Rent a top-of-line CEO if you can't afford one

By SiliconIndia   |   Monday, 19 October 2009, 02:44 Hrs   |    33 Comments
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Rent a top-of-line CEO if you can't afford one
New Delhi: In mid 2007, Bangalore based Prateek Apparels, a leading supplier of ready-made garments to fashion brands such as Levi's, Wrangler and Van Heusen in India, wanted to launch a discount retail. Its promoters were in dilemma as they had design, sourcing, manufacturing and even front end knowledge, but lacked in the practical experience in retail, recalls Sanjay Dalmia, President, Prateek Apparels.

With an economy growing at nine percent levels had ensured that most of the top talent in the retail sector was grabbed by the big retail chains or upcoming ventures. Dalmia was not sure about hiring a retail consulting firm either, and then he came to hear about Collabrant and its model of CXO service outsourcing from trusted sources. AP Srivatsan, Co-Founder of Collabrant came on board as CEO for Coupon, Prateek's new chain of large format discount stores, reports The Economic Times.

Srivatsan is a former Marketing Head at Nestle India, and has also worked with companies such as Gillette, Pepsi and Zip Phone. His role at Coupon was to prepare a business plan and rollout strategy, including hiring and its implementation. He operated almost on a full time basis from Prateek Apparels' offices for over a year before handing over charge to the promoters.

Coupon now has six stores in cities including Hyderabad, Raipur and Kozhikode, and Dalmia is hopeful that 12 stores will be up by January 2010, taking its revenues from the current 80 crore to 175 crore.

For the startup entrepreneurs and small business owners, hiring and retaining senior executives can be a costly affair. The choice lies between attracting seasoned professionals at very high salaries or staying small, when it comes to growth. "In India, unfortunately, the supply of startup CEOs is limited," said Alok Mittal, Managing Director, Canaan Advisors, a venture capital firm.

Collabrant offers CFO, CMO and even CEO services for a fee. The company with its three founding partners and 15 associate partners, focuses on the outsourced CEO practice with 60 percent of revenues coming from this offering along with corporate finance services. They sign up for a period of 3-5 years with a client during which time they spend 7-10 days on average at the client offices every month.

"In small businesses, a large chunk of capital goes into salaries of the senior management. We get paid a fraction of the salary bill of a senior resource and we take equity of 5-26 percent in the business," said Srivatsan.

As compared to 60 lakh-1.5 crore compensation for a full time CEO, Srivatsan stated that his firm delivers the goods for as little as 30-35 lakh. With clients such as Primus and Nandu's (a ready-to-eat foods brand), the company clocked revenues of 3 crore last year in addition to the equity holdings that it has not exited so far.

These CXO outsourcing providers are small firms or individuals who come with plenty of years of experience in running companies or have held senior level positions in large corporates. Also, there are the lone timers like Jayant Tewari who works as a CFO on rent. He works from home, spending 2-3 days a month at clients' office as their CFO. He even carries the visiting card of the client. His clients are small businesses within the $5 million range who cannot afford to hire a specialized finance head. "If you are a small company, you cannot afford to hire someone on a full-time basis. You need someone who is outward facing and into strategy and finance," said Tewari.

Among his clients is A Little World (ALW), a mobile technology based micro banking company that operates across India. In 2005, ALW was in its fifth year of operations developing mobile payment technology, it was a 20 member team with zero revenue, and then its CFO quit to join an investment bank.

"We were looking partly at a stop-gap arrangement. We needed someone with experience who could handle negotiations with U.S. based VCs. One of the best law firms in the U.S. in the IT space was negotiating on the other side. Jayant was a big influence on the nature of the transaction and we were able to argue our case well," said it's Founder, Anurag Gupta. Today ALW is 800 people strong and has revenue of 20 crore.

CMO Axis offer an outsourced marketing model. Its promoter, Vinod Harith was previously heading marketing communications at Wipro, and later was with iGate and Hyundai in an 18 year career which he began as brand manager for Medimix. "In today's economic conditions, marketing is the first thing that's axed. We offer a shared services model. Lot of SMEs does not have a marketing team. They are wary because of costs and the support system needed. Once they focus on marketing, it suddenly begins to look like a bigger investment than they had imagined," said Harith.

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