Corporate digest magazine october

Risks and Entrepreneurship

October 2017 INR 150/-

- (Special Story)

Venture Care

Digest

Strategy | Finance | Digital | Legal www.venture-care.com

Star ng a NIDHI COMPANY in India - ( Legal & Compliance )

Things to considered while dra ing a business plan - ( Strategy )

Financial ModellingA prac cal view - (Finance)

Index 3

Editorial Special Story Risks and Entrepreneurship

4

Legal & Compliance 8

Star ng a NIDHI COMPANY in India

Strategy Strategies: Root of business Tested Ways Grow Your Business

18 20

Things to considered while dra ing a business plan

24

Momentum = Mass X Velocity

27

Road Map to dra a Business plan

29

Finance Financial Modelling- A prac cal view

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32

October 2017

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Editorial

Prashant Kumar

Editor

This October issue is focusing on finance & strategy with special story as “Risk & Entrepreneurship”.

Strategies are important and are root of any business. Strategies can not be avoided. You will find that how strategies are important in this digest.

Nidhi Company means a company which has been incorporated as a public company with the object of-Cul va ng the habit of thri y and savings amongst its members and receiving deposits from, and lending to, its members only, for their mutual benefit.

Objec ve of nidhi company is to simulate savings among its member and to lend Loans and receive money as deposits for the purpose from only its members.

It is very good idea that has been carried out by RBI. You will find all the related aspects of a nidhi company.

Businesses get started. Promoters expect to grow the business. You will find that what are the ways to grow the business.

Business plan is so important that any promoter would like to have to have a sound business plan.

There are other special theams in this issue which I hope that you will enjoy reading.

Happy Reading...

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Special Story

Risks and Entrepreneurship

Risks and entrepreneurship go hand in hand. No business owner should just believe it and be passive.

Of course risks should be mi gated or at least be reduced.

Let me clarify that risk is not always bad for business and its owner. Entrepreneurs should take calculated risk. First of all let us discuss what the benefits are of risks in the business: It refines vision and mission of the company It makes the organiza on more proac ve in handling any kind of situa on It makes decision makers more aggressive It helps in devising flexible strategies for the organiza on It sends posi ve energy to the middle and junior level management It helps organiza ons in reaching new height of growth It helps in forming much more loyal and dedicated team for execu on

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Special Story However, it is injus ce to say that there are no cons of risks: Frequent failure of strategies may dishearten the top management Compe tors may acquire the failed organiza on Execu on team may leave the organiza on Sense of fear may develop across the organiza on Future contracts may be cancelled There may be socio-economic pressure from stakeholders including government It is general no on that a start-up always faces higher degree of risk.But, this in not completely true. A bigger organiza on will always face higher degree of risks because of large size, huge ďŹ nance obliga on, bigger team, global opera on etc. Shi ing from one strategy to another to reduce risk is me taking and by the me it takes alterna ve course of ac on, a ermath of risk becomes severe and unmanageable.

In contrast, smaller organiza ons including start-ups can shi to alterna ve strategic plans soon to mi gate or reduce risk.

Let us discuss that what kind of general risks an organiza on may face: Management risk- any of the key persons leaving the organiza on Product risk- failure of product because of being out-dated or compe tors came up with much advanced product or associated services Team risk- execu on team leaving the running projects suddenly Suppliers' risk- vendors/suppliers cancelling the contracts at very short no ce Legal risk- companies falling into li ga ons with compe tors Environmental risk- sudden development of rules and regula ons by state or central government pu ng pressure hard to survive Financial risk- inability to service to debt or not mee ng ďŹ nancial expecta ons of outside equity providers

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Special Story General approach for mi ga ng or reducing the impact of risks: Try to forecast the risk- although it is difficult in changing business environment but to some extent it is possible as well as desirable.

Do not ignore ifs and buts- always have back up plan; be it related to product/services modifica on, new launch, execu on team etc.

Communicate well inside and outside the organiza on- miscommunica on will create risk Maintain rela onship- develop and maintain rela onships with current customers/vendors and also with past vendors.

Raise finance only to the extent of requirements and stage-wise Focus on cu ng down the opera onal and other cost Develop new way of marke ng KEY TAKE AWAYS, risk is a double-edged sword. Taking risk is good but mi ga ng the impact of unwanted risk is desirable. Understand your business and business dynamics very well and deeply. Do counter a ack if possible and required.

