Working Capital Management - a family perspective



13 Jun 2018

We all have been reading a lot about the Working Capital Management as the key challenge for the SME Sector. Some people believe that Mother managing Home Budget is a great example of Working Capital Management. My typical middle class upbringing made me relate to this assessment with the addition of my father to the Working Capital Management Team. When I correlated this with my professional experience and personal experience of starting a family, I got some wonderful insights. I am planning to share these with you in a series of 4 small write-ups related to 4 phases: 

  1. Starting the Family 
  2. Growing up
  3. Maturity 
  4. Transition

The expecting parents focus on following aspects of finance: 

  1. Manage Birth of the baby 
  2. Create Contingency Fund 
  3. Cover Monthly expenses 

The Net Liabilities include:  

  1. Equipment for the Baby 
  2. Services for the Baby 
  3. Healthcare for the Baby and Mother
  4. Monthly Expenses like Rent / Installments, Food, Basic Household Items, Travel, etc.   
  5. Insurance 

The Net Assets are limited to Monthly Salaries or returns on the limited investments at this point in time.

There is little focus on creating long term capital intensive assets or availing long-term credits.

I believe this is how the start-ups begin - like a family. Complete trust in your partner/s, Passion for the Product, willingness to do anything to make the things happen, dreaming of creating a great future together.


Then the reality strikes.

Conceiving. Growth of the baby. Delivery of the Baby. Delivery Complications. Baby won't sleep, affecting schedules, making it tough to concentrate on work, service providers mess-up leading to life getting really difficult. This generate a lot of stress. New parents are clueless about what's going on.

Who comes to rescue - grandparents. They counsel parents and guide them to take care of the baby. We call them Mentors in the business World.

Let's look at the challenges faced by start-ups around you from Working Capital Perspective:

  • Product Development time: Nature has defined the time for birth of a baby. In business, parents / promoters need to estimate the development time and prepare for the same. How
  • Routine Check-ups: They help parents assess the growth of the baby and prepare for complications, if any. Are you conducting periodic reviews to assess possible delays / challenges / additional resource requirements to deliver your products ? This will help you acquire the required working capital in time at good rates.  
  • Delivery Complications: While everyone prays for a smooth delivery, they always go for the best medical facilities for delivery ensuring availability of support in case of any complications at the time of delivery. How are you managing your product development cycle ? Do you have the adequate resources ? Any funding at this point in time will come at a high cost.   
  • Post Delivery Set-up: Have you created the support infrastructure to take your baby to the world / market ? Do you have the necessary equipment / resources ? Have you created infrastructure for sales ? Have you hired experienced professionals to handle your baby ?   
  • Patience: Parents love their baby. People adore babies. Acceptance takes times. Parents need to be patient. So do the promoters. 
  • Perseverance: While human babies and parents show unique resilience and survive through multiple odds, the digital babies have a long way to go. 

Trust you have experienced this as well. Please share your experiences / feedback / comments with me at charudatta@suhrud.co.in