Another year goes by

Convict lake Alpen glowMy phone rang early this morning. Half asleep, I picked it up. “Happy birthday, Prem”, the voice on the other end said. It was my Dad.

After the call, I spent a few minutes thinking.

Yet another year gone by (33 of them actually), am I headed in the right direction? If active life is for 70 years, I am at the half way mark. Am I spending time on the right things? What could I get rid off? What should I add? (3 years back, I wrote this and am happy that I did do something about it.)

Mark Twain’s quote (few say it wasn’t his) came to my mind.

“Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.”

And this quote by Einstein which I try to follow religiously.

“To maintain your balance in life, you need to keep moving.”

Actually, the above is more like a personal philosophy at Tapprs. “Every 3 months… change”.

We have evaluated options over the last 1 month. Tapprs will change over the next 1 year. How much.. I am not sure yet.

The ride has been fun. We are profitable at a small scale. The lessons have been fabulous. The mistakes have given me better maturity. Yet, at this point, change is staring at us. Whether we take the bus or stagnate is a question I could answer only a year later.

There are few things that I don’t like in this rental model:

  1. Capital intensive: Topline is dependent on capital expenditure, esp inventory purchase. Actually, we could already be doing double or more revenue, but we chose to go slow on our capex. (When I was very active in value investing, I would never touch a capex heavy company. Strangely, I started one myself :). )
  2. Higher risk: No deposit rentals is just like no collateral loans. This doesn’t bother me much – infact, it interests me a lot. I keep thinking, “how could we statistically account for risk?”. I do pay attention to things such as risk weightage, spread, etc. It’s fun. However, I have to acknowledge the intrinsically higher risk.
  3. Scale: Unless you expand out of a city, its a small business. Its profitable though. Our appetite is slightly higher now.
  4. Operationally intensive: Okay, I accept there is no escaping this in most businesses. We indeed have embraced the fact. But still, if we could make it less operationally intensive, I would definitely be happier.
  5. Level playing field: We are strictly ethical about how we run this business. We pay tax on everything we buy. In fact, we never buy anything without a bill. And we invoice every single rupee and pay taxes on that. Now, a player or two who doesn’t really do that has a 12.36% service tax cost advantage over us, a 14% vat advantage on items purchased, etc. We will never do that, which means naturally, a few customers will not come to us owing to our prices. (We will not change because of this though. Such players exist in every market.)
  6. Frothy market: Camera industry is growing at 100% y-o-y, in India. Globally, it is on the decline a bit. Today, Indian market is on an upward tide. Like Buffett says, ‘only when the tide goes away, will you know who has been swimming naked’. It could be 3 years from now or 5 or 10. I don’t know. But frothy markets create a sense of euphoria where you mistake an uptide for intelligence :). Combine points 1,2 & 6 – you get a deadly combo.

And then, there is the opportunity cost. Time is money. If we are spending all our time on this, we do not get time to do something better. We are now thinking in terms of opportunity cost. If we had the time to do only one thing, what should we be doing? Is this the best opportunity optimized attempt for us?

There are multiple ways forward from here and I am already exploring few of them. As of now, they are just a cluster of thoughts / ideas and hence don’t want to write about them. Only thing is, there will be change.

Much like another beginning, perhaps. Maybe will blog about it some time later.

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