MAY 2011 VOLUME 2 ISSUE 9 Rs 100
YOUNG TURKS How a new breed of entrepreneurs is changing the rules of the game
BULLETPROOF YOUR Y OUR B BUS BUSINESS USIINESS US The ultimate guide to a perfect business plan
Steps to set up a costeffective office IT network
SOCIAL ENTREPRENEUR Vijaya Pastala’s organization is helping farmers boost their income in a unique way
ALSO: How to Register a Trademark How to Insure Your Firm How to Set Up a PR Practice How to Form an LLP How to Acquire a Business
table of contents 30
IN CONVERSATION 30 ‘START CHEAP, FAIL CHEAP, BUT
JUST DO IT’ Stuart Read, Professor of Marketing, Innovation and Entrepreneurship at IMD, Switzerland, talks about the difference between marketing and entrepreneurship and how India is a rich source of activity. By Shonali Advani
WOMEN ENTREPRENEUR 32 MAID FOR MOTIVATION
THE WRITE CHOICE 46 Is a business plan essential to starting up? What are the functions that a business plan performs? Which are the types of business plans one can write? We solve all the mysteries related to that all important document. By Team Entrepreneur
Motivational speaker-cum-entrepreneur Priya Kumar’s ﬁrm Priya Kumar Training Systems helps corporate employees build team skills, leadership attributes and high motivation levels. By Shonali Advani
SOCIAL ENTREPRENEUR 36 QUEEN BEE
INSIGHTS 21 JASMINE INDIA (UN)LIMITED Bharat Banka on the power of digital media and how it could impact social movements and issues of governance in the times to come. 22 EFFECTIVE TAX PLANNING
Ranjeet S. Mudholkar on the tax implications of various business ownership models.
24 CO-FOUNDER CONFLICTS? 26
Nandini Vaidyanathan on some basic principles that can help co-founders tide over conflicts smoothly.
26 BUILD A WINNING BRAND Richard Branson on building brands from scratch and giving them a strong identity. 28 BOARDS AT WORK: PICKING YOUR FIRST SET OF DIRECTORS Vijay Anand on choosing the right set of first directors for your enterprise. 6 Entrepreneur + May 2011
Vijaya Pastala’s Under The Mango Tree helps rural farmers improve productivity by using bees for cross pollination of crops. By Bindi Mehta
SUCCESS INC 38 LORD OF THE LAND
Bhavarlal Hiralal Jain didn’t start his enterprise to make money. With Jain Irrigation Systems, he has successfully impacted the lives of several farmers and helped them stand tall in the face of limited resources. By Bindi Mehta
WIN BIG 44 WHEN SUCCESS MEETS STYLE India Business Icons 2011 will celebrate style and elegance in the entrepreneurial space by raising a toast to business owners with a remarkable persona. By Team Entrepreneur
SUCCESS STRATEGIES 52 DON’T MELT DOWN Do you wake up the moment your smartphone beeps the arrival of an e-mail? Do you worry about a sale you might miss when sleeping? Do you have absolutely no time to take a break? Well, it is time to slow down and take control. By Joe Robinson 56 BRANDED WITH THE BEST Let people have fun while being associated with your brand. Give them an experience they will keep coming back for. We tell you how. By Craig Reiss 32
MONEY DEPARTMENT 60 WHERE NOT TO LOOK FOR MONEY– AND WHERE YOU ARE MORE LIKELY TO FIND IT Sourcing funds to get your dream venture rolling could be a tricky situation. Which are the right places to look? What are the general myths of funding? The answers are all here. By Bob Reiss 62 CFO: ENGINE OF THE FINANCE FUNCTION Today’s CFO matches steps with the CEO and contributes to all major enterprise functions. Don’t overlook his importance. By Bhairav Kothari 36
64 GIVE YOUR CUSTOMERS PAYMENT
OPTIONS Don’t you like it when your suppliers give you ﬂexible payment options? Open your doors to old and new customers by supporting multiple payment modes. By Michelle Dun
67 GUARDED ANGELS Are women more conservative investors than men? Does gender play a role in angel investment? Two researchers ﬁnd out. By Gwen Moran 69 IMPACT OF DIRECT TAX CODE ON SMEs The new DTC Bill is here to make entrepreneurs sit up and align their businesses to the revised tax provisions. By Nihar Jambusaria Entrepreneur + May 2011 7
table of contents TECH DEPARTMENT
70 WIRED TO THE FUTURE