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October 2017

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Legal & Compliance

Starting a Nidhi Company in India Nidhi Companies is regulated by Sec

on 406 of Companies Act 2013 and Companies (Nidhi Companies) Rules, 2014

MEANING: Nidhi Company means a company which has been incorporated as a public company with the object of-Cul va ng the habit of thri and savings amongst its members and receiving deposits from, and lending to, its members only, for their mutual benefit.

OBJECT TO INCORPORATE NIDHI COMPANY: Nidhi Company is incorporated with following objec ves: To s mulate savings among its member To lend Loans and receive money as deposits for the purpose from only its members.

Since Nidhis come under NBFCs, the RBI is empowered to issue direc ons to them in ma ers rela ng to their deposit acceptance ac vi es. However, since Nidhis deal with their shareholdermembers only, RBI has exempted such no fied firms from the provisions of the RBI Act and other direc ons applicable to NBFCs.

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Legal & Compliance APPLICABILITY: The Central Government made 'Nidhi Rules, 2014' for the purpose of carrying out the objec ves of 'Nidhi' companies. These rules shall be applicable toEvery company which had been declared as a Nidhi or Mutual Benefits under Sec on 620A(1)of Companies Act, 1956; Every company func oning on the lines of a Nidhi company or Mutual benefit society but has either not applied for or has applied for and is awai ng no fica on to be a Nidhi or Mutual Benefit Society under Sec on 620A(1)of Companies Act, 1956; Every company incorporated as a Nidhi pursuant to the provisions of Sec on 406of the Companies Act, 2013.

PRE-REGISTRATION REQUIREMENTS FOR REGISTERING A NIDHI COMPANY : Minimum Three Directors: Minimum three Directors are required to incorporate Nidhi Company. All this three director has to act as members of the company.

Minimum Seven Members: Nidhi Company can be started with seven members. Out of which 3 are also to be appointed as directors.

Minimum Capital Requirement: Nidhi Company as Public Limited Company Should have Capital of Rs.5,00,000/- Like Public Limited Company.

No Preference Shares shall be issued.

Object of the Company The objec ve of such a firm would be to imbibe in the members a habit of thri and saving and the services would only be restricted to its members;.

The name of the company must have word as Nidhi Limited at the end.

PROCEDURE FOR INCORPORATION OF NIDHI COMPANY : Get Digital Signature Cer ficate (DSC) of all seven members.

Get Director Iden fica on number (DIN) of three Directors by using DSC. Suggest at least Six Company name. We will do search for name availability.

Apply to ROC for name approval with adding word Nidhi Limited.

Once name is approved by ROC File Incorpora on document with ROC like MOA AOA Consent of Director, Affidavit and declara on from directors etc.

Once Incorpora on form is approved by ROC, ROC shall issue Cer ficate of Incorpora on with PAN and TAN No.

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Legal & Compliance

Requirement to Apply for DSC: All 7 members should have DSC Pan Card Self A ested Residen al Proof Self A ested Dully ďŹ ll and sign DSC applica on form.

Requirement to Apply for DIN: (Minimum Three Directors are required for Incorpora on of Nidhi Company) Photograph of the Applicant - To be Self-a ested.

PA N - To be Self-a ested Mobile No. Email id.

Educa onal QualiďŹ ca on Occupa on Proof of residence of applicant Address proofs like passport, elec on (voter iden ty) card, ra on card, driving licence, electricity bill, telephone bill or bank account statement shall be a ached and should be in the name of applicant ( shall not be later than 2 months).

DSC of Individual.

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Legal & Compliance Requirement to Apply for Name Availability: Six Proposed name with significance of Name Authorized Capital- Minimum 5 Lacs Jurisdic on of Registrar of Companies.

Main Object to be pursued by Company Requirement to Apply for Incorpora on of Nidhi Company: Registered office address of Company.

Recent Address proof with NOC from Owner.

Consent from all Directors Affidavit and declara on from all directors and subscribers.

TIME PERIOD: Time Required for Incorpora on of Nidhi Company Shall be 20-30 days, depending on government approval.

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Legal & Compliance POST-REGISTRATION REQUIREMENTS FOR A NIDHI COMPANY : There are certain Compliances which Nidhi Company has to do a er incorpora on of Nidhi Company.

Every Nidhi Company shall, within a period of one year from Incorpora on of the company, ensure that it has Not Less than 200 Members: A er incorpora on, a Nidhi company must add at least 200 members to comply with this requirement of law. Further, it has to maintain this during the course of me. If the total members falls less than 200 at any me therea er, it will leave the company at default.

