Fuelled by change

Fuelled by change

Phanindra Sama, Sudhakar Pasupunuri & Charan Padmaraju, founders, redBus

“In this segment, our scale is our best differentiator as it will be very difficult for our competition to reach where we are,” says Phanindra Sama, co-founder, Pilani Soft Labs Pvt. Ltd., which runs India’s leading bus ticket booking website redBus.in (redBus). And the numbers do back his claim – for the year ending March 2011, the company grossed annual revenues of about Rs. 120 crore, doubling its revenue of Rs. 60 crore in the previous year. While over 70 per cent of its revenue comes from its website, the remaining 30 per cent is split between Bus Operator Software Services or BOSS (the company’s ERP solution created for bus operators) and SeatSeller (GDS created for travel agents and other offline sales partners).

“When we began, we were a typical startup, paying more attention to creativity and enthusiasm over actual skill sets. As we scaled up, we realised that many of us, including myself, were clueless on how to handle this growth”

Through its endeavours, Bengaluru-based redBus has created a remarkable attitudinal shift towards technology in a traditional industry such as transport. Sama attributes this to the direct impact on an operator’s top-line. Today, close to 90 per cent of the existing operators use BOSS and Sama adds that the success of the software was “unexpected”. redBus is constantly on the lookout for ideas that will take it closer to the Rs. 500 crore turnover benchmark. One such idea is leveraging the mobile phone platform and the company is collaborating with Nokia to launch a mobile phone booking application in May 2011. The company has also shown willingness to outsource some of its operations such as its home delivery system. redBus is in partnership with Bengaluru-based Gharpay and is jointly conducting a trial in Hyderabad to judge the system’s efficacy. “We will watch for indicators that suggest they are doing well enough to support our scale,” says Sama.

This is not The Smart CEO’s first interview with Sama – our first dates back to April 2010 where Sama gave us an insight into the founders’ backgrounds, the generation of the idea and how redBus went about creating its identity. Since then, the company has courted change in several areas of its operation including the inception of a finance and accounts department and hiring at the senior level. Here is what brought on this wave of change at this startup.

Brand first, technology next

“At the start, we created BOSS first and made a pitch to bus operators. To us, it appeared logical to establish the technology and then launch redBus, the website,” says Sama. To his dismay, things did not go according to plan and based on the advice of mentors, redBus made its appearance. The visibility the website gave the company made a discernable difference. “Our competitors also approached it the other way and lost out in the game,” adds Sama. While this was one among the many changes redBus made, it was, perhaps, the most significant as it gave them a head start to create a network. As Sama mentions on more than one occasion, this business is all about creating that huge network. Speaking of the other changes the company has made, Sama points out that the organisational structure has changed from a functional one to a matrix organisation structure. “We now have regional and zonal divisions, this helps us manage growth better,” he adds.

Smarter hiring

People often make or break an organisation and Sama is quick to acknowledge that the company has smartened up its hiring policy. “When we began, we were a typical startup, paying more attention to creativity and enthusiasm over actual skill sets. As we scaled up, we realised that many of us, including myself, were clueless on how to handle this growth,” he says. In this phase, the company has made a conscious effort to hire people whose skill set is in sync with its ambition. Today, it has on board a chief financial officer and designated heads of technology, marketing, operations and finance. Unlike other organisations that might have been unkind to first hires, redBus wants to give its employees a fair chance by investing in management training.

Apart from better management of human resources, redBus has also changed its approach towards accounting. The finance and accounts function was outsourced when operations commenced in 2006. However, in the last year, the scale of business warranted an in-house finance and accounts department. “Having an in-house finance and accounts team gave us better control over our working capital and without checking on our account details, we know how much there is in the bank,” shares Sama. And money in the bank is something Sama does not have to worry about for redBus is cash flow positive. The company has been ably supported by multiple rounds of funding to the tune of US $ 3.5 million from Inventus Capital Partners, Seedfund and Helion Venture Partners. redBus has put the money to good use by implementing in-house ERP systems, establishing new locations and making smarter hires. Sama suggests that if the company did need money in the future, it would not look beyond its current investors. Adding to a few things that remain constant is the company’s marketing approach. Sama finds that word-of-mouth continues to bring in the numbers and shares that big marketing spends have never been discussed.

If one were to take Sama’s word for it, redBus wants to join the Rs. 500 crore club by 2013-2014. If it can indeed sustain its momentum over the next fiscal, he will be proved right.

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