"Top 5 Mistakes to Avoid as an Entrepreneur" by Ritchie R Nanda

Ritchie Nanda talking during The Economic Times Family Business forum in Mumbai, India

Over the last 36 years of my entreprenurial journey, I have like most human beings, made many mistakes that led me to fail.

From the young age of 16 years when I joined Tutkuks, to creating India's most successful and recognised security brand called TOPS which employed over 75,000 employees and partnered with thousands of customers across India, UAE and the UK, I was duly recognised, awarded and respected by my peers, stakeholders and industry stalwarts. While I was at the peak, everyone including me felt that I was infallible and everything that I touched or did would turn out to be a grand success, but that was not to be!

I took many risks, got too ambitious for my own good, trusted the wrong people, made too many personal sacrifices which I should never have made, and did not realise the power and impact of a global recession. I failed and lost everything that I had painstakingly built.

Mistakes to Avoid as an Entrepreneur

Here are the 5 biggest mistakes that I made. These mistakes should be avoided at ALL costs if you want to survive as an entrepreneur.

1. Trust no one but your self

Over the years, as I grew, I started building a team of people that I thought were loyal. These people made me believe that they were honest, sincere and that I could trust them and I did! When I acquired Shield in the UK in 2007, I relocated to London and entrusted the entire Indian business to my CEO, CFO and their professional team. The senior management who were also sitting on the Indian company's board, soon realised that they had complete control and the power to run the business the way they wanted. The Indian management team strategically started hiding facts from me and started showing me wrong, fabricated reports and accounts making me believe that all was well and in order. They cheated me, hoodwinked the stakeholders, and embezzled millions of Pounds from the Indian company.

In 2018 when I relocated back to India, some of our old and poor security guards and employees who I trusted, talked to me and told me the truth. The Indian management had fabricated reports, accounts and lied to me all along making me believe what is not the truth but by the time I got to know what they had done to the company, it was too late as too much damage had been done.

This cornerstone principle of trusting yourself should became your foundation to run your enterprise. You can delegate, but do not trust anyone. Always have checks, and counter checks in place to ensure that no one is playing you and ruining what you have painstakingly built!

2. Do not delegate financial powers to anyone

One of biggest mistakes I made was relinquishing all financial and banking authorty to the India management when I emigrated to the UK in 2007. Giving people the complete power to sign cheques, make bank transfers and open or close company bank accounts, is worst than giving them a truckload of loaded guns!

Either your business needs to be tech driven where tech completely controls your payments, or you need to find a way to remain in complete control of your finances. I know many entrepreneurs would say that's not possible and that they have to trust people with their money, but my advice is dont! Very few people have the lineage, ethics and the values to stay 'clean' and 'uncorrupted' when they have access to millions of pounds of cash on an everyday basis. I made this huge mistake and lost millions of Pounds; if you can learn from me and save your heard-earned money and wealth, I would be extremely pleased that I have helped protect you in a small way 🧡

3. Only grow your business to a level that you can survive during the worst times

I was always extremely ambitious. When I joined TOPS in 1993, we had one office. I wanted to create a national presence very soon and by 2000, TOPS was present across 30 cities in India and by 2007, we were present in 200 cities and towns in India. We also rapidly branched out into complimentary services like security systems, investigations, emergency response services, facilty management, etc and before we knew, we had created a mammoth manpower business that employed nearly 80,000 employees. In 2006, I also spearheaded the acquisition of two Indian companies, Guardwell and Adtech Systems to further strengthen our large business in India. 

Not being satisfied with the huge growth in India, I decided to expand internationally. In 2007, we raised funds and acquired Shield for £19Mn. After acquiring Shield, I set my mind to acquire a $300 Mn business in Los Angeles. On 15th September 2008, after signing the term sheet to acquire this huge American firm, we were sitting in Rockfeller Centre in New York when we learnt about the collapse of Lehman Brothers and the start of the Global Recession. 

That global recession in 2008 started the end of my security business. During my entrepreneurial life, I had never heard of, or seen what a recession is, and I was extremely naive to fully understand how recession could affect a security business! Soon I realised that while recession did not directly affect our business, it indirectly crippled us as it affected numerous large corporations in the UK who were our main customers. When these large customers collapsed, they failed to pay us our money and that caused a HUGE cash flow crunch in our business. Whether the customers paid us or not, we had to continue paying thousands of our employees month after month. Also since we were only a vendor and were not secured creditors, we did not get a single penny of what was owed to us! This caused a huge cash flow turmoil in our UK and Indian business; something that we could never get out of!

4. Strictly avoid taking debt for your business needs

One of the biggest mistakes that I made as the Chairman of Shield was to allow the UK board to take £10Mn debt from a UK bank for meeting their cash flow needs. 

When things are going relatively well for an enterprise, many banks offer low cost debt as an alternative to equity and most businesses fall prey to the lure of fast, safe and clean money. It happened to us as well. The UK board led by me made a huge mistake. We should never have taken the debt from the bank for our cash flow needs. We should have enforced stronger credit control policies, and terminated customers who were not paying us on time. We sadly did not do that and instead chose to retain those defaulting customers assuming that they will get out of their financial mess, and in order to buy time, we compensated the cash flow gap with external debt from the bank and Invoice Financing arrangements. 

When good times go bad which happens to most entrepreneurs, these same friendly banks who invited you their parties and Diwali get-togethers, will go all out to recover their dues from the Company and the guarantors without bothering that they were the ones in the first instance, who had conducted a professional business, financial and legal due diligence of the business and only then provided the debt to the company. The banks assume no responsibility for their actions or the external extenuating circumstances like global recession, etc and go straight for your jugular! They are ruthless, insensitive and will run you into the ground to recover whats due to them!

5. NEVER give your personal guarantee or your personal property as a collateral for a company debt

Had I not given my personal guarantee or the collateral of my £5.5Mn personal property to the bank for the debt that Shield UK took for their cash flow needs, I would have been in a far more better financial situation than where I am today!

Because of the personal guarantee and my property collateral, the bank took aggressive action against me, and legally took possession of my family home in 2022. The bank ruthlessly evicted us from our home without bothering about the plight of my family. The bank also took my solvent Indian business and assets worth £20Mn into administration and effectively killed my business. This overtly aggressive action by the bank completely broke my back. I went into severe depression, and because I had no way out of this financial mess, I had to legally declare bankruptcy in the UK!

However, even though I know that this was the BIGGEST MISTAKE of my life, my wife and 3 children look upto me with pride and constantly remind me that had I not given my Personal Guarantee or the collateral of our family home, thousands of our employees and their families would have come on the street! They constantly reiterate how my gesture of putting my people and their families ahead of my very own family, will always pay me back in the long run. It's very tough to lose everything that you have single handedly built but this fate was written in my destiny. I have learnt from my mistakes, and now am rebuilding my self to become a better and more stronger man!

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