We list the 7 important things you must
be cognisant of before embarking on your business journey – and how successful
businesspersons navigated choppy waters to lead the way.
Starting
your own business and being your own boss have their own high – but not
managing finances and business operations efficiently come with staggering
lows! The reason many start-ups fail after a promising start is not due to lack
of hard work or ambition. Often, there are many missteps owing to a lack of
information on how to do things right.
If
you’re a new business owner, you would benefit immensely from these 7 things
that you must know:
- It’s the idea that counts. Your business can flourish from the get go if it is based on a unique, marketable idea. An idea with a clear selling point, launched in a market that does not yet have the product or service that you will sell, has a higher chance of success than start-ups that are modelled along the lines of other successful ventures[1]. For example, instead of starting a tiffin service like many others, your tiffin service can be aimed at senior citizens who cannot cook for themselves, or for single people looking for healthy meals.
- Research everything. Do not leave a single thread untied: get all the information about the potential areas of failure. A fool proof idea is a successful idea. Take the example of Arunachalam Muruganantham, India’s ‘Sanitary Napkin Man’ – he founded a company that manufactures affordable sanitary napkins so that rural girls and women get access to them and do not miss out on their normal lives. When he did not have enough information about sanitary napkin technology, he created an artificial uterus and also wore a sanitary napkin to understand how it feels when used. He worked for over five years to perfect the machinery that could manufacture cheaper sanitary towels using the right materials. Today, he trains thousands of women in the business and has already reached over 100 countries with his cost-effective technology.[2]
- Have a Plan B, Plan C and Plan D. Not everything will go smoothly across all levels of your business, so you will need to innovate and come up with practical solutions to the issue. Take a cue from Flipkart’s Sachin Bansal and Binny Bansal, who launched in India in 2007 with an e-marketplace that sold books. At the time, online payment gateways were a risky proposition with inadequate security and lack of trust from customers. Flipkart overcame this problem by introducing COD (Cash on Delivery and Card on Delivery) payment models – which is now a popular payment option across the country.[3]
- Manage your finances efficiently. A major setback comes from lack of financial planning. It is important to employ the right cash management services from your bank so that your income is streamlined properly. Meanwhile, it is equally important to manage your bills and invoices, as also the tax payments. All new companies should actively involve small business cash management principles to keep their revenues steady. Steady income and profits year after year make it simpler to apply for loans at a later date. The example of food tech major Zomato is a relevant one in this case: after valuators slashed the company’s value in 2016 citing high cash burn and poor performance, Zomato engaged with top tier cash management services to reduce its cash wastage and boost profits. As a result, in April 2017, Zomato registered high growth and was able to secure funding of $20 mn from its existing funders.[4]
- Register the business. Many businesses try to cut costs by not registering their company, or trying to work remotely from cafes and their own homes. Not registering the business invites its own set of problems – you do not have a company current account, so accepting payments from clients becomes an issue. Taxation also becomes a problem, because you must explain your source of income and why the monies are being deposited in a savings account instead of a company account. There is also the problem of not having an office space that can seat a minimum number of people – it creates a poor impression when the company is trying to pitch for bigger business but does not have an office to show prospective clients! Start by completing the company registration, VAT/TIN/Service Tax number formalities and initiate the process of getting a current account for the company.
- Make an expenses chart. Along with a careful watch on revenues, the monthly overheads and incidental expenses need careful watching. It is all very well to have an office space, but you must analyse whether you need an office that can seat 30 people when you only have a staff of 10. The bigger your office, the more its overheads are. You have a number of compulsory expenses – staff salaries, rent/EMI on the property, power and light bills, pantry and stationery costs, communication and transport expenses, etc. You must know exactly how much money the company spends on these items every month. The chart can help you cut down unnecessary expenses and save money for other purposes.
- Apply for funding after a year. Once your business is up and running, you can hope that it makes enough revenues to sustain itself. However, merely depending on company profits to take the business forward is not a very good approach. You must periodically apply for angel funding or venture capitalist funding so that the business expands faster and you can realise tomorrow’s goals today. Or you can learn from the example of Craftsvilla founder Manoj Gupta, who faced a slump in the business but recouped with several rounds of funding from prestigious investors. Today, Gupta plans to turn more profitable with more lines of products in the largely handicrafts e-selling space.[5]
[1] http://www.forentrepreneurs.com/why-startups-fail/
[2] http://www.bbc.com/news/magazine-26260978
[3] https://successstory.com/companies/flipkart
[4] http://www.thehindubusinessline.com/companies/zomato-raises-20-million/article9669169.ece
[5] http://techcircle.vccircle.com/2016/09/26/aim-to-turn-profitable-in-six-months-says-craftsvilla-founder-manoj-gupta/
