Andrew: Hey there, freedom fighters. My name is Andrew Warner. I am the founder of Mixergy.com, home of the ambitious upstart. This is home of interviews with entrepreneurs from all over the world who come here to spend about an hour with me and you to talk about how they built their businesses, teach you what they learned along the way, and pass it on so that hopefully you’ll get some value out of this conversation, use what you’ve learned to build a successful company yourself, or grow your already successful company.
And then come back here and do your own interview so you can share what you’ve learned with others. That is the circle of Mixergy, my friend. And today, we’ve got an entrepreneur from the other side of the globe. I want to find out how an entrepreneur in India built one of the top outsourcing companies in the world. In 1992, Pranit Banthia founded Hi Tech Outsourcing Services which does non-voice-based, but knowledge-based services to global companies.
Let me explain what that means. That means: You know those annoying phone calls you get from outsourcers? That’s not his company. You know how some companies need other companies to take phone calls for them? That’s not what his company does. What they do is data entry services. They do mechanical 3-D modeling. They do architectural design. They do mobile development. That kind of thing. All knowledge-based stuff.
Alright, enough of my intro. Just one last thing, and that is to say that this interview is sponsored by Scott Edward Walker of Walker Corporate Law. He is the entrepreneur’s lawyer. I’ll tell you more about him later, or you can just skip ahead and go to WalkerCorporateLaw.com and find out about him, but first I’ve got to welcome my guest, Pranit. Welcome.
Pranit: Hi, hi everybody. How are you?
Andrew: Good. Thank you for doing this interview. You’ve come a long way, but it all started for you as a college project. What was the college project?
Pranit: Okay. It was part of the final semester of our project. We had to design some kind of computer program. And I and three of my friends chose export systems, and that we had to do in prologue. So, it was about the doctors. The doctors promised certain rules to arrive to some diagnosis. So we were trying to build an expert system so that we could build a knowledge base into that system so that it would help them in diagnosing different types of diseases.
Andrew: I see, so I go to see my doctor. My doctor asks me what hurts and what are the symptoms. I tell him the symptoms. He punches it into his device, and then he gets some suggestions for what I could be experiencing, and it’s all based on research and data that your system collects, saves, and then offers up. Is that the idea?
Pranit: Yeah, exactly. And then it would also give the combinations of all certain medicines that he can prescribe, and of course, after that, a doctor has to make his own decision and prescribe his own medicine, but yes, it suggests what could be the disease and what could be the most possible medicines that he should suggest.
Andrew: So this sounds like a brilliant idea. Before we go to what happened next and how you shifted your path, what happened with that idea?
Pranit: We did it for the six or eight months that was a part of the school project, and then we were all thinking, I mean, “what next after this?” So one of my friends actually went to the U.S. and he started doing his further studies when he was gone and me and my friends in France who were there, we thought, “OK, let’s do something else,” and that’s how everything started.
We doubled up the product and we thought that we would be able to market it, but the real problem was that we all three were tech-crazy, we all three were all computer ingenious, and really speaking we had very little expertise in marketing and business development. That is where the entire concept could not succeed, actually. We just could not find doctors. I mean, we developed a good product, and still today also I think that in some point of time it would have become, trying to market it in a nicer way, a good product, but that was not to be.
Andrew: And you know what, I’ve interviewed several entrepreneurs here on Mixergy who’ve said that even if you’re a great salesperson, it’s hard to market to doctors. It’s hard to get in front of them. It’s hard to convince them to do things differently. So, that’s an interesting issue. What happened next was someone contacted you, and that contact changed the path of the rest of your life. Who was it, and what did they want?
Pranit: Okay. Before that contact, what was happening in data entry was, when we were developing this software product with virtually no cash in hand. So we thought that okay, we need to do something to get cash. And that’s where we thought to start training, I mean we’ve got all these computers and that was something very new at that point of time.
So we thought that okay, in our spare time we’ll start teaching students, we’ll get some cash and then yes we’ll keep on doing this project. And in the meanwhile what we did was to prepare a small video about the computer education that we were doing, and we started getting on local television, the local area televisions. So somehow, and at that time we were teaching Windows.
Andrew: And this was advertising that you did on television?
Pranit: Yeah. Advertisement that we did on television, all about computer education.
Andrew: And this seems like a pretty impressive first step, buying ads on television, creating ads where you’re on camera or have someone else on camera. That’s expensive and it requires a lot of experience, doesn’t it?
Pranit: It was not on…I mean it was not on national television or even something like city television, it was like a very focused, small group of television area. I mean we used to call it channel here in India, wherein it would be shown in local community, shown to maybe 1,000 houses, that was all. So it was not really an expensive proposition. We were billed at video hour sales, so there was no cost involved in it.
So it was actually a decent video with very little cost involved as far the advertisement part was concerned. And we thought that okay, if we do well, we will do another kind of tag [ph] this would be much more effective than that. So we had that small video, I mean probably a minute or so, a video running on the local, I mean I’m talking about just a few thousand houses. Just a few thousand houses.
Andrew: Okay, and how did that go?
Pranit: Yeah, and then we were advertising about that we teach Windows and all those kinds of things. So some gentleman saw that okay, at least we are teaching Windows, and he wanted software to be developed on Visual Basic. And that was very new at that point in time, Visual Basic. So he thought that he was not able to find anybody in the city who had the knowledge of Visual Basic at that time.