However, if the company is not able to reach the limit of 200 members, then you must apply for me within 30 days of closure of ďŹ nancial year in Form NDH-2 with Regional Director.

Net Owned Fund: Net owned funds shall be Rs.10,00,000/- or more ('Net owned funds' means the aggregate of paid up equity share capital and free reserved as reduced by the accumulated and intangible assets appearing in the last audited balance sheet).

Ra o: Ra o of net owned funds to deposit shall be not more than 1:20. This ra o is very easy to understand.

Suppose, if you have net owned funds of 10 lakh, then your total deposit limit would be INR 2 Crore.

Deposit: Unencumbered term deposits of not less than 10% of the outstanding deposits as speciďŹ ed in Rule 14.

Members restric on: A Nidhi Company shall not admit a body corporate or trust as a member.

A minor shall not be admi ed as a member of Nidhi Company. But deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi

GENERAL RESTRICTIONS: Rule 6 provides general restric ons.

According to this Rule no Nidhi shallCarry on the business of Chit Fund, Hire Purchase Finance, Leasing Finance, Insurance or Acquisi on of Securi es issued by anybody corporate;

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Legal & Compliance Issue Preference Shares, Debentures or Any Other Debt Instrument by any name or in any form whatsoever; Open any Current Account with its members; Acquire another company by; Purchase of securi es or Control the composi on of the Board of Directors of any other company in any manner whatsoever or Enter into any arrangement for the change of its management, unless it has passed a special resolu on in its general mee ng and also obtained the previous approval of the Regional Director having jurisdic on over Nidhi; Carry on any business other than the business of borrowing or lending in its own name; Accept Deposits from or lend to any person, other than its members; Pledge any of the assets lodged by its members as security; Take Deposits from or lend money to anybody corporate; Enter into any Partnership Arrangement in its borrowing or lending ac vi es; Issue or cause to be issued any adver sement in any form for solici ng deposit; Pay any brokerage or incen ve for mobilizing deposits from members or for deployment of funds or the gran ng loans.

Share capital allotment: Every Nidhi shall allot To each deposit holder at least a minimum of 10 equity shares or shares equivalent to Rs.100/-.

To each savings account holder and a recurring deposit account holder at least 10 equity shares of Rs.10/-.

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Legal & Compliance Acceptance of deposits: A Nidhi shall not accept deposits exceeding 20 mes of its Net Owned Assets as per last audited financial statements.

The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.

Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.

In case of recurring deposits rela ng to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi.

The maximum balance in a savings deposit account at any given me qualifying for interest shall not exceed Rs.1,00,000/- and the interest shall not exceed 2% above the rate of interest payable to savings bank account by na onalized banks.

Interest for fixed and recurring deposits shall be at a rate not exceeding the maximum rate of interest prescribed by RBI which the NBFC can pay on their public deposits.

Every Nidhi shall invest and con nue to keep invested, in unencumbered term deposits with a scheduled commercial bank or post office deposits in its own name an amount which shall not be less than 10% of the deposits outstanding at the close of the business on the last working day of the second preceding month.

In case of unforeseen commitments, temporary withdrawal may be permi ed with the prior approval of the Regional Director for the purpose of repayment to depositors, subject to such condi ons and me limit which may be specified by the Regional Director to ensure restora on of the prescribed limit of 10% Loan: A Nidhi shall provide loans only to its members. The loans given to a member shall be subject to the following limits: Rs.2,00,000/- where the total amount of deposits from members is less than Rs.2 crores; Rs.7,50,000/- where the total amount of deposits from its members more than Rs.2 crores but less than Rs.20 crores; Rs.12,00,000/- where the total amount of deposits from its members is more than Rs.25 crores but less than Rs.50 crores; Rs.15,00,000/- where the total amount of deposits from its members is more than Rs.50 crores.

NOTE: A Nidhi shall give loans to its members only against the following securi es, namely: Loans to the members shall be given against the securi es of gold, silver and jewellery and immovable property.

Repayment period of such loan shall not exceed one year in case of gold, silver and jewellery.

In case of immovable property the loan shall not exceed 50% of the value of the property offered as security and the period of repayment of such loan shall not exceed 7 years.

Loan may be given against the fixed deposit receipts, Na onal Savings Cer ficates and other Government securi es and insurance policies.

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Legal & Compliance The rate of interest to be charged on any loan shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method.

Dividend: A Nidhi shall not declare dividend exceeding 25% or Such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in wri ng and further subject to the following condi onsAn equal amount is transferred to General Reserve; There has been no default in repayment of matured deposits and interest; and It has completed with all the rules as applicable to Nidhis.