While setting up a local area network, there are wires and then there are no wires. Do you need 24/7 connectivity? Do you understand switches and routers? Build your own LAN by getting the basics right. By Team Entrepreneur
THE ULTIMATE ‘HOW TO’ BUSINESS GUIDE
109 Use Quora for Your Business
82 IS THE IPA IPAD D 2 RI RIG GHT FOR YOUR YOUR
BUSINESS? The updated gadget is anything but perfect. It does offer built-in videoconferencing though. By Scott Steinberg
84 BATTER BA Y LOW? There is no reason to worry. You can now recharge your high-end mobile devices on the go. And without a plug point. By Ankush Chibber 85 AN EAR FOR COMFORT
The Bose Bluetooth device has size, design and looks that work to its advantage. But it doesn’t stop there. It goes one foot forward with the comfort factor. By Jonathan Blum
CLASSROOMS 88 WHAT A CAN SOCIAL MEDIA DO FOR AN AT E-COMMERCE BUSINESS AND HOW?
E-commerce means you are online already. But how do people know that? Well, social media could help. By Rajiv Dingra
110 Register Your Trademark T
HOT OT ST STARTUP OF THE MONTH
112 Form a Limited Liability Partnership
96 GAME ON! Heard about a healthy mix of work and fun? Three family members get together with a resolve to make board games accessible in Indian languages to young and old alike. By Shonali Advani 99 JUST CLICK AND CALL!
119 Insure Your Business 120 Buy a Business in India 123 Hold an Event for Your Brand
102 ONE FOR THE ROAD A boon for drivers on the road, Rescue First offers on-the-spot vehicle breakdown service and helps commuters get back on track. By Shonali Advani
124 VIETNAMESE TRENDZ InterContinental The Lalit Mumbai brings mouth watering Vietnamese cuisine to Indian plates. By Sriya Ray Chaudhuri
104 SPINNING THE YARN
126 TINKER AND TA T ILOR
106 PRESS PLAY Channelplay focused on below-the-line advertising to win big clients in the retail space. And it paid off for the ﬁrm. By Sana Salam
129 OVERHEAD, SCHMOVERHEAD
An IT professional got attracted to eco ﬁbers and converted his interest into an innovative business venture – Sarga Eco-Textiles. By Shonali Advani
The revamped Honda Accord and Civic are here. Take a look at what they have to offer. By Pranbihanga Borpuzari
Techniques to stuff an entire business trip under the airline seat. By Jennifer Wang
90 THE YOU Y NG TURKS
8 Entrepreneur + May 2011
116 Choose Your CRM
Uniﬁed Communications company TringMe makes international calling simpler, cheaper and more intelligent for its users. By Shonali Advani
YOUNG TURKS India’s longest running TV show on entrepreneurship has completed a decade. Take a look at some of the entrepreneurs who changed the business horizon over the last decade. By Team Young Turks
114 Set Up a PR Practice
CHAITANYA SURPUR COVER DESIGN
10 FEEDBACK 11 RESOURCES 14 NEWS IMPACT 16 SME DOCTOR 20 STUMPSPEAK 130 BACKSTAGE
Jasmine India (Un)limited A new revolution is brewing in the country… By Bharat Banka
is interesting to observe that just three months after I wrote on the international aspects of Jasmine Inc in this column, the subject has manifested itself in India rapidly. I had raised the points of whether and how the Jasmine revolution could reach Indian shores from the global scene. I believe we’ve got the answer sooner than we had bargained for or imagined in the form of a not-so-silent revolution on the subjects of lack of governance/transparency and the power of general public being demonstrated in an open environment. To allude to the events occurring in the last few weeks across India in the real world and the digital world, a few of these need specific mention. On the subject of governance and the role of the general public or common citizens, a movement that started as the solitary belief of a few Indians in northern India became a mass hysteria cutting across geographies of India. That set of Indians has been trying to bring some discipline to the disorganized set of public governance and public rights/ participation in policy-making. But the participation in the silent protest movement extended to ranks, files, age groups, professions, social profiles of citizens with a common voice and a unified objective to bring back power of people. The eventual or initial success, however, can be termed as a job well begun but it is far from being the end. While the movement was initiated and continued to receive support from across the nation by way of physical presence of supporters, there was another peculiar trend that emerged and went rather unnoticed comparatively at the time. This was the support that was generated from the confines of living rooms of homemakers/office desk