So he thought that let’s approve these people at least who knew Windows, what was Windows? What will we be able to do? Then when we met, I mean we were all three computing geniuses and then he probably that these are then enthusiastic people. They will do something, they will learn. And we told them give us two months, not pay us anything, give us two months, we will show you.
We will learn Visual Basic and we will be able to do it. So then he thought that okay, it’s worth giving a try. He gave it a try and he told that “Yes, let’s go ahead.”
Andrew: And this was the first outsourcing project that you had. Was he happy with the results?
Pranit: Well, mixed. That project went on for actually four years, almost like three, four, five years, almost like that.
Andrew: Wow, okay.
Pranit: It was mixed kind of thing. There were successes, there were failures. He was able to sell product, that particular product and that company was in the U.K., and he was visiting India. And there was no communication, I mean, we had to communicate over fax and all of those things. There was no email or nothing. It was very difficult, I mean, communication was very difficult.
But so, he was able to sell a few products there but probably realized that this is something, software development is something that is not going to click actually. And there was just too many communications on fax which was slow, and when there was implementation part coming, it was becoming more and more tough.
So probably then after three or four years of a lot of work then we gave all of the source code and everything to him. So I would say it was a partial success actually. And clearly it was…I mean the communication really took us down actually at that time.
Andrew: I can imagine. You know what? It’s tough enough to communicate on Skype. I do it with people who I work with on a daily basis and we sometimes just have to cut it out and find other ways of communicating. But to do it via fax, back at the time when people weren’t used to communicating with outsourcers or having outsourcers must have been really tough. You then got another phone call completely out of the blue from someone in the Netherlands and what did they want?
Pranit: Okay. It was not a phone call actually, so when we were doing this software development and computer education, there was a gentleman from the Middle East. He was looking for somebody who could do data entry input for them. And it was like complex hanger-ton [ph] kind of work. So he just thought to just drop it in the computer education site so that these people must be having good computers. Because the kind of software that he had that required at least a 386 at that time, that was I think late 1995, and his software had required at least a 386 and we showed them that yes, we have 386.
Andrew: You just said, “I need someone who has the right computer, 386 Intel processor, the one with the 386 Intel processor,” okay yes.
Pranit: At least, because his software would run on 386 only and he was looking for people around who had this kind of computers and hardly anybody had any idea at least who had this kind of computer system. So we thought that okay, we put in at least the first three media.
And then he just started talking to us and we told that we had worked for this company in the U.K. and we had been teaching a lot of students, so we can get students who can do the data entry pre-work, so he probably thought that these people might be able to do it. Let us see if they are able to install my software on the market because that was simply another challenge actually.
I mean, we got 386 and installing it was another challenge. So we took like almost 15 days because that software, there was something, some connection thing was there and it was not working actually, that software. Somehow we were able to get hold of a great networking genius and he was somehow able to connect that software and that software could run.
That was like a big win. I mean, we could run that software and then the gentleman told us “Okay, now that you have connected the software, this project is yours now. Now I am giving you this project.”
Andrew: Talking about a whole long time. It’s not even a long time ago, but it’s a whole other world as far as computers are concerned. We’re really getting into the story and the understanding of how far we’ve come because of simple technology. Well, not simple, it’s complicated but we take it for granted, like the internet for communication, like web apps, which allow apps to work on just about every computer. Amazing, and so you didn’t have data entry people, how do you suddenly now get into data entry?
Pranit: Well, so when he asked, I mean he asked if okay, you are to do data entry. I just told him yes, I know. I mean we teach data entry. And he told that “I want 99.9% accuracy.” I just could not understand what does it mean, actually.
Andrew: Really. Even the phrase “99.9% accuracy,” okay.
Pranit: What, 99% accuracy? What does it mean actually? So, then he’d explain to me that all of the characters that enter, I mean he explained me all of those things, okay. I thought okay, you need it, I understood it, fine. Let me foresee, I mean how much does it cost? I mean, I have no idea what sort of work, then how to charge for a data entry service.
So I just told him to give me two days. I will try and see what can be done actually. And in the meanwhile I made several phone calls. I tried to find out what kind of salaries are to be given to data entry personnel, what is going on in the market and did all kinds of market research. And then I told that yes, I’m not guaranteeing you 99% accuracy because really speaking, these are hand-me-down things, but we will give you our best. I can tell you we will give your our best. You can come and audit as many times, I mean you can put your one person here.
We’ll be inputting, we’ll be putting all the sincere effort that we can do, but I am not sure about 99.9% accuracy. You have to trust us. So, he took two days and he called back and said “Okay.” He had one other Indian lady with him and he told that “Okay, she will be talking to you. She will be working very closely with you to see that accuracy levels are met.” But that’s fine. I mean, she’s most welcome. And then it started, actually.
Andrew: And that’s where things took off. By the way, these two entrepreneurs, these two business people who you met, the one from the U.K., the other from the Netherlands, also pioneers who are ahead of their time, who said today anyone can go on to Odesk, Elance, Google, Find Outsource and Company. These guys had the vision ahead of the rest of us to say, “What there’s a price discrepancy. It costs so much more for data entry in the Netherlands than it does in say, India. There is no easy way to do it but I will find a way.”
And they went over and they found a way. So life is going well but then you hire people. You staff up and something bad happens. What happens?
Pranit: A bad happens in the sense?
Andrew: In the sense that doesn’t the business start to go away at some point?
Andrew: You finish the first data entry project and?
