Started from the bottom, now we’re here: Red Mud

December 15, 2016

“Entrepreneurs are like artists,” says Aashish Adhikari, founder of Red Mud Coffee. With another sip of coffee and an excited note of nostalgia in his voice he explains, “Behind every painting there is a story of an artist who is often not recognized, remembered and applauded. Entrepreneurs are just the same. They too have to experiment with ideas and take many left turns in life before getting a right way.”

Adhikari had a lot of startup failure experiences before becoming the founder of one of the most popular coffee hangouts in the capital.

During his stay in the United States for eight years, he set foot in various businesses. While those businesses were purely learning experiences for him, a trek to Mid-Western Nepal gave him an opportunity to view the potential of Coffee in Nepal.

“Having just returned from a country where coffee is a beloved drink, the first idea I had was to export it to US. However, I changed my mind and decided to start something which would contribute in creating popularity of local products in the local market itself,” he adds.

Financial Setup

With the aim of providing delicious local flavored coffee along with impeccable service, the coffee bar embarked its journey back in December 2012 from its first outlet at Thapathali. The initial investment was Rs 2.5 million. Adhikari had borrowed it from his family and friends. He struggled with his finance and time commitment to the business for almost a year and a half.

“It is rightly said that startups make huge mistakes when they acquire short term funding for long term results. My business was growing and I needed continuous investment. So, I had to approach other means in a bid to get loans. It lead me to experience very challenging situations in the business.”

“I had to approach cooperatives in order to pay back the money borrowed. I chose cooperatives as means for an easy loan but it later proved to be very costly,” he says. “In terms of growth and expansion, my startup became more cash hungry and I had to get a loan from a government bank which charged lesser interests. However I worked with the bank for around eight months and the experience was simply a nightmare.” Adhikari feels that trying to get funds from a government bank was another financial mistake of his.

“Though I had enough collateral, the bank was always indifferent to the business case. They didn’t want to look into my accounts or business growth but were trying to dishonestly persuade some extra benefits from me. This difficult experience had taken away much of my time which I could have contributed to my business,” he bitterly exclaims. The prolonged situation led him to switch to a private bank which helped him get his funds smoothly and quickly.

Human Resource

From dishwashing to financing, Adhikari did everything he could to sustain the business in the initial days. “It is definitely difficult for a startup to spend money on a separate human resource dedicated towards handling transactions. As the transaction was little, I myself handled the designs and accounts in the beginning,” he claims. They used Excel and QuickBooks to handle the accounts at first. Later, they started POS application and tablets for orders.

“We now have store managers and use technology to manage our finance in terms of revenue, purchases, procurement, inventory and supply chain,” he says. Red Mud is also planning on to bring an app for its smooth supply chain management.

Importance of Financial Management

“Your business will be systematic if you’re conscious about your financial management from the beginning itself.”

“If there are a lot of mistakes from the early days, there will be issues of cost, fines and other difficulties.” In his view, financial management should be a priority of businesses from day one. ““Rather than engaging and lingering into the financial problems themselves, it is better for entrepreneurs to hire or consult professionals who specialize on it.”

He mentions that small business often do not register in VAT/PAN and end up being dishonest about their transactions. “This will not work for the long run. Doing things right from step one along with proper financial management and use of technology is what will help business reach the next level” he opines.

With three-chain stores Red Muds’ fourth outlet is being opened next month at New Baneswor. They are also experimenting a flagship store at Manang. “While I was in Lamjung, I saw the coffee plantation but was surprised to see a restaurant nearby serving Italian coffee. We talked to the owner of the restaurant and decided to work with him to serve Nepali coffee there” Adhikari shares his idea behind a seasonal café in Manang where they’ll make use of coffee from the domestic market.

Red Mud was initially started by Adhikari and later moved forward with two other partners. After completing a 100 days business accelerator program, the entity got an investment from a Dutch investor after which Red Mud gained more exposure and motivation for a larger vision. “The restaurant began with an aim to popularize the local flavor among coffee lovers in Kathmandu. Gradually we have plans to expand it globally and give a taste of Nepali coffee to coffee admirers all over,” he shares.

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