Director: The director shall be a MEMBER of Nidhi.

He shall hold office for a term up to 10 consecu ve years on the Board.

He shall be eligible for re-appointment only a er the expira on of 2 years ceasing to be a director.

Where the tenure of any director in any case had already been extended by the Central Government it shall terminate on expiry of such extended tenure.

The person to be appointed as a Director shall comply with the requirements of Sec on 152(4) of the Act and shall not have been disqualified as provided in Sec on 164 of the Act. Auditor: The tenure of Auditor is five consecu ve years.

No auditor or audit firm as auditor shall be appointed for more than two terms of five consecu ve years.

The auditor shall be eligible for subsequent appointment a er the expira on of two years from the comple on of his term.

The Auditor of the company shall furnish a Cer ficate every year to the effect that the company has complied with all the provision contained in the rules and such cer ficates shall be annexed to the audit report and in case of non-compliance he shall specifically state the rules which have not been complied with.

Branches: A Nidhi may open branches only if it has earned net profits a er tax con nuously during the preceding three financial years.

The company may open up to 3 branches only within the district.

If it proposes to open more than 3 branches within the district or any branch outside the district, it shall obtain prior permission of the Regional Director and in ma on is to be given to the Registrar about opening of every branch within 30 days of such opening.

No Nidhi shall open branches or collec on centers or offices or deposit centers, or by whatever name called outside the State where its registered office is situated.

Further branches or collec on centers or offices or deposit centers shall be opened unless financial statement and annual return are filed with the Registrar.

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Legal & Compliance Closure of Branch: A Nidhi shall not close any branch unless: It publishes an adver sement in a newspaper in vernacular language in the place where it carries on business at least 30 days prior to such closure.

Informing the public about such closure; fixes a copy of such adver sement or a no ce informing such closure of the branch on the no ce board of Nidhi for a period of at least 30 days from the date on which adver sement was published and Gives in ma on to the Registrar within 30 days of such closure.

COMPLAINCE WITH REGISTRAR OF COMPANIES - RETURNS: NDH -1 Within 90 days from the closure of the first financial year a er its incorpora on and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in Form NDH – 1 along with such fee as prescribed with the Registrar duly cer fied by a Company Secretary in prac ce or a Chartered Accountant in prac ce or a Cost Accountant in prac ce.

NDH -2 If the company is not complying with the above it shall within90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 along with fee for extension of me and the Regional Director may consider the applica on and pass orders within 30 days of the receipt of the applica on.

NDH -3 The Nidhi Company shall filed Form NDH-3 within thirty days from the conclusion of each half year duly cer fied by a company secretary in prac ce or chartered accountant in prac ce or cost accountant in prac ce.

If there is failure the Nidhi shall not accept any further deposits from the commencement of the second financial year ll it complies with the provisions besides being liable for penal consequences provided in the Act. PENALTY: If a company contravenes any of the provisions of the rules the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs.5,000/- and where the contraven on is a con nuing one, with a further fine which may extend to Rs.500/- for every day a er the first during which the contraven on con nues.

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Strategy

Strategies: Root of business

S

“ trategies are roots of any business, plans are stems and branches and growth is fruit”.

There are many areas where strategies can be implemented: Product strategies Marke ng strategies Growth strategies Financial strategies R&D strategies Service strategies HR strategies and many more

1. Framework For Opera onal planning Strategies provide the framework for plans by channelling opera ng decisions and o en pre-deciding them. If strategies are developed carefully and understood properly by managers, they provide more consistent framework for opera onal planning. If this consistency exists and applied, there would be deployment of organiza onal resources in those areas where they find be er use. Strategies define the business area both in terms of customers and geographical areas served. Be er the defini on of these areas, be er will be the deployment of resources. For example, if an organiza on has set that it will introduce new products in the market, it will allocate more resources to research and development ac vi es, which is reflected in budget prepara on.

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Strategy 2. Clarity in Direc on of Ac vi es Strategies focus on direc on of ac vi es by specifying what ac vi es are to be undertaken for achieving organiza onal objec ves. They make the organiza onal objec ves more clear and specific. For example, a business organiza on may define its objec ve as profit earning or a non-business organiza on may define its objec ve as social objec ve. But these defini ons are too broad and even vague for pu ng them into opera on. They are be er spelled by strategies, which focus on opera onal objec ves and make them more prac cal. For example, strategies will provide how profit objec ve can be sharply defined in terms of how much profits is to be earned and what resources Of how much profit is to be earned and what resources will be required for that. When objec ves are spelled out in these terms, they provide clear direc on to per-sons in the organiza on responsible for implemen ng various courses of ac on. Most people perform be er if they know clearly what they are expected to do and where their organiza on is going.