Pranit: Yet. Okay. Now that project did not finish fully. I mean that project did not finish fully. What happened was we received 18 boxes. Eighteen boxes of, I mean, and stuff actually – we entered everything. We were paid also for that.
There were three or four such kind of shipments that were to come to us, so eight. I mean three or four shipments of 18 boxes. By the time we had shipped it and it was a little bit late for the end customer because they were searching for the right person who can do it.
I mean, a lot of time had already gone by. They brought the other 54 done locally. Actually, what happened was we had invested a lot. Assuming that’s 72 boxes will come.
Pranit: But really speaking, only 18 came. We were left wondering now what to do with all the investments that we had made. It started becoming tough actually. Because a lot of investments were made and took loan from bank. I mean, that was the first time that we took loan from bank because we had to get 25 machines.
Andrew: Ah, yeah.
Pranit: But that, I mean, opened a lot of that was a big learning. I mean, getting business is one thing. Getting business is one thing. Executing is another thing. Then calculating cash flow is another thing.
That was a lesson learned in a very, very hard way about the project feasibility and what kind of volume we should commit to and what kind of readiness with all the constraints we might have.
Andrew: We spoke with [Bacalli], your senior vice president at the company, who’s told us that today your retention rate is about 80%. Back then, suddenly you lose a major client. That’s not, that’s, what is it? A 100%, 50% of your business? What do you do then with all these computers and all these people who you’ve staffed up and geared up with?
Pranit: Luckily, what happened during those days, I mean, ’95, around ’95, toward ’95 end or ’96 beginning, internet came. Internet came to India.
So we very quickly knew that communication had been the biggest bottleneck in our business so far. First thing that we did was to internet. What we tried to see is how to make it visible. Lot of research in how we can, how a website can come higher in the rankings and so forth.
Between ’96 and ’98 really, we were struggling very hard. I mean, that was the very tough period from a sourcing and international customer point of view is concerned. We could not get any customer between the period ’96 and ’98. What we could get actually is a local, a big local customer. I mean we were, we got a contract of entering data around 50 books of big voluminous books of who’s estate actually where we are.
The high point of that is we got an order of [estate] that we should enter everything …
Andrew: So [High Court] just said, “Here are our books, can you enter the data so that it’s all computerized?”
Pranit: Exactly, exactly.
Pranit: The rates were ridiculous. But we had the all-day infrastructure. They gave very low rates. We had the computers, we had the people. We thought that it’s best to do something rather than just having everything idle.
We decided to take the contract. But we knew that we had to take on contract which is going to run in to huge problems. What happened, once we had done those last two or three months and we were running into a deeper problem than we were in earlier because this stock has to continue one year or so? So we just were trying to see how we could try something different, how we can generate some profits out of that.
And at that time when we were researching all of these things then somehow with somebody’s help we found our which we can use which can increase our productivity, I mean, several folds.
Andrew: Because OCR can start to basically do the basic data entry and humans can correct it?
Pranit: Yeah. Exactly. So over time effective time was cut down by mostly 80-90% actually. I mean, the project was running in deep loss. It was now in decent profits. So that was kind of a game changer for us as far as this cash flow part was concerned. So we had the computer. We had the people and now with the technology we could have the very successfully. That was a successful project. So that gave us decent profits, and that really helped us in gaining a lot of confidence.
That gave us time for our website to start coming on high in the rankings, and then it could provide us with a launching platform of outsourcing services, what we are doing now.
Andrew: Do you think that if you hadn’t taken on this business that you were out of desperation and that the business that you took on — that if it hadn’t been operating at a loss, do you think that you would have figured out OCR as quickly?
Pranit: I don’t think so because at that point, I mean, we were in real trouble at that time. It was like we were working desperately trying to see what can save us. So at that time, I mean, probably it was a “do or die” kind of situation. We had just launched, and we just tried to research everything. So probably we founded. I’m not sure if we were in a comfort zone at that point. If things were running very nicely then we would really have worried about the technology part trying to see if we can do things smartly. I don’t think we were wise enough at that point in time.
Andrew: Sometimes being pushed up against the wall with other options forces you to fight harder than you would have if you were more comfortable.
Pranit: Yes, yes. I think so.
Andrew: Let me do a quick sponsor spot. And then I want to ask you about something that my researcher turned up that you did in 2001 which surprised me and kind of goes against what I said earlier.
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So Pranit, what I see here is in 2002 you did data entry. You did form processing. You did medical transcription, all connected to what we talked about before; scanning, image editing, OCR, even web design and web promotion. But you also did call center, and this is the thing at the top of the interview that I said you don’t do any more. What happened with call center, no?
Pranit: I think we never did call center.
Pranit: We never did call center. We thought that we would do call center.
Pranit: Okay, yes. We talked to one gentleman and sort of a partnership with him. Okay, let’s do a call center together, but it never took off. We never started. We did some research on how it would be done, but we never started it.
Andrew: Why not?
Pranit: We were struggling about the communication Internet part throughout the years, and that requires a very, very strong level of internet lines, like private lease connectivity and those were–they could have been done by–we were just worried with how…so much communication everything in the communication issues we do not want to return to another sector for communication issues where we have to set up private lease lines and then it has to be done from internet international.
So we were unsure how it was going to work, and then another challenge was to find good English speaking agents here in India, because especially in the location where we are today, that is Andergard [SP], here Indians can’t speak English but probably the requirement that was there about the English, the fluency in English and everything, we were not able to find out the right kind of people.
