Role Model
Positive about growth
 Sampath Kumar MP through his passion for innovation and knack for financial management has created a successful business and his company Positive Systems has emerged as a leading sub-distributor
By Ramdas S
Since its inception in 2000, Positive Systems has seen tremendous growth. Presently ranked among the top 20 sub-distributors in the country, it has matured into a Rs. 107 crore company. Even as many of its peers long diversified into retail or corporate reselling, it continues to be focused on IT distribution—re-distributing products from leading vendors including Intel, AMD, Seagate, Western Digital, Acer, Samsung, Lenovo and TVS-E.
Sampath Kumar MP, Founder CEO of Positive attributes the success of his company to his inkling towards financial accounting. “After BCom, I was planning to pursue a course in chartered accountancy. So, I assisted a leading CA in Kochi for a few years. There I learnt the importance of good accounting and financial management. I believe, every startup should have basic accounting knowledge,” he advises.
Humble beginning
Kumar joined the booming IT industry in 2000. He started Positive Systems with an investment of Rs. 2 lakh and two employees. “While we did a business of Rs. 45 lakh, what alarmed us the most was that we ended the year with bad debts of Rs. 18 lakh. That year, I learnt the most important lesson of my life—always check the credit worthiness of your customers,” he recalls.
The setback however, did not deter Kumar’s resolve to expand his business. In the second year of operations, Positive’s revenue grew over 1,000 percent to Rs. 5 crore. The sub-distributor recovered most of the losses incurred during the first year, and continued to set bigger goals.
Game changer
In 2002, the sub-distribution market in Kerala was getting crowded. Established sub-distributors had aligned with some of the biggest brands, and it was difficult for a new entrant to capture the market. By that time sub-distribution had also become a very investment intensive business, and needed deep pockets.
“Back then, our resources were limited, and we had reinvested every rupee. The bank too provided us with an over draft facility of Rs. 2 lakh. Even vendors and distributors were scouting sub-distributors who could buy products worth lakhs of rupees in a single lot, and that too at month end,” explains Kumar.
By using his financial management knowledge, Kumar decided to employ a different plan. He raised money through business loans and approached distributors and vendors. “I told them that I would commit to the monthly targets, but I would buy the products in smaller quantities everyday. I did not believe in buying stocks in a single purchase and blocking the credit,” he informs.
It was a revolutionary idea, and large distributors and vendors vehemently opposed it. “They threatened to cancel my month-end backend rebates on bulk purchases. But we were firm and found a few takers in Samsung, TVSE and AMD. Other brands soon followed. It took us nearly two years to convince vendors and distributors that our suggested model could work,” Kumar reminisces.
Over a period, vendors and distributors realized that it was easier to actually plan inventory and schemes on a daily and weekly basis. “The logic was simple. With daily sales and purchase, we could provide consistency in the business volumes month after month. Today, a majority of vendors have moved to a linear purchasing program across the country,” states a proud Kumar.
Talent was also hard to come by. “People who had worked with others sub-distributors scoffed at the idea of doing business without stocks and limited credit. Many refused to join us. So, we started hiring freshers, junior executives without any background in IT. A team with no baggage has more faith in the management,” he says.
Growth drivers
From Rs. 5 crore in FY2001-02, the company grew to Rs. 107 crore in FY2009-10. The company is targeting Rs. 135 crore in the current fiscal. And this is achievable, says Kumar, “Since there are no monthly targets, everyone has daily targets to achieve. Hence, there are no backlogs.”
Another rule at Positive is that at least 50 percent of the purchased stock needs to be sold on the same day. “We try and sell the rest of the inventory over the subsequent five days. Today, our own capital plus the loans and bank credit is not more than Rs. 1.5 crore. We get credit from distributors for 21 to 30 days. With our daily purchasing and billing plan, we do not carry inventory of more than Rs. 1.5 crore. We are comfortably transacting business worth Rs. 10 crore per month,” says Kumar.
Positive lays a lot of stress on market intelligence, and that has given it an edge over others. “We spend hours collecting information from the market, across all branches and districts, and on all vendors including the competition to understand current dynamics. Every purchasing decision, every scheme we design, and any change in prices are based on this market intelligence,” Kumar shares.
A committed reseller base and strong vendor relation is yet another reason behind the company’s growth. “We have close to 450 resellers. A majority of them are from the smaller towns and districts and form the backbone of our business. We have always tried to build relations with vendors who are either No1 or No 2 in a specific product category,” he discloses.
Today, Positive has branches in Thiruvananthapuram, Kollam, Kottayam, Thodupuzha, Thrissur, Kozhikode, Kalpetta and Kannur. “In the next two years we will start offices in Pathanamthitta, Malappuram and Palakkad. By 2014, we plan to set up a branch in each district of eastern Kerala.”
Despite expanding business, Kumar is not considering geo-expansion. He feels that the IT market in Kerala will continue to deliver strong growth over the next few years. “We do business on distributor credit, and any diversification would mean that we divert their funds, which is very unfair.”
Back to the roots
Although Positive Systems is headquartered in Kochi, Kumar stays in his village in Thodupuzha which is 60km away from his office. “I collect market intelligence and discuss the findings with branch managers during the 1.5 hour commute to the office. So once I reach office, the team can start executing the plans.”
Kumar has one more rule that he always follows. He does not carry work home, and does not even take business calls. “When I reach office, I don’t worry about home; and once I reach home, I stop worrying about office.”
While the entrepreneur in Kumar has been inspired by many businessmen and women, he does not have a role model. “When I started this business, I saw a lot of successful businessmen in our industry. I wanted to achieve what they did, but did not want to follow their footsteps.”
Kumar wants to hand over the reins of his business to his team of managers in the next five years. “I want to do something else. But till then, I have ambitions only for Positive Systems.” |