Page 63 - #letter to son

#SangamNiti AFTERNOON MUSINGS
Today, his Group is among the largest employment generators in the
country. Furthermore, the breakthrough IPO of the flagship Group
company was also executed under his watchful supervision. With him,
I always feel a connection based on his visionary approach to business
and humane way of doing things. Just like my father who felt it was his
personal responsibility to come to the assistance of his fellow villagers,
the head of the Group is also someone who deeply cares for his fold.

With all these entrepreneurs, stalwarts as they are in their own right, I
feel it seems wrong to call their hectic days and sleepless nights, glorious
triumphs and desperate struggles, under the bland banner of ‘business’.
For many, I realise, that business is the all-out pursuit of money. For
these few folks however, it was to create, to contribute, to actualise their
vision.

Entrepreneurs today may all the time be tempted to take debt, easy
money, to build their businesses. But if one wants to build a business on
the foundations of conviction, equity is the route to do it. Equity helps
the entrepreneur bring skin into the game. Equity enables the build-
up of business sustainability. It helps unleash the entrepreneurial spirit,
ushering in a wave of innovation that helps the enterprising fulfill their
aspirations of actualising their vision and creating something valuable,
while contributing to societal progress.

When you’re starting a business, you should always remember that in
the financial space, ‘E’ should come before ‘D’, that is ‘Equity’ should
come before ‘Debt’.

The risks of assuming debt upfront is in the interest payments –
irrespective of the performance of the business, interest liabilities will have
to be discharged on time. Without fail. History is replete with instances
of companies that have gone bankrupt, becoming insolvent, because they
were taken over by their creditors on account of failure to repay their loans
on time. Equity, on the other hand, is not a yoke like debt. Returns can be
distributed among equity-holders solely based on the performance of the
business. The primary equity-holders, the lead promoters/entrepreneurs
in this case, have a visible incentive to grow their business.

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