The Masterstroke-Two & Half Moves

Moving ahead on their journey Tushar & Rutwick set up the operations of Ask on the Move, They had two things to do as discussed in The Blueprint.

1. Design the Database
2. Fill the database

The traditional yellow pages had the Catagory, Name & Phone number. While Tushar wanted to have more important details like Address, Operational Days, Operational Hours & fee range, but collecting them would be an expensive task at this point in time. So he decided to convert the existing yellow pages into digital format.

He sat down with Rutwick discussed the database design with all the sustainability & scalability provisions planned out & asked Rutwick to do a requirement planning. Rutwick being the pro at designing databases got back to Tushar in a week's time with the requirement of 5 programmers. Tushar ran though his engineering college contacts and conducted coding challenge in his engineering college to identify good programmers. The idea was to interview & induct top 5 as interns with a good stipend, a handsome variable bonus on performance, a job on completion of their engineering with a payment equivalent to average pre-placement offers and a lucrative variable bonus on their performance, putting it at par with highest pre-placement offers. The 4th year students were the target audience. They conducted the challenge & identified good developers. Tushar took extra care in selecting the people with the right mindset who had a vision, purpose on being a part of something great and did coding for the sheer joy of it. Ask on the Move started with two employees (Tushar & Rutwick) & 5 motivated interns

Now with the database team in place to develop,Tushar needed the data entry piece sorted. The task would become much easier if he could strike a deal to get the softcopy of the database from the companies that printed yellow pages, plus if he could strike a win-win deal with a large yellow page maker, he would reduce his initial investment in hiring the data entry team & leverage it for marketing and of course avoid any potential litigation arising from copyright issues. However, there was a risk, that the Yellow page owner might act on his business plan without him in the equation & capitalize it. He had to tread carefully. He had to carefully analyze each owner before discussing the deal. He started with his scuttlebutt (Ground research). He found 5 Yellow Page makers who controlled the lion share of the market, out of which 3 were reasonably profitable, but none of them were able to grow topline at more than 6% per annum & Bottomline at 4%. Another interesting fact was all of them were closely held family businesses.

Their revenue model was to generate revenue by selling yellow page copies & selling advertisement space in the copies. Since they were of interest for local businesses, 65-75% of revenue came from selling copies to customers priced at Rs.250-Rs.300 each and 25-35% from Advertising priced at Rs. 200-250 for a quarter of a page. This was in stark contrast to leading Magazine where 70-75% revenue came from advertising & 25-30% from subscription where the cost of a copy varied between Rs.40-50 was from A Rs.300-400 per square centimetre for advertising.

Basically the Yellow Pages businesses were cash cows.

He also found that owners of the top 2 Yellow pages had other business interests as well. The one with the second-largest circulation named Find your business had an owner who was in his early 50's and generated 20% of his total income from yellow page business. He had a daughter with a network engineering background, doing a 2-year family business program from a top B-school. The one with the highest circulation was named Sampark whose owner was in his mid 60's. He generated 40% of his total income from yellow page business. He had a son named Dr.Vinay, who was a renowned Cardiologist. He was in his mid 30's & stayed in Delhi. Sampark as per the filings available on Registrar of companies was generating a net profit of Rs. 1.5 cr. Doing the final part of his research he found Dr.Vinay to be the candidate to approach as he had no interest in running the business.

In the meantime, he was invited to Riya's wedding in Delhi. Riya was Tushar's maternal uncle Sanjay's daughter. On his call to congratulate Sanjay Uncle & Riya, he found that Sanjay Uncle had recently undergone a biopsy and had recovered well. Out of curiosity, he asked for the doctor's name, who had done the operation. To his surprise, it turned out to be Dr Vinay. Tushar then checked if Dr Vinay was invited for the wedding, and the answer was affirmative as Dr Vinay shared a close bond with Sanjay Uncle & had promised to come to bless Riya on her wedding.

Tushar immediately booked his tickets for Delhi to attend the wedding festivities. Tushar had run the possible conversation with Dr Vinay multiple times in his head and was more than ready. Finally, the D-day arrived &so the time to meet Dr Vinay. After the ceremonies were completed, Tushar asked his Uncle to introduce him to Dr Vinay, which was done happily by Uncle and he left them alone going on to fulfil his responsibilities as the host. The conversation between the two started on a general note. Tushar found Dr.Vinay to be someone who was deeply interested in serving people with a keen interest in wildlife, history & music. The conversation meandered around life and business and Tushar put forth a question about his background and business interest. Dr Vinay with all the other things mentioned about Sampark. On further probing, he expressed his aversion to carrying forward the business and wished to set up a retirement fund for his parents. Tushar very subtly told him about his Investment management prowess and offered to help him with managing his funds. Dr Vinay was now interested. Engaging him in further conversation & sensing it to be the right time, Tushar pitched his business plan of Ask on the Move and offered to pay him a one-time royalty of Rs. 50 lakhs to leverage the database of Sampark with a Rs.4.5 cr offer of buying out Sampark in 2 years time, all this with top-up to manage funds for him & his family at a nominal annual fee. Dr Vinay was impressed with Tushar's intensity, genuineness & conviction. However, he asked for time to think about it.

Tushar returned home and within a week received a call from Dr Vinay, who obviously had done a thorough background verification about Tushar. Dr Vinay said he would like to go with the deal with a one time Royalty payment of Rs.15 lakhs and a price of 7.5 cr for the business. Tushar asked for some time, making a mental calculation of the total cost of putting together data in the database, potential litigation cost arising from copyright issues, marketing & advertising expenses. As mentioned in The Blueprint, Ask on the Move had a fund of Rs.3 cr. He called Dr Vinay after a couple of days making a final calculated yet bold offer of Rs.10 lakhs as one time Royalty payment, a final price of Rs.7.5 cr for Sampark. This is where Tushar played his masterstroke with a request to market Ask on the Move as an upgraded version of Sampark till final settlement with a 10% stake in Ask on the Move priced at Rs.1 crore, reducing the balance amount to Rs.6.5 crore to be paid in instalments starting in the 2nd year with the final instalment to be paid by 4th year. Dr Vinay readily agreed as he was more interested in having a retirement fund for his parents and now he would still be holding a stake in his father's dear company with a genius like Tushar at the helm. The legalities were completed over the next couple of weeks.

Tushar with his out of the box thinking in one move had increased his initial fund available for marketing, advertising & promotions by reducing his investment in data entry upfront and getting the advantage of Sampark's reputation. A Masterstroke indeed!

Stay tuned to witness the next phase of Growth for Ask on the Move.

Disclaimer - "This article is purely fictional. Any resemblance to anything or any person real, living or dead, is purely coincidental."