of a BPO employee/office cubicles of busy executives/ desktops of young students and massive support from GenY. This was the digital power generated by what one could call “Netolutionaries” or net revolutionaries. This could be clearly spotted on the blogs and social media websites including T Twitter and Facebook. An indigenous event that was reported more by local media in the confines of Mumbai without any prominence on a national scale was when a number of Mumbaikars progressed to lodge protests by walking on the city’s only sealink. These citizens decided to break the rule that restricted pedestrians from walking along the sea-link by forming a sequence. They also blocked traffic on the sea-link for a few hours. The peaceful and sudden movement caught the administrators unprepared. The point was made. Arguably, the similarities of these events with activities during the freedom struggle of the country are intriguing, be it the hunger strike or be it the silent (but firm) protest by token break of rules. The messages that speak loudly are pretty unambiguous… the dislocation of governance causing damage and irritation to common citizens may not be tolerated for long and the silent weapons would be used effectively to counter it. The powerful digital world would play its crucial role in future social movements and the rules that differentiate commoners based on social class may be changed to bring about equality. Can you smell the fresh fragrance of jasmine, my rekindled and awakened fellow Indians!
“The eventual or initial success, however, can be only termed as a job well begun but it is far from being the end.”
Photo© Kuldeep Chaudhari
The views expressed here are personal. BHARAT BANKA is the Founding CEO of Aditya Birla Private Equity. Entrepreneur + May 2011 21
INSIGHTS BRAND XXXX BRANSON
Build a Winning Brand The celebrated entrepreneur offers advice on deﬁning your business image. By Richard Branson
he conventional wisdom at business school is stick with what you know. Of the top 20 brands in the world, 19 ply a well-defined trade. CocaCola specializes in soft drinks, Microsoft in computers,
26 Entrepreneur + May 2011
Nike in sports shoes and gear. The exception in this list is Virgin—and the fact that we’re worth several billion dollars really bothers people who believe that they know “the rules of business” (whatever they are). We are the only one of the top 20 that has diversified into a range of business activities, including airlines, trains, vacations, mobile phones, media, the Internet, financial services and even healthcare. We have created more billion-dollar companies in more sectors than any other company. Between 2000 and 2003, Virgin created three new billion-dollar companies from scratch, in three different countries. Virgin Blue in Australia took 35 percent of the aviation market and reduced fares dramatically. Virgin Mobile became Britain’s fastest growing network. Virgin Mobile in the United States was the country’s fastest growing company ever, private or public. As a result of this diversification, Virgin has been able to weather the storm of recession. Our risks are spread over many companies, industries and countries; the failure of one will not bring down the whole group. Why, then, are today’s business teachers telling young entrepreneurs to stick to what they know, rather than advising them to imitate a company like Virgin? Because they should. The Virgin brand came into existence gradually, reflecting what I was fundamentally interested in. And to my own surprise, it wasn’t publishing magazines, as I’d originally thought; it wasn’t even music. My driving force, I realize now, was finding new ways to help people have a good time—ideally, in places where they were least expecting it. Like airports.