So we posit it will be just too many things, we will have to fix too many things: high investment, communication and data line issues, agents. So we thought about this other part, the daytime three part, was looking very promising. So we posit there’s enough time actually, about six or seven years that we have been trying, we have been struggling and doing one thing, this thing, that thing.
Well, finally we have seen that this is working, the other thing is working. Let’s just focus on one thing, try to set up our business and then we’ll try for other things.
Andrew: I see. Get really good at doing one thing instead of trying to get okay at a couple of different things.
Andrew: Okay. The other thing that I notice is, you used to call yourselves “Hi-Tech Export,” I think?
Andrew: And you still have the domain. Why is that?
Pranit: Yeah again. We did not have…at that point we were not aware about how this would be an outsourcing, will be a great work to have. So what we thought we would give was exporting our services. That’s what we had in mind. So we thought that “Okay, I’m in the natural thing.” I mean, our company’s name was Hi-Tech Software Private Limited.
Now we thought that we are doing exporting of the software. So, we were not trying to find out what would be that good name, so we thought that let’s do Hi-Tech Export because that choice, I mean it looks like it was a very bad choice. I mean Hi-Tech Software was better than Hi-Tech Export, but then we thought about Hi-Tech Export. Let’s go with Hi-Tech Export. Then we had that domain name.
Andrew: The other thing I see here is–I don’t even know how I found this– but, I see a picture of what is your first facility. And I say facility because it wasn’t an office, it was a house.
Andrew: Is it a two story house with a gate in front? I see a moped in front of that. This is where you launched. Was it your house?
Pranit: Yeah. See, that was my house actually. So, it was like, so I was staying at one area and the other area was straight out of the college, so the best thing was actually the house. Fortunately enough, there was some space available there, where we could have all these computers and everything.
Andrew: So all these people we talked about were in your house working where you lived?
Pranit: Yes, and that was like three shifts.
Andrew: Three shifts in your house! So how did you handle it on a personal level? Did it feel exciting because “Look at me, I’m in business,” or did it feel overwhelming because “Look at me, I’ve got business everywhere.” Everyone’s in my kitchen.
Pranit: It was easy. I mean I was not married. I was a bachelor at that time. Everything was business at that point of time so I would get up next to five o’clock, I would check my emails, I would do some other things I had to do for an hour. Then after the full day before going to bed again I would do some work. So, it was like–office and home–there was no separation for me. It was just like one. I was available twenty-four hours actually at that point of time.
Andrew: So we talked about how you got your first clients. These are people who just found you because they were pioneers, they were willing to go out of their way, they were looking. And there was a bit of luck involved in that. They brought ideas to you that you hadn’t thought to get into. How did you get the next group of customers, the group where you actually had to go and find them and bring them in?
Pranit: Yes, so that actually started from 1996 when the Internet started. And we really thought that we could do something to get our site visible to the costumers globally. So, I mean, we spent tremendous time from ’96 to ’98 really trying to figure out what would be needed to get our side. Then started in ’98-’99 and we could get out first costumer in ’99, early ’99 or mid ’99. So, actually the lead started in ’98 itself, but we got our first costumer in ’99. So that’s just when really things started taking shape.
Andrew: Just getting really good at what we call today “search engine optimization”, but back then didn’t really have a name.
Pranit: Ya, so, it was a SEO actually, that provided as the to get those costumers.
Andrew: I don’t want to overlook this. One of the things that happened was you have to shut down the shop and let go of your dated entry people. At that point, this is when you lost the business to do dated entry, after you staffed, after you bought all those 386 computers. When you had to let people go, when you had to close shop, did you feel like a failure? How did you feel?
Pranit: That was actually a input, hold on…
Andrew: No, this is after what we’re talking about, after SEO started bringing customers to your door. Why did you have to shut down at that point, then?
Pranit: So, again, the first costumer that I recall, that was like 50 agents, it was a pretty good costumer and what we had computers investment was not a challenge. From an execution point also, it was pretty decent, in fact the client was extremely happy, I mean, the lady, we still had her reference letter with us, so that was my proud actually about the delivery part. That was a .com company, that was a good, it was a .com company. Early 2000 or mid of 2000, that company went bankrupt.
Andrew: Ah, okay.
Pranit: So we lost the entire business and some of the payments also did not come, what was happening those days is that we were also getting leads anywhere. I mean, we were not be able to get costumers, but the leads started coming because of SEO. So we know, we knew that things were going to work out. And it’s not today, it’s a question of time. Once we are getting leads we will be able to get costumers. So, really speaking, at that point of time, I was not deserted at all, actually.
Pranit: That definitely was that we had to lay off so many operators for no fault of this. That was certainly a low point, but I had two of my colleagues that were still with me, so we were really confident that we would be able to get costumers. So it was kind of a mixed feeling when we had to lay off people.
Andrew: I see, so you had to lay them off because the business went away, but inside you already said: “I got all the data that shows that this is going somewhere. We are getting leads and if we are getting them now, we’ll keep getting more of them.
Pranit: Yes. I mean, in the first three projects, the difference was that we were doing that project, but we were not knowing where we would be getting more costumers. I mean we had no idea about that. So when that project stopped, we knew that we did not have anything else, in the first part, I mean from ’92 to ’99 we did not have that visibility. But this time we had the visibility that we were going to get costumers. So that was pretty ok.
Andrew: Look at all the ups and downs of business: the up of getting excited about building a project, the down of even though the project is good or not good at sales and so you can’t get into that. The up of suddenly coming to you and saying: “Well, could you build software for me?” and you say: “Yes, in two months I can learn visual basic and I can create it for you terrific.
