Trust Score

How can you grow your business with Trust Score?

Sundar’s Story

Sundar decided to join his family business, a maker of cement-based blocks and precast structures for construction. About a year into his work he noticed that some of the most critical business decisions were made using little or no formal data or business insights. Worse still was that certain things were done in a particular way ‘because we have always done it that way’. He encountered this troubling phrase at several meetings. Senior colleagues said he would understand the culture of the business and the answers to his own questions over time.

Sundar’s parents had started the business nearly forty years ago. And Sundar, the youngest of three, was the first to get involved in the company. He was an engineer, had studied abroad and brought grand plans with him. His stint with a management consulting firm prior to joining his family enterprise positioned him well to diagnose problems with the way it was operating.

Businesses run on trust. And most businesses choose to trust each other based on how they have treated each other in the past. For this there needs to have been some shared history. The likelihood of doing business with a new customer, partner or vendor remains low unless the business comes recommended or referred through a known person.

But what if you have no history with each other? How can you grow your business by trusting a new set of customers? And are you doing the right thing by choosing to trust the same businesses that you have been dealing with for a long time? Are your existing customers just as healthy as they used to be?

The Business Challenge

Sundar realised that many of the products made by his family business were becoming commoditised – it was a large, fragmented market with shrinking margins. Builders, construction companies and developers could get their wares from dozens of vendors like his company. Some of them had also backward integrated and setup their own cement block making units. On the other hand, in the pursuit of growing the business this fiscal, Sundar’s company had sold building blocks in big numbers to developers in the North. These deals had started to go bad – some of the customers were not honouring their payments.

The North was a new territory and the company’s sales staff had little knowledge of that region. The customers had come recommended through a family friend who had advised Sundar’s parents to expand their geographic footprint. The developers placed orders for their ongoing projects and some of the material had been dispatched. More of it was already in production at three of the factories Sundar’s family operated. If this trend of non-payments continued, his business would see losses for the first time in years.

A Big Call

Sundar thought back to the meeting in which he pushed his parents into making the decision to sell to new customers in the North. He firmly believed that the business needed to scale-up. And he thought it was a good sign that new customers were making in bound enquiries and placing orders. None of them foresaw issues with payments. But he recollected that Ajay, their sales director, was not keen on this.

Ajay, a nearly sixty-year-old bespectacled man, had been with the company for twenty five years. He had strong relationships with nearly all customers and routinely made visits to them. Sundar was previously not keen on Ajay’s thinking – reluctant to sell in the North. But now that his instincts had proved right, Sundar sought his counsel.

‘What should we do now? Should we ship the rest of the material to the non-paying customers in the North? If not, where could we sell it? What about the variations in specifications? What about our soaring inventory costs and stressed out cash flows?’

It would be an understatement to say Sundar was downcast and worried about the future of the company. He was losing sleep with the burden of the business sitting heavy on his young shoulders.

Collective Introspection

Ajay said to Sundar, ‘I think what you asked your parents to do was a good idea. We need to look for ways to grow the business. If we didn’t make those sales, we would have shrunk this year.’

This gave Sundar some relief, but he was perplexed.

‘But didn’t you say it was not a good idea? And you have turned out to be right! We are financially over extended.’

‘Yes. But that is in hindsight, when everyone knows best,’ said Ajay, adding, ‘I had different reasons for not recommending those developers in the North. But I didn’t know that they would turn out to be troublesome customers. Many of their developments were on illegal land and they have lost court cases. That’s why they are not paying us.’

‘The mistake we made was not knowing enough about them. We took on too much risk based on someone else’s recommendation. We should have done our due diligence or asked for payment up front.’

Sundar knew Ajay was right. But he also knew that hardly any customers would be willing to pay anything significant upfront. It would most likely have been a deal breaker and the developers would have probably have approached other suppliers.

He wished there was something that could have given their team a better understanding of potential customers and their financial health. After all, he would need something sooner rather than later. The commodification of the industry meant that it came down to margins – every sale had to result in revenues for their continued profitability and survival. And it was important to grow so that they could build resilience through scale, diversify their product lines and eventually build up their brands to create  differentiation and long term value.

What’s the solution?

Many businesses refrain from expanding because of a lack of trust in the ecosystem. They can’t afford the impact of bad debts on their balance sheet. And they would much rather keep operations at a small scale and forgo their ambitions. This is why there is so much untapped value in healthy, small businesses. Their owners prefer to keep risk to the minimum.


November 2020 saw the launch of a multi-dimensional numerical score that gives decision makers the overall health of any business entity. The Crediwatch Trust Score is a sophisticated, yet simple way of understanding a business. It could be exactly the kind of product that Sundar, Ajay and the rest of their company could use to make better informed decisions. Below is a sample extract from a CW Trust Score Report.

Crediwatch Trust Score Report 1
A multi-dimensional view of the overall health of any business entity.

There is no dearth of information around businesses – some industry watchers argue that we are living through an infodemic (an information epidemic). However, distilled business insights – information that leaders can use for better decision making – are hard to come by. That’s what makes the Crediwatch Trust Score so simple, yet powerful. It is exactly the kind of tool that could add meaning to Sundar’s business. If he had the opportunity to review trust scores of customers from the North before taking on orders from them, he could have averted the mess they currently find themselves in.

Business insights are available in abundance at the top of the pyramid – the roughly 8000 publicly traded companies in India are well covered. However, MSMEs contribute nearly 30 percent of India’s GDP annually. And yet, we know precious little about most of them. There are over 60 million MSMEs in India, each carrying their own untapped potential. With better visibility into the broader business ecosystem, value is waiting to be be unlocked for millions of small business owners.

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