3. Increase Organiza onal Effec veness Strategies ensure organiza onal effec veness in several ways. The concept of effec veness is that the organiza on is able to achieve its objec ves within the given resources. Thus, for effec veness, it is not only necessary that resources are put to the best of their efficiency but also that they are put in a way which ensures their maximum contribu on to organiza onal objec ves. In fact, taking strategic management, which states the objec ve of the organiza on in the context of given resources, can do this.

Therefore, each resource of the organiza on has a specific use at a par cular me. Thus, strategies ensure that resources are put in ac on in a way in which these have been specified. If this is done, organiza on will achieve effec veness.

4. Personnel Sa sfac on Strategies contribute towards organiza on effec veness by providing sa sfac on to the personnel of the organiza on. In organiza on where formal strategic management process is followed, people are more sa sfied by definite prescrip on of their roles thereby reducing role conflict and role ambiguity. If the decisions are systema zed in the organiza on, everyone knows how to proceed, how to contribute towards organiza onal objec ves, where the informa on may be available, who can make decisions, and so on. Such clarity will bring effec veness at the individual level and consequently at organiza onal level.

Strategies provide all these things in the organiza on through which everything is made crystal clear.

To conclude,“Without a strategy the organiza on is like a ship without a rudder, going around in circles.

It is like a tramp; it has no place to go.” They ascribe most business failures to lack of strategy, or the wrong strategy, or lack of implementa on of a reasonably good strategy. They conclude from their study that without appropriate strategy effec vely implemented, failure is a ma er of me.

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Strategy

9 Tested Ways to Grow a Business

Let your business grow on new trajectory. Here are some ways that will flourish your business.

1.

Get your business spread in the exis

ng market

Ge ng new customers is not bad. But be er will be to sell more to the exis ng customers; retain the exis ng customers. Acquisi on of new customers will involve higher promo on out-go. Whereas, selling to exis ng customers will be cost-effec ve. Pricing is another aspect which will help your business in penetra ng the exis ng market. Remember that always charging compe ve price may not help.

Some mes you need to reduce the weight/quan ty of the product (indirect pricing) or offer free gi s.

You may even change the packaging.

2. You may seek referrals.

During or a er every job or sale, ask your sa sfied customers if he knows anyone else who would be interested in your products or services. However, this is possible only if your deliverables can delight the customers.

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Strategy 3. Innovate or modify your product Every product or service has some life. It is always sugges ble to go for product innova on or modiďŹ ca on. This will help in adding new customers also. However, research & development wing should be strong enough to perform this. Just think of transforma on of oine business into online business.

4. Extend your market reach.

You may start locally but increase the market reach. Many businesses have gone this way and grew tremendously. There are many ways to get it- open stores in new loca ons, go virtual, acquire other companies, make e-ups, use social media, use website etc.

5. Par cipate in trade shows and arrange seminars Trade shows can be a great way to grow too. Because trade shows draw people who are already interested in the type of product or service you oer. They can powerfully improve your bo om line.

6. Win the niche market Big market customers try to follow the customers of niche market. Once your product or service has got hold in niche market, it will be easy to extend the present big market. Think of branded apparels, use of home appliances, mobile handsets and many more.

7. Reduce the costs.

Don't forget that reducing cost directly helps in increasing bo om line and thus valua on of business.

It is not necessary to cut costs in all the areas. Few areas where it can be done are- reduce wastages, electricity cost admin costs and other indirect costs.

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Strategy 8. Diversify your products or services.

DiversiďŹ ca on in products and services is interes ng way to empower growth. Package the products.

Simply think of a burger or pizza is available with sauce and chilli akes and cold drinks. Or, a restaurant serves meal with pickle and 'papad' and 'chutney'.

9. Franchising.

Franchising is good way to grow your business. It may not be possible to directly reach the customers to create brand of your product or services and go for franchising model.

To conclude, there is no op on to let your business grow. The above ways are not exhaus ve but there are ways possible to achieve that depending upon the nature of product/services and business model.

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Strategy

Things to considered while drafting a business plan Ribbo: Mr. Tick I want some fund for my business.

Tick :

How much fund you need?

Ribbo : Approximately INR 5 crores. I need it urgently.