And then the down of that after the second takes, you got a second client and then the down of the second client taking the boxes away, saying: “Sorry, we’ll do it in all the” , and then the up of getting another client online and the down of having it go away and, oh, my God! You just have to, I think as an entrepreneur, we have to manage out states, meaning, we can’t allow to come in depressed one day and then high one day and depressed the next day, because if we do, we are going to be awful to work with.
If we come in depressed at the low points, we are never going to see the opportunities that will allow us to see things through. If you would have said, “Hey, you know what I had to let these people go. I am a failure.” You never would have been able to find the next group of customers to see the opportunity that was there and to get here to the pinnacle of success to do a Mixergy interview.
Andrew: Here is another high, speaking of, so you knew it. You eventually were proven right. Customers were coming in.
Andrew: Then there was this one… We asked Bacall [SP] about one of your favorite moments and he said that there was a client that was doing $300,000 a year in revenue. Do you know the one I am talking about?
Andrew: I’ll tell you then maybe…
Pranit: So that was, yes.
Andrew: … so I will tell you then maybe you can fill in the details? You were at $300,000 in revenue then you got a project that doubled your revenue instantly. You had to hire 100 people all at once, double the company in a matter of days.
Pranit: Just trying to recollect. Oh, yes, yes, yes. I remember. That company was S&L[SP]. Yes, so again, that itself was a great opportunity and by my rough chance, luck, I don’t know how. We were doing simple work which involved hardly any… it was just a question about accuracy, nothing else. But this customer came, he wanted financial research, financial analysis.
We had absolutely no background about financial research. We were all in doing this programing and everything. So finance part there was nothing, it was a big company in the U.S. and probably they sent out this offer to a few others also.
We thought, okay, let’s do a sample. Let’s do something. It had something to do with balance sheets and everything. So we said, “Okay, let’s learn what a balance sheet is and how it works and all those accounting terms which we had hardly any idea about what they were.” So we did send a sample to our client and actually told them we will give it a try. It’s okay but it is probably not near what we can expect. It is unfortunate that we cannot do anything about this. We said to give us one more sample, let us do one more try. So he told us fine.
That time when we found some accountants, in the U.S. they are CPAs. We found some CPAs on consultancy basis and we told them let’s do it together. This is something that we must do actually. So they did samples and they sent it over and the company said now that we were getting closer. Let’s see. We will talk. In the meanwhile, I was visiting the US at that time, so I told them I would come to see you. You have seen the sample so I will come and see you.
My father was here. He was an income tax … He had the finance background. So he told them that while I am going there I will take care of whatever happens regarding this finance project, I will take care here locally. So I told him fine.
So back then I told us whatever you are saying sounds okay but we need to see your capabilities without that we can do nothing. We must visit your location, visit your facilities and see what you are doing and what you can do. So they came here. They saw everything we were still working in that house. Actually, interestingly, when they came everything in the office was in shabby condition so everybody here said let’s paint it so that it would look good. Somebody is coming from the US so we must present a good picture. So we, our employees who were there, said they would do very quick painting themselves.
Pranit: They tried to do a lot of things because everybody was working very close, like a close knit family. We were all working 24 hours together. Something like 24 hours together. It was like a family feeling. So they said we will do the painting. Let’s see if we can present a rosy picture to our customer which is coming. Of course, it was easy for them to realize that it was all done in such a hurry.
Andrew: They could smell the fresh paint.
Pranit: So they came here. They visited the place. Something … they found something that told them that these were hard working people. They would do something. They would do something. Let’s give them a try. I mean, I told them we have a much, much smaller company than what you are. I mean, they were in the millions of dollars, a very big company and we are nowhere near you, but probably they thought let’s give them a try.
I’m surprised why they chose us, why they thought that they should give us a try, but they decided to give it a try and that project turned out to be a huge success, and that actually, our revenues were doubled in just no time actually. And interestingly, we had no money for the kind of investments that it required. They required all top quality hardware and software, everything. So they told that we will pay you an advance for everything. You don’t need to make investments for anything.
Pranit: So they paid an advance for hardware, software, running into probably hundreds of thousands of dollars. It was surprising how much they trust somebody. So, they predict that all you have to do is, find all the right people, and do whatever we will say. We will train you; we will send people; we will send over mentors here who will train you. All you have to do is ensure that whatever is being told to you, you do accordingly. And I said “Okay, yes that we can do. Definitely we can do.”
So we hired CPAs and we hired high-end staff, management people and the mentors came, they trained them about the infrastructure and what they wanted, and everything started falling into place. My father also helped me in setting up everything. He had the finance background but of course he was working so he could help me only a little bit. So things, I mean that project worked out very well actually, yes. That was the one biggest project that we got after starting up this outsourcing.
Andrew: What year is this?
Pranit: That must have been 2003 or 2004 I think.
Andrew: So at that point you got roughly $600,000 a year in revenue because of this deal?
Pranit: Yeah, in 2003 I would say, 2003 probably.
Andrew: So this is S&L Financial. I was looking at the help wanted ads and they’re hiring people right now in, I hope I’m pronouncing this right, Ahmedabad.
Pranit: Yes, that’s right. That’s where we are.
Andrew: That’s where you are. So, did they stop working with you and now they’re hiring their own local people in your city?
Pranit: Oh, so we continued for two or three years probably, and then staff grew to 80 or 90 analysts and then the operations were becoming too much important. I mean, this India operation for what they told us they want to buy out this operation, because we want to have full control over the operations.