HOW TO BUILD A WINNING BRAND Contrary to appearances, Virgin is focused. Our customers and investors relate to us more as an idea or philosophy than as a company. We offer the Virgin experience, and make sure it is consistent across all sectors. It’s all about the brand. If you are embarking on a new venture, how should you envision and develop your brand? Let’s start with what a brand does. Brands exist as a means of communicating what to expect from a product or service. The Virgin brand tells you that using this credit card is rather like using this airline, which, in turn, is rather like using this health club, staying in our hotels, and paying into this pension fund. It is a guarantee that you’ll be treated well, get a high-quality product that will not dent your bank balance, and get more fun out of your purchase than you had expected. Should you follow the Virgin formula and focus your new company on providing a certain customer experience? It really depends on the type of business you are in. We are in the consumer-facing sectors where service is the key to success. You need to assess what is core to yours.
business and share what we think with the people who matter most—our customers. The people who see our advertisements are the same people who read about our tussles, setbacks and mistakes. So why would we pretend the real world doesn’t affect us? Almost everybody in Britain knows of our run-ins with British Airways over the years. We had a lot of fun when we introduced onboard massages on Virgin Atlantic, running an advertisement in the newspapers saying “British Airways doesn’t give a shiatsu!” Whatever you and your team decide your new brand will stand for, deliver on that promise. That’s the only way you’ll ever control your brand. And beware: brands always mean something. If you do not define what the brand means, then your competitors will. Apple’s advertisements contrasting a fit, happy, creative Mac with a fat, glum, nerdy PC tell you all you need to know about how that works. So, what’s next? For any business building a consumer brand, speaking to journalists is part of the deal. Be prepared! Know what you stand for and be certain that you’re delivering it. Then you’ll be able to answer every question openly and frankly, building your relationships with your customers and the media in the process.
“The people who see our ads are the same people who read about our tussles, setbacks and mistakes. So, why should we pretend the real world doesn’t affect us?”
BRANDING TIPS FOR YOUR SMALL BUSINESS When creating your first advertisements, designing a logo and reaching out to potential customers for the first time, you may be tempted to create a brand that’s very corporate and remote. Too many companies want their brands to reflect a particular idealized, perfected image of themselves. As a consequence, their brands acquire no texture, no character and no public trust. In contrast, Virgin wears its sense of humor on its sleeve. It’s about our wanting to be honest about the ups and downs of our
This is an edited excerpt from Richard Branson’s book Business Stripped Bare: Adventures of a Global Entrepreneur (Virgin Books, 2010). ©Entrepreneur Media, Inc. All rights reserved. RICHARD BRANSON is the founder of the Virgin brand, which houses over 360 companies. If you have a question for him, you can e-mail him at BransonQuestions@Entrepreneur.com. Please include your name and country with the question.
To read more, grab the May issue of Entrepreneur Entrepreneur + May 2011 To Subscribe, visit www.entrepreneurindia.in
FIERY AMBITIONS: Priya Kumar 32 Entrepreneur + May 2011
MAID FOR MOTIVATION Priya Kumar brought her passion to read, learn and teach together into a venture that’s helping change mindsets across the globe. By Shonali Advani
he started working at age 13, by choice, because she speaking. However, the next year didn’t turn out to be as wanted extra pocket money to buy music and other glamorous; and life gave Kumar a reality check. “Nobody things that interest girls that age. Her craze to make wanted to pay a young kid to talk,” she laughs. This one an extra buck went on for nine years and with it her monthly year was most crucial as it cost her everything: time, money, income of Rs.300 grew proportionately helping her build up rejection, experience. It was a new life all over again, and a savings bank of Rs.9 lakh. Today, at 38, Priya Kumar, CEO Kumar had to learn everything from setting up an office, and Chief Facilitator, Priya Kumar’s Training Systems, has marketing herself as a professional speaker and run a busirisen from tutor to motivational speaker, only because she ness. “In India a lot of people do things without realizing chose to change her path at age 24. “I was always an unoffithey are entrepreneurs,” she points. cial speaker; whatever I learnt I taught,” she laughs. Back then, 