Tick : Then why don't you dra a business plan for your business? Do you know purpose of a business plan?

Ribbo : Of course. It has sole purpose of convincing the investors to bring money in my business.

Tick : So I think you are very clear that how and where the fund will be u lized.

Ribbo : Not exactly. But once I get fund I will start u lizing it.

The above conversa on discloses two things- purpose of business plan and Clarity required.

So entrepreneurs must understand that the sole purpose of business plan not just raising fund but it should give complete clarity of the planning. Meaning, ďŹ rst let us be clear about the planning and then approach any investor for raising fund. Dra ing a business plan on paper is like a tool which helps investors to understand the planning aspects. Investors are smart enough to read between the lines.

Then do not invest just on the basis of business plan but the business and entrepreneur.

Let us discuss that what are the things which should be considered while dra ing an impressive and logical business plan.

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Strategy Title page: It includes the table of content and execu ve summary. Purpose is that a er looking at the contents, investors will come to know whether the business plan covers all the aspects. Before going into the details of business plan, investor goes through execu ve summary to understand what the different plans are. Execu ve summary should not be very lengthy but to the point and impressive.

The organiza on: Business must have legal structure. If presently, it does not have any legal structure then which structure has been planned for and why. The business plan must men on clearly that what kind of legal structure is suitable for the business.

Under this heading it should also be men oned about the team required or employed to execute.

Whether the present team strength is sufficient or need to be increased.

The Industry: It should have an overview of industry such as present status, segmenta on, scope of growth etc. The business plan should clearly men on that which industry segment will be targeted and why.

SWOT: Strengths and weaknesses in the business should be genuinely men oned. SWOT gives an insight of the strengths and weaknesses to the entrepreneur also. Moreover it leaves a very good impression in the mind of investor. Further, “how weaknesses shall be converted into strengths or at least can be removed” should also be men oned to make the investor clear.

What the opportuni es and threats to the business? How it will be overcome? Can the business combine strengths and opportuni es?

Product and services: Business plan should complete details of the product which will be marketed. Is this a mass-reach product or niche product? “How the product is unique from the similar product? Why the purpose of the product? How it fulfils the very need of the customers? All these ques ons should be answered.

It may happen that product is associated with some services to the customers. What kinds of services are being given to the customers? Does the proposed service add value to the customers? Whether the product just fulfils customers' expecta ons or it provides customer delight. All these should be men oned clearly in the plan.

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Strategy Marke ng the product: The planning document should men on that how the product is ge ng marketed presently. Further, it should also men on that what are the short term and long term marke ng plans. Importantly, the business plan should also men on that how the planned marke ng will be eec ve to achieve the purpose. Moreover, the plan should also discuss the marke ng tool to be used. It may happen that marke ng of the product will be needed in stepwise; those steps should also be clearly explained.

Opera on and delivery: Business plan should clarify that how the opera onal ac vi es will be carried out. How the product shall be delivered to the customers? Does the planned delivery model add value to the customers' expecta ons?

Finance: Perhaps this is the most cri cal aspect of the business plan. This column should men on that: How much fund is needed? At which stage a par cular amount is needed? Where the fund shall be u lized?

How much fund shall be u lized for a par cular purpose?

If possible a projected proďŹ t & Loss account and balance sheet should be men oned to have outlook a er the fund is infused. The planning document should have ready plan to give suitable exit op on to the fund providers.

To conclude, the business plan should men on, with clarity, all the planning aspects. Also the entrepreneur should, by own heart, should be clear about the dra ed plans.

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Strategy

Momentum = Mass X Velocity I t is not just a formula in physics. It has great business sense! Every business wants to grow and therefore businesses need to know where they exist; which will increase the growth momentum.

Meaning of “Mass”, here, is “how much big the business is”. “Velocity” defines the aggressiveness with which business implements the growth plan/strategy. At least one of these two should be significant enough to reach commendable growth momentum. Of course, combina on of both will be most desired.

ITC in last AGM announced few facts: Gross revenue crossed INR 55,000 crore and PBT surpassed INR 15,000 crore.

Non-cigare e segments, compared to 1996, grew 18 mes sharing 58% of net segment revenue.

Since 1996, Market Capitaliza on has grown 72 mes and touched INR 4,00,000 Crore.

ITC is big enough to create wealth for shareholders. Velocity is less. In the past it has undertaken some sustainable strategies such as launch of e-choupalfor connec ng farmers to markets and helping in real price discovery.

Another example of less mass but high velocity is “Patanjali”. The velocity with which it started manufacturing and adver sing the different products under same brand name. Today patanjali brand is known everywhere and preferred too.