So then they bought all the operations, including software and everything they bought and they told that “Okay, now you can just do the management part.” I mean just the management parts we want to remain with you. So then what we did was, so then everything was transferred there. They operate a new office and their staffers there and we were providing them just the management support.
Andrew: I see.
Pranit: And that continued for a few years. And then they told us “Okay, now it’s big enough,” like they had 150 or 200 staffers and then they started doing everything on their own. So now they had a third office and when they started doing everything on their own actually.
Andrew: So they gave you money up front for the technology, they trained you, they taught you the business, they funded you as you built it, and then they bought it from you. They did it all, and all because when they said no to you, you said “Give us another try,” and then you found someone who could teach you how to do it right, the CPAs, you got help and you won them over by making the extra effort in getting past the “no.” That is inspiring.
Pranit: Yes. I mean, that was a totally different kind of work which we had no history or no background, no history of doing and that was from a big company and still we are surprised. I mean, why did you choose us? I mean, they could have chosen anybody in there. I mean, they came here to India, they could have chosen anybody. Why did they choose us? I mean, that is still…I mean, we are surprised, actually.
Andrew: You know, I wonder if, first of all they didn’t choose you at first. I wonder if it’s because of the fact that you were willing to go out of your way and say “we will make this work.” If you were willing to find the resources, if you were willing to paint the walls, that kind of dedication, that kind of willingness to work is, I imagine it’s something that you would admire and you would want to work with someone who did that today.
Pranit: Yes, I mean probably yes, if I see a nice prospect for work, but yes it must have been a very difficult decision for them because it was very important work for them. And they could have chosen anybody. I mean they could have easily skimmed past experience in this area, they could have chosen but they took probably a very bold decision.
Andrew: I see them on LinkedIn. They have, according to LinkedIn, 2,181 people. 2,181 people on LinkedIn alone. That’s a very big company, a great partner.
Andrew: So one of the reasons why they picked you is because frankly, prices were lower in India than they were in many other countries, and they are an international company. But the other reason is, you were hiring well. I don’t want to get past the ability to hire, I don’t want to just leave myself and my audience with the understanding that “Well, you’ve got a job and so you just brought people in and they magically were the right people who got the job done.” How do you hire at such levels, so many people all at once and do it right?
Pranit: Yeah, I mean hiring itself was a very difficult process because I mean we were hiring all CPAs, all high-end people and they were not very easy to find, easy to get. So, a lot of screening work, my father also helped me in finding out the right entity and what we did was, we asked S&L can they interview them? Can they interview them and see if they fit in with their requirement. So they told us yes, it would be a good idea.
So they started interviewing them and then what we project, since it was turning out to be good because they turned out okay. They had the short list, I mean we were not forwarding them a bunch of candidates to interview and then to start short-listing them but while there were candidates we were giving to them we were telling them that okay, yes, there are some person who is working during that time. So probably then they would really start making the final calls about who to select at that point.
Andrew: So they also helped you hire the right people. Do you have any advice for us? I’m not going to…in my whole life I’m not going to hire as many people as you probably have hired in the last year. And my audience is never going to–well chances are, most people are not going to hire as many people as you have hired–but do you have any advice for us on how to hire the right people based on your experience?
Pranit: Well, that is the most important thing that anybody should focus on. Getting the right people on your team is the most, most important, single most important thing. So, definitely I would say technical abilities, tests should be there and personal interviews should be there. Then definitely the difficult part is definitely how to check about the behavioral skills.
That is the point where most of the problems start happening. I mean we see people who talk very nicely, their CV, their resumes are very well turned, they talk nicely, they have all the knowledge in place, but then really that does not threaten the culture. I mean there’s some mismatch here or there. I mean, in some respects it’s fine.
Andrew: How do you test for that, or how do you know ahead of time that that connection will work?
Pranit: Yeah, so then we take help of, I mean for example there is this behavioral testing skills of Thompson Publishing. Thompson, they do some behavioral testing work and we sometimes have psychologists in place who will check about the behavioral skills. Then, what we see is we check, I mean again in India we can find out different traits of people and from which region they are coming. I mean, different people have different traits coming from different regions.
So we try to link so many different things and see that okay, and non- verbal expressions also play out tremendously also. We start to looking for somebody who has very good skills in understanding the non-verbal expressions part of that. So not in every interview, but in an interview at the senior level at least, we have all these kind of things that we try and see that fix them.
And then, of course, then there are price checks, the most important thing. So that is where we lay a lot of focus about talking to past customers. And many times they are not really reluctant to give an honest feedback. I mean, they say “Okay, it worked out nice,” but really speaking, we had to dig in very hard. And we had to request them to give a very candid opinion about the behavioral aspect, because we are the ones really who really give to us real likes on all the behavioral aspects. So just try to see and connect all of these things.
Andrew: I think in the U.S. we’re not–I’m not saying we’re not allowed to ask that is the right way to phrase that–but it’s a dangerous question to ask, which means that we don’t have insight into the previous history of the people who we’re hiring. If someone called me up and said “What was it like to work with Steve,” I couldn’t really say it, because I’d be endangering Steve’s future ability to get work. I’d be putting all kinds of risks on myself.
I asked my H.R. person at the previous company I was with, I said “What do I say when someone asks?” and she said “What you can say is would you hire that person again, and are they welcome?” so there’s…it’s very dangerous. But I see in India it’s a different culture, a different environment.
