is committed “- where the chicken did not have any “skin in the game” while proposing a dish that needed bacon and eggs? Well, this is a classic example of how some people would prefer to risk others resources while risking very less of their own. This is exactly what happens also in business and financing if there is no skin in the game. Here, the term Skin refers to the financial stake while the game is the business itself.
One of the key principles I follow is, bring skin in the game and expect the same from others. If partners in business and financing have an unequitable skin in the company it is a perfect recipe for a fall through, especially during downturn. Reason being, the one who does not invest or have a skin may or may not have a commitment to achieve the goal and would have an unfair option to walk away without losing out, while it is not an option for the one who has invested. At the same time the one who has the skin in the game may or may not be competent to run the business on his own and so would be a complete loser and money will sink into a bad business.
Here is a specific instance of how lack of skin in the game has ruined a business! The marketing Partner of one of the units, who came to us for funding, did not have skin in the game. The production partner had put in all the money. They tried for about a year. Sales did not materialize. The marketing partner conveniently walked away because he had no skin in the game. This led to financial ruin for the one who actually put in all the investments.
Bringing Skin to the game is non-negotiable. I definitely bring my skin in the game.
Have you ever thought why debt is often referred to as a trap? It is simple. It is easy to get into but hard to get out of! In financial parlance, Debt is either Good Debt or Bad Debt! And in business, one needs to remember 2 things –
Let me share an example of how I lead by example when it comes to following this principle:
During a family emergency, I was called by my co-investor to understand the situation. I narrated what happened. He was kind enough to ask - "Do you need funds to get out the situation?" My answer was clear – “I will not take investor capital to get rid of personal problems. It’s like throwing fresh clothes on dirty laundry.”
“Most people overestimate what they can do in 1 year and underestimate what they can do in 10 years,” says Bill Gates.
In fact, I would rather say a quarter century - 25+ years should be vision span for any business or even relationships for that matter.
Why long-term thinking is important for me and for the business –
Benefits of thinking long term
“The captain is last to abandon the ship “– This analogy resonates perfectly with Principle # 7 - Last to exit
A Captain is responsible for all the lives and steering the ship through thick and thin. Then there are Rats, who jump off the ship when there is first signs of trouble. Even though, I do not take charge of the ship, I still resonate with captains’ responsibilities
I believe that as an Investor, exiting off an investment before anyone else can, puts my co-investors at risk. As a matter of principle, I would rather not cause an irreparable damage to a relationship or the business, that I highly value, by being the first to jump off the ship. Rather, when we are challenged by storm, I would try my best to steer the ship to the shore, and yet if we do not succeed, I would give the first right of exit to my co investors before I take mine.
Why?
Because – With great power, comes great responsibility: I would rather retain the power than shy away from responsibility.
Relationships – be it with a co-investor, founder or a partner – will last only if the parties believe in each other. And for the parties to believe in each other, they need to have shared values. Shared values create a healthy and transparent boundary of ethical behavior that will translate to trust. Where there is trust, the unspoken camaraderie will be a catalyst for unified direction in goals. Once the relationship is built on these fundamentals, probability of success in business is at its best. The underlying foundation of relationship is shared values. So, I partner or invest with someone who share my values of..