There are many other examples which created wealth in a very short span of me; Amazon.com, Flipkart, Snapdeal, Paytm, Ola, Uber to name a few. These were very small ini ally but suddenly acquired velocity to achieve huge growth momentum.

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Strategy How does huge momentum help?

It works two ways. It removes bo lenecks internal to the organiza on- The present execu on team will become more aggressive, if earlier was not. Also, middle level managers will gain conďŹ dence in execu ng further plans/strategies. Secondly, momentum will help externally also in the sense that it will help in acquiring more market share.

Ways to gain momentum Operate locally for reasonably longer me period and make hold on local market.

Create and make aware brand for the product to the target customers.

Innovate the product & brand recall frequently.

If required, make alliances.

Acquire local companies or brands which seem to be compe tors.

Adopt aggressive marke ng strategies.

Adopt aggressive pricing.

Add innova ve and value added services to the product.

Step into global market What for whom Gaining momentum by acquiring high velocity seems to be good for start-ups and SMBs (Small & Medium Businesses). Start-ups should gain it in the form of stairs. These companies should develop a plan very fast and execute. Moreover, they need to be much more innova ve and aggressive. BeneďŹ t of this will be that it will help in acquiring market share very fast. Risk a ached is that if plan fails the promoters may be demoralized.

Bigger companies should acquire momentum by implemen ng plans slowly and con nuously in long term. Even new plan fails, it will not aect the present product-service por olio much.

To conclude,acquiring momentum is needed. Which business should acquire momentum in what way is to be decided prudently.

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October 2017

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Strategy

Road Map to dra a Business plan Execu

ve summary

It is a very important sec on while dra ing a clear business plan. Execu ve summary reveals that how the company is planning for its future growth and whether this is dierent from others'. Apart from discussing about organiza onal plan, product/service plan, marke ng plan, survival and growth plan and ďŹ nancial plan it should also answer some cri cal ques ons such as:Why this business will be successful?

What is the risk appe te level of the business owner?

What is the level of fund required to successfully launch the business and how much will be promoters' fund?

What is the short-term and long term goal of the business?

Business Descrip on This includes the core related areas surrounding the business and product/services. Some of the key ques ons could be: What is the core area of business chosen?

What is the product or service which will be sold?

What is the growth poten al?

What is the business life?

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Strategy Organiza onal descrip on This is all about the organiza onal structure and unique factors which compe tors do not have.

Whether there is plan to have pvt ltd or LLP or any other structure for the business. Has the business idea been conceived by a single person or more people are involved. Whether there is single decision authority etc. in nut shell, the following ques ons may be important to be considered: What is the legal status of the company and future plan?

How many are key decision makers?

How many managers are required (opera onal segment-wise) How many technical personnel are required?

How many sales personnel are required?

What is the plan to increase the number of personnel in next 12 months?

Product and services What is marketed are actually products and services. This sec on should comprehensively include even the small aspects related to products/services. “What is the USP of the product and how it serves the exact need of the customers” should be very clearly men oned. If services are a ached with the product then focus should be highligh ng the add-on benefits which customers will derive.

Every product has life. The sec on must men on the approximate product life. Also, how the company will plan with the new or modified product with extended or with at least earlier similar benefits. Few ques ons which draw a en ons are: Is it standard product or customized one?

If it is standard product and any customer wishes to add some more features then is it possible?

Whether IP has been taken on the product?

How product maturity shall be tackled?

What will be the R&D cost and maintenance to the business?

Industry Industry dynamics always change. Business plan must include the probable changes and the way to overcome those changes. Key success factors should be iden fied and should be men oned that how the company will go forward.

The complete industry should be categorized into segments and sub-segments and accordingly the customers should be iden fied. This sec on must include also: Who are the targeted customers?

What is the size of the targeted customers?

Who are the compe tors? (in numbers) What is the expected market share for this product/service?

Marke ng Many business plans usually say that what marke ng channel shall be used to market products/ services. But a sound and explanatory business plan should clearly express that HOW MARKETING WILL BE DONE, WHICH CHANNEL SHOULD BE ADOPTED AND THE EXPECTED TANGIBLE BENEFITS WHICH THE COMPANY WILL DERIVE FROM IN TERMS OF GROWTH OF CUSTOMERS.

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Strategy This sec on should answer the following also: Why the customers will need it?

How the poten al customers can be reached?

Can the customers manage their business opera ons without this new product/service?