Pranit: So I see that. As to reference checking, it’s something which is not very common in the U.S.?
Andrew: No, reference checking is common, but the kinds of things you can ask are limited, I think. You couldn’t ask about behavior. I don’t think you can ask about personality types. I don’t think people would want to be open because they wouldn’t want to expose themselves to the legal risks.
Pranit: Okay, I see. Interesting.
Andrew: You study American business, specifically one businessman–Jack Welch–you read his books. You study him. What do you learn from him?
Pranit: Oh yeah. I learned a lot actually. I am a big fan of Jack Welch. So I learned everything. His strongest point that I have seen is the people management part. That is where I have tried to understand his thinking. I mean he’s very direct in the way he communicates but the way he writes is very direct, very clear, easy to understand.
And when it comes to people management, whenever we see here that what we should be doing, we can directly understand what he was writing in his articles It directly relates to what we should be doing. So, somehow over a period of the last five or six years that I’ve been reading his books I mean he is the single most influential leader who’s thinking has really influenced me.
Andrew: Is there one thing that stands out for you? I’ll tell you one of the things that stands out for me about his books. He said that whenever someone quits you should–I think it was within 24 hours and if not that then 48 hours–have a replacement.
The company should not suffer, should not feel like any one person is so irreplaceable that the company will not be able to replace him within 48 hours. And that way there’s continuity. That means also that there’s also people who are constantly being trained for leadership and that stood out for me. What else for you?
Pranit: Well, it’s about different…like in hiring. I mean when we hire, he mentioned that one of the key questions to really value that you should really be focusing on was why you quit the jobs. I mean, if you quit the three jobs and why you have been quitting those jobs. I mean people normally say “for better career opportunities,” but a good, expert people would say, really he would say that: “drill down into it. Try to find out the real reasons what happened in the job and that would give a lot of insights about that person.”
So you have to be really sharp in asking that question, so that would be one. Then, about differentiation: he is a big fan of differentiation, differentiating performance and that’s what we have been trying to…we have tried very hard in the last six or seven years about building the total differentiation within our team.
Andrew: How do you do that? When you are at the back end for so many companies, how do you stand out and differentiate yourself?
Pranit: Differentiation? I mean, in the people’s performance, I mean in their life performance.
Andrew: Oh, I see.
Pranit: So, when we have a team of, let’s say 100 people working on a certain project. Then, how do we differentiate performance of everybody, and how…I mean he has that rule of “20 70 10.” Like, “20” are your top performance, “70” are the heart of the company who would write the company, and “10” are the bottom performers.
So how do we segregate the team into “20 70 10?” For that we need a lot of a quantitative measures, qualitative measures, transparency, and all those things that need to come in to have that “20 70 10” kind of a differentiation which is also fair and transparent. That’s a big thing in itself, actually, so that is another thing that we have learned from him.
Then, he talks about what you need to get increments in promotions so that is something that is apparently going on here in our company. I mean this company, we do increments and promotion. I normally write an article every week and share it with our management about the different aspects.
The article letter that I shared last time was about increments and that again was taken from Jack Welch and there’s another article that will be going tomorrow that will be about promotions. So increments and promotions are one of the most important things that anybody would be looking at the end of the year. So the philosophy of increments and promotion. Again, that part is there. There is a lot of things to learn from him.
Andrew: Is there a favorite book by him that you recommend?
Pranit: That is “Winning.”
Andrew: “Winning.” That’s the one. I think I heard that one on audio- book. I think he might have even read it himself and if he didn’t he got someone who was really powerful to read it because the audio was just as motivating as the words.
Pranit: Yeah. Alright, it’s a great book, yeah. And then I’d read a lot of his questions and answers, I mean, that gives a lot of insights.
Andrew: His questions and answers? What was he doing it in? I forget. Was it Business Week, I think, in the back page he used to do that?
Pranit: He writes for Business Week, and then he had books themselves made out of questions and answers.
Andrew: I didn’t know that.
Pranit: So that’s something I read.
Andrew: I want to tell people where they can follow-up and then ask you one final question, actually two final questions. The follow-up guys, if you’re into this kind of questioning, this kind of research, and if this is the kind of depth that you like out of your interviews, I want you to know that we have about 1,000 interviews available to you at MixergyPremium.com.
When you go there, you find interviews with entrepreneurs like the founders of AirBNB, Y Combinator, Sun Microsystems, Wikipedia, and as I said, about 1,000 other companies. It’s all available to you. My goal with those interviews is to tell you stories that will be interesting for you from a collection of entrepreneurs that you’re not likely to get to meet, not likely to have an hour long conversation with yourself, and if you would, frankly, I don’t believe you’d ask as good of questions as I do because my job is –
My obsession is, my work here is to do research, to be prepared, and to ask the kind of questions that yes, you would think to ask, but also the ones you wouldn’t think to ask, and to give you not just facts, but stories that show you how those facts come into play in a business, and to give you, behind those stories and facts, ideas that you can use in your business.
Think about the story today about how Hi-Tech outsourcing almost lost one of its big customers. Most people would’ve said “No, alright, well we’ll have to get better, we’ll come back in the future to this company, or come back in the future and get another company and we’ll earn our growth and we’ll earn our spot maybe 5-10 years in the future,” but Pranit told us today about how he said “No, I will go and make another effort, and I will find another way to see if I can get a ‘yes’,” and as a result of that he doubled his business.
