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Oct, 22 2009

Services in tough times

In order to reduce costs, many companies, big and small, today, outsource their company’s business service needs. A number of viable options are available to business services industry to cater to the rising demands of the consumers.

Business services are numerous. To name a few, there are: financial services, insurance, tourism, telecom, courier, realty broking, logistics and many more. Business services sector emerges out to be a major business opportunity, which caters not only to the business owners but it serves to the companies in a big way. Despite a slowdown in the economy, franchising in low cost business services sector still remains unaffected.

Leaving the un-organised players behind, majority of organised players, these days, are heading to make the industry more systematic by providing their services to the larger consumer base. The factor which encourages ambitious entrepreneurs to take on franchise route is, low capital investment and low risk. Following are some industries which offer low investment franchise opportunities:

Financial & realty broking services

Motilal Oswal, Unicon Financial Intermediaries, Reliance Money, Sharekhan, ICICI Securities, India Infoline, Anand Rathi, Adroit Financial Intermediaries, Kotak Securities, Ventura Securities, IL & FS Investment Limited, are a few of the pioneers in financial services sector who offer services to a large chunk of consumers. They provide guidance and support to the investors in the market through a channel of sub-brokers who act as intermediaries between the customers and the company. They serve to the local people by providing their services, thereby, help companies to grow in the industry. The sub-broker gives right advice to the investor to put money in the right channel. Dharmesh Dixit, Head, Sub-Broker Channel, ICICI Securities elucidates, “ICICI Securities’ business model is based on a fully automated and transparent IT platform. Each customer of the sub-broker will have a unique fully integrated three-in-one account where his bank, demat and trading account are inter-linked, and this is mapped to the sub- broker. The system allows execution of transaction only if the customer has requisite funds or securities in his bank or a trading account. This insulates sub-broker from hassles of recovery or customer default and minimises his risk.”

Besides financial services, realty brokers also offer their services to the consumers who are interested to transact in the real estate sector. Major players like RE/MAX, REBI, Century 21 India and LJ Hooker provide real estate services, acting as an intermediary between the sellers and buyers and assisting them in buying, selling and leasing of the property space. In a low cost real estate business, the assistance is generally provided by the brokers and broker associates. This sector is also supported by the online venture which supports the needs of the target consumers. Specifically in the realty sector, there is an immense opportunity in the low cost franchising business. Samir Chopra, CMD, RE/MAX India considers, “As transaction value in the realty sector is very high, hence only a few transactions can ensure speedy breakeven for the entrepreneurs. Considering the financial crisis our economy is going through, these low cost franchise alternatives not only provide a cheaper platform to entrepreneurs to start a business but are surely going to reap a rich harvest when the real estate market regains momentum.”

Cartridge refilling

Soaring prices of printer cartridges, increase in printing demands, un-organised players, and rising e-waste have led to the emergence of cartridge refilling sector. In order to make it a feasible business venture, old cartridges are nowadays recycled and refilled with good quality ink to improve the life span of the cartridge.

Refilling and re-using old cartridges saves the environment by reducing waste and makes it a cost-effective business alternative. Though the industry is in an un-organised shape, it is expected to boom with the presence of few organised players like Cartridge World, Re-feel, Cartridge Café and Navson’s Cartridge Clinic. These companies are primarily into inkjet, laser refilling and cartridge re-charging. They also sell original equipments manufacturers (OEM) cartridges for inkjet and laser printers, fax machines, specialty paper, office supplies and so on. Refilling, re-using and re-manufacturing cartridges is an innovative idea to control the e-waste and landfill usage.  Cartridge refilling industry is nowadays accepted as a low cost and recession proof trade option, as it gives an assurance to the franchisee that it will not fail, since use of computer and internet is rising and along with that is rising the consumption of printing needs.

With presence of un-organised business service providers in the market, there has been a considerable rise of duplicacy in providing services to the end consumer. Although rectification is required to make this sector more organised and risk-free, there are a few organised companies in this industry which are expected to revolutionise the industry. Valerian Fernandes, Founder-Director, Cartridge Café seems very positive, he says, “Rectification has already begun with new players entering the cartridge remanufacturing industry; brand awareness and IP protected components used in remanufacturing of cartridges will only help create awareness to protect the environment and grow the biz in India.” While talking about bringing in transformation to make this sector well organised Samit Lakhotia, Business Development Manager at Re-feel says, “Creating awareness and educating people about the benefits of recycling printer cartridges by opening more specialty stores providing high quality refilling services to the end consumers will help in making this industry more organised.”