Does the price (cost to the customers) of the product/service jus fy the benefits?

Threats No business can avoid threats. It should be men oned that how the possible threats should be handled. Answering the following ques ons may be beneficial: What could be the poten al threats?

How frequently it can come?

What will be the level of impact of threat on the business?

How the company will overcome it?

Financials Financial plan is one of the crucial aspects because ul mate objec ve is to raise finance and use it for various purposes. How much finance is needed at which place should be men oned. The following should be included: What will be the promoters' contribu on?

For what purpose the promoters' money shall be used?

What will be the exit op on to the investors?

To conclude, every business plan is unique in its case. So it should be dra ed with utmost care.

Moreover it should include all the planning aspects and should be self-explanatory. Loopholes, if any, should be highlighted and also the way to remove those loopholes. This will make the business plan more genuine and presentable.

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Finance

Financial Modelling- A prac cal view Few analysts understand that financial modelling nothing but workings on excel spread sheet. Par

ally

true!

Financial modelling is of building a model which represents real world Financial situa on. This is a mathema cal model. It is designed to represent the expected performance of a business or project or business por olio.

Myth and truth a ached with financial modeling It is only for accoun ng purposes:- There are many accoun ng so ware available globally. These so ware are just used to see the result. But financial modelling is developed for many purposes such as corporate finance, asset valua on, project management etc.

It is a standard product:- Many analysts believe that financial modelling is a standard product and can be used the same model everywhere. But this is not true. Even in the same organiza on different financial modelling shall be used for different purposes such as valua on, corporate finance, es ma ng risk return a ached with por olio etc.

It is very easy to develop:- Since the model is a representa on of real world situa on, anything expected to happen in the real world has to be incorporated in the model to know the impact on the profitability and wealth. Therefore assessment and forecas ng of data input is very cri cal. Moreover, all the variable inputs should be considered and level of impact needs to be assessed with proximity.

Small business does not need financial modeling:- financial modeling can be used even for small businesses including start-ups. For start-ups it is helpful to build out a model to understand all the variables needed for success. The act of building out the model will bring different expenses, revenue ideas, and cash flow requirements to the surface.

Same model can be used every me :- NO. as the me passes, business becomes bigger i.e. the internal variables are going to change. Also, external market dynamics will also shi . Therefore, there is need to update the mathema cal model.

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Finance How to develop financial model for your business?

Step 1:- understand the business Clarity on business's aspects is very important. It is impera ve to know the product's worth, industry aspects, change in dynamics of the industry, funds as and when required and impact of any kind of change on business.

Step 2:- iden fy the variables:It is not possible to iden fy all the variables at a me. But list out the variables as many as possible is required. Also it is the best idea to find out the most cri cal variable. For start-ups it is bit difficult but business understanding can help in that.

Step 3:- Assessment of impact of those variables:A er iden fying the variables, impact of those variables should be assessed. Impact may be upside or downside.

Step 4:- Give quan ta ve figure to those impact:This is one of the most difficult task to convert qualita ve aspects to convert into quan ta ve figure.

But it is required because financial modeling is a mathema cal model. For already running businesses, it is bit easier because previous impact is known but for start-ups it is difficult. The way out is to keep tenta ve figures and as soon as any change in variable is no ced quan ta ve figures should be incorporated.

Uses of financial modeling The most popular use of this mathema cal model is for internal analysis for decision making. Be it market environment or internal situa on, these are not sta c.

Financial model can be presented to the investors/fund providers to provide them to have fair view so that they can have good confidence to invest in the business.

To conclude, business owners should appreciate the value derived from financial model. It will help in growth of the business and will keep minimum risk with maximum return. Let us not considered developing a model waste of me and use it properly. Start-up should even be more proac ve in developing it to grow faster.

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About Venture Care:Venture Care is India's 1st of its kind online Business Solution Company which helps to Plan, Launch, Manage and Grow Businesses. Find More about us at www.venture-care.com

WHAT WE DO Since 2010, Venture Care (a S&F Advisory Brand) is helping businesses and enterprises to Plan a Business, start a business, run a business, Grow a Business and Close or Exit from a Business.

We at Venture Care generate ideas, spark actions and quantify time-bound results by providing tailored, practical and affordable solutions for the growth of your company. Venture-Care is dedicated to turning good ideas into measurable change Our team of Chartered Accountants, Business planner, Technocrats, Strategist, Marketers, Senior Bankers, Company Secretaries, Tax Experts and other professionals enables us to help and guide you to flourish your business aspirations.

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