One question, one story, in a full hours’ worth of interview. If you want more like that, go to MixergyPremium.com. When you do, I’ll help you out by giving you stories, interesting entrepreneurs, that will help you grow your business, and you, frankly, will be helping me here and the team because every time you sign up to become a Mixergy Premium member, you allow us here to hire more researchers, us here to find more guests, us here to prep the guests better, and to do a better interview for you and, frankly, for the overall community.
As I said, it’s a circle here, circle of Mixergy. We help you, you help others, and we all grow together as our little community. Go to MixergyPremium.com, and sign up. I guarantee you’ll love it. Two questions: The first is going to be about money and the second about mission. Revenue: what size revenue are you guys doing today?
Pranit: We are doing roughly around $10 million plus.
Andrew: Ten million dollars plus. All bootstrap, no outside funding except for customers, right?
Pranit: No, absolutely nothing. The only funding that we took was in 1996 when we had to get so many 386s.
Andrew: That’s when you had to go to the bank for a loan, for the Intel 386 chips. Those were hot commodities at the time. This was before the days of the Pentium.
Pranit: Yes. Yeah…sorry it was not 386s but it was the product Pentium.
Andrew: Oh, they wanted you to go to the Pentium?
Pranit: Yeah, that was in 1995 when we had purchased it. It was, I’m sorry it was not 386 it was Pentium actually. And we had one Pentium at that point of time, and they wanted us to get 25 Pentiums.
So we had to take a loan and we suffered a lot because that quality did not work well and we could not get the volumes that we were looking for and we were in deep trouble. And then we realized that we just cannot take loans. I mean that is a big, big…I mean that would ruin the company if something doesn’t work out.
Andrew: So there’s was ultimately that you stopped taking loans?
Pranit: So we must…we should not take loans because if something doesn’t happen, if something critical doesn’t happen, it could ruin the company. It could ruin the people who are working the company, because for them the project no loss. And after that, we never took any loans and somehow we started getting good projects, with product lines forming and they were funded, and things just worked. And today everything is fine.
Andrew: What tremendous progress, from this project that you started in college to where you are today, from scraping by to get revenue to now over $10 million in sales and a growing company with over 800 people on the staff over 3,500 projects done to date. I see a list of your clients on the website, a very impressive collection.
But it’s not just about the Domino’s who were signing up and working with you, Xerox, I think I saw FedEx is one of your clients. It’s not just about the revenue. I believe a large part of entrepreneurship is about the personal growth, the person you become as a result of this. So, over the years, we’re talking about what, 20 years now plus, what’s the best thing that’s happened to you, you personally? How have you grown? How have you become a better person for this experience?
Pranit: Better person? Well, I learned a lot of things. The biggest thing is, which we have read in the books, it’s a different thing to have feelings, to experience it and then learn from it. It’s like learning from failures. I mean, there were so many failures and as we thought about the projects starting and some were from our mistakes, some were not from our mistakes. But then where we could learn things out of that that yes, that could be a different way of working.
I mean, there was a hybrid project, that was going to be a big failure, but we learned about how important it is for automation, and how important it is to just do things in a different way, use technology, do it in a smarter way. So, I mean once we started doing this daytime career business processing we laid a lot of emphasis on automation. I mean we always have…even when we have no software implementing.
We always hired four or five programmers who would foresee what we can do about the automation of the project, how we can use technology, even when we are doing today engineering design, we are trying to see what functions we can put into automation. So we learned a lot about the automation part. We learned about the failures. We learned a lot from failures. I learned about…patience is a big thing.
If we have the self-confidence, if we have the self-confidence opportunities will come, and we must seize those opportunities. So patience is a big virtue and we should not lose self-confidence. So that’s another thing that I learned.
Andrew: Don’t lose self-confidence. Not losing self-confidence, it’s important. I mean, I don’t want to write that off. We always think about the business of things, the mechanics of running a business, the spread sheets or the financial statements like we talked about earlier but, you know sometimes mastering I believe, I have found mastering that inter game, that staying confident in the face of defeat, often will turn things around.
That is if I’m not mistaken you correct me if I’m wrong, that is one of the reasons why you were able to turn around that client S & L. That you maintained confidence in the face of what to many people would have seemed like Defeat.
Pranit: Yes, I mean, let’s try it, let’s do one, let’s try and see whether we can make it happen. So, I mean those things are really important. And last, the most important thing, opportunities will come. I mean if we have those opportunities will come. We have to just wait for the right moment. Let’s not become impatient.
They are going to come, they’re expectation of how we seize those opportunities. So that is something, another important thing. So if we are having for example to day let’s say if we have a rough time for 6 months, let us say something’s bad, something doesn’t having the way we have been wanting, I will just say to myself, let’s be patient. We’ll get opportunity, we’ll get the big that we’re looking for. So, that helps with building the self-confidence.
Andrew: Congratulations on all your success. Everyone in the audience if you want to take a look at the company that we’ve been talking about here today, first of all you could Google them apparently traffic still comes from Google that’s one of the big traffic sources. Or, you can just go directly to the website and I’ll give you the URL it is www.hitechos.com. Thank you so much for doing this interview.
Pranit: Thank you very much it was my pleasure. Thank you for picking.
Andrew: I love having conversations like this! Thank you all for being a part of it and for allowing me to do this and as always let me know what you’ve gotten out of this interview, what you’ve been able to do, I’ve been really getting a lot of positive email here and I love seeing it, it fires me up thank you for being a part of it thank you! Good bye, everyone.