Stock Market Crash And The Spirit of Ajit
(Image used for illustrative purpose only)
This is an ode to the spirit of Ajit, my friend who is among the five crore MSMEs in India. He is good in his craft. He works hard. He networks well. Understands the importance of customer delight. But he is struggling in the business for no fault of his. When America and China fight trade wars, he suffers. When fuel prices or CAD go up, he suffers. When stock market crashes, he suffers. His only fault is the business he has chosen. Supplying building materials. The business that flourishes mainly during the buoyancy in economy.
People buy houses and offices mainly when the sentiment is upbeat. When the sentiment turns negative, all prospective customers postpone their purchase. And he suffers. For him to do well in his business, the overall business environment has to be positive. An aspect that he cannot control. Often, he finds himself as the last man standing and bearing the maximum brunt.
Take for instance, the 1100 points intra-day crash in the stock market on Friday, 21 September 2018. A couple of companies were found wanting in corporate governance standards and the sentiment of the entire stock market turned negative further. Customers will now wait longer for sentiments to improve to open up their purses wider and spend. The sentiment is unlikely to improve quickly given the domestic political environment and global uncertainties.
Ajit is staring at a bad Diwali. And so are all those who are into products that are dispensable during low sentiments. Products like gifting, holidays, real estate, insurance, stocks, mutual funds, fashion, jewelry, luxury goods, retail, etc. One little crack in the stock market and five crore businesses are affected. Mind you, there are no more than 5000 companies that are active in stock markets in India.
These are very small businesses and do not have enough agility to skirt the sentiment. Neither do they have enough cashflow nor is the external funding easily available. Then they have employees, families, suppliers, etc. to manage. Most of them are first-generation entrepreneurs. They are unable to plan for such exigencies as they are always engulfed with challenges that are urgent and critical to attend. Normally, there is hardly any hedge.
One of the possible built-in hedges is to have a wider product offering that caters to multiple business segments or human needs. This could also be translated as having more customers. Customer acquisition, as an initial business strategy, has worked with many of them. Ofcourse, the credit worthiness and serviceability are key to such strategies. The other hedges are niche or idea-driven businesses. Though it is easier said than done, the niche or idea-driven businesses have a better chance to weather the ‘sentiment’ challenges.
Ofcourse, the spirit of enterprise, the fuel in Ajit’s lamp of business, should never dwindle. More power to you, the Ajits of India.