Franchising – expand business

Be it any industry, franchising nowadays plays an important role in expanding the footprints of your brand in different locations, thereby offering you an alternative to build the brand awareness and achieve gains in longer run.  The most significant part of having a franchised business is that the franchisee gets the back of an organised brand which adds credibility to the franchisee who takes up the franchising route.

Vijay Chopra, National Head, Business Alliances, Unicon Financial Intermediaries Pvt. Ltd says, “Franchise business is one of the most successful global business model. This benefits the company to increase it’s scope or reach of business; it also gives people an entrepreneurial bent and an opportunity to do the business of their choice with professional support and know-how from the parent company and all of this comes at a very low cost.”

On the other side, Lakhotia adds, “A lot of low cost franchise models are working successfully in the field of education, travel, food, etc. The profitability depends upon the dynamics of each individual business model. Since India is a big country with so many cities and towns, the biggest advantage of a low cost franchise model is its penetration power.”

Re-feel uses over 3,000 different types of raw materials for cartridge refilling purpose. The company has strong logistics and support system for raw materials supply to all its franchisees.

Talking about the stock broking sector, Manish Shah, Associate Director, Business Strategy, Equity & Product Development, Motilal Oswal notifies, “Stock broking may be a low cost business as compared to other businesses.  However, stock broking is a high involvement business.” Further adding to it, he says, “We feel that many broking companies entering into sub-broking is not the same as franchising. Franchising involves branding, IPR transfer, service standardisation, supervision by the franchisor and many other related concepts. All these are not present in sub-broking and these are the key factors in franchising. Hence, our conclusion would be that through sub-broking many companies are just taking baby steps towards franchising.”

Low-cost options

Financial services, realty broking, courier, logistics, cartridge refilling, offer profitable low cost business alternatives to the companies. The start-up capital required for cartridge refilling or stock broking would be less as compared to other small businesses.

The capital investment is charged as per tier I and tier II cities. The investment would be higher in tier I cities as compared to tier II cities. Anyone, who starts business with any of these segments would require lesser capital investment and a few people to operate the store. On this, Shah adds, “Any one can start a franchise with a marginal capital.  However, from our experience, we have seen that it is not high or low capital that is core to the success of the business. The success comes from commitment to the business and customer by providing a high level of service.”

While on the other side, Dixit informs, “The only capital investment required by the sub- broker is towards registration charges, security deposit and infrastructure. Our platform ensures even our sub-broker model an attractive and low cost business proposition.”

ICICI Securities ensures that its overheads are very low, and that itself is a significant benefit to its associates. All transactions and settlements are automated through our award winning ‘online trading’ platform which makes him free from incurring costs on back office operations and associated staffing. It also makes an impact on real estate costs since he does not need to block expensive space for back office operations. This ensures, his investments are focused on growing his business and nurturing his customer relationships. Shah adds, “The scope of franchising in financial services depends on the segment and regulations with regard to the segment.  Such as, banking cannot be done through franchise operations, however insurance and mutual funds are by and large sold through agents which is a form of franchising.  Hence the scope in almost all sectors except banking is huge for franchising.”

Training

Any entrepreneur who enters the world of franchise business is offered proper business training and support for operating the store efficiently and effectively. Lakhotia adds, “From signing of the franchise agreement till the store is operational, we assist in site selection, store design and all related business start up activities. We have a comprehensive training program which covers technical, marketing, administration, accounts, customer handling and store management activities.”

While on the other side Unicon Financial Intermediaries provide training to achieve technical, operational and marketing prowess over the business. Also, we provide them management training and inputs from time to time.” According to Shah, training is the biggest contribution to the business of the franchisee.  They believe in the adage “Teach a person fishing rather than giving him fish to eat.”  The company trains him on client acquisition, relationship management, advisory, technology and operations at the time of starting  business and there are continuous refresher sessions for the same.

ICICI Securities also helps the franchisee by providing continuous support in terms of marketing and promotional activities for customer acquisition and education.

In the services sector, providing user friendly customer service is very essential to make sure that you offer quality service to satisfy the needs of the end-consumer.

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