1997, her firm was called Institute of Self With a typical middle-class upbringing in Chandigarh Development and Kumar was the only employee in her own and working parents, Kumar’s journey has been fueled by office, doubling up as fictitious secretary ‘Jennifer’ to fix her own aspirations to make it big. “I had rich cousins, everyappointments. “I was very professional,” she recalls. And body should have one person in the family who has it all; it that’s pretty much how she got her first client too, a big increases your aspirations,” she quips. After nine years of firm [name undisclosed], which Kumar unabashedly used tutoring, Kumar had built up a healthy since then as a promotional strategy to savings kitty but was bored. Being market her firm and bring in business. a voracious reader, she had already To her liking the next six months YOUNG ACHIEVER begun to flirt with the idea of being were just that. At this juncture, she t Initial investment: Rs.9 lakh a speaker at some conferences, and decided to get some formal training t Corporate charges: Rs.2 lakh-Rs.4 spoke on subjects that interested her and attended every possible workshop lakh like anti-smoking, relationships, as and across the globe. “I wasn’t impressed, t Number of employees: 5 when she was invited. each speaker was a bigger rip-off of “It was a glamorous life, I was oversomeone else,” quips Kumar. Awards: whelmed and so decided to do it profesThis was a turning point in Kumar’s Citizen of the decade as a writer by the Rotary International. sionally,” she says. Without a second vision for herself as a motivational Woman leader in India, 2nd position, thought she took the plunge and made speaker. Not satisfied, desirous of somein 2010. her big career move from teaching to thing more substantial she decided to Photos© PRIYA KUMAR TRAINING SYSTEMS
To read more, grab the May issue of Entrepreneur Entrepreneur + May 2011 To Subscribe, visit www.entrepreneurindia.in
N E E U E Q BE
’s ala rural t s a a P trains thus y a j Vi ation ping; e z kee reas ani org in bee to inc e. folk elping incom a h heir Meht t di B By
ijaya Pastala always knew she wanted to work in the ‘livelihoods’ space. She just didn’t know how till she read a National Commission of Farmers report published in 1976 talking about the importance of honey bees in agriculture. Today, Vijaya’s organization Under The Mango Tree (UTMT) trains tribal, rural women, and small farmers in beekeeping and encourages them to take up apiculture as an important part of their daily basket of agri-activities. These bees help cross pollination of farmers’ crops, thus leading to increase in yield and productivity and eventually enhance the livelihoods of rural farmers. Pastala’s enterprise clocked revenues of Rs.15 lakh for the year ended March 31, 2011 and is aiming to reach revenues of Rs.40 lakh this year.
THE BEGINNING Pastala’s work related to a World Bank development project brought her to Mumbai in 2005. That was when the thought of starting out on her own first struck her. “I did a preliminary market scan and figured that there were a lot of NGOs actively working in the livelihoods enhancement space. However, most of them lacked a business perspective and a conduit to the market. I founded UTMT 36 Entrepreneur + May 2011
primarily as a platform for rural producers to access markets,” says Pastala, Founder, UTMT. 2005 was also the year when Pepsi got into contract farming. In the next few years, Reliance and Big Bazaar also entered the retail market for agro produce. “Suddenly there was a dearth of good suppliers in the market. UTMT started out aiming to fill in this gap by becoming a platform connecting rural producers to the market,” says Pastala.
BEE WISE She registered UTMT as a sole proprietorship in 2007 and opened a bank account to manage her finances. In the initial days, there was a strong focus on research. It was during this phase that Pastala laid her hands on the Government of India report mentioned above. “Statistics clearly indicated that breeding honey bees for agricultural productivity was about 14 times more lucrative than breeding them solely for honey. The Indian government had introduced the Italian bee Apis Mellifera into the country. This bee was high on productivity but not attuned to India’s climate. The government’s beekeeping training program was ineffective. UTMT changed its course to focus on offering training in beekeeping to tribal farmers. While pursuing this, we started building a brand (Tribal Gold) for retailing the honey produced by these farmers as a by-product of keeping bees on their farms,” says Pastala. In 2008, she quit the World Bank to give all her time to UTMT. The firm devised an independent training module Photo© Neha Mithbawkar
involving the Apis Indica or the indigenous Indian bee. To breed the Italian bee and maintain it, a farmer would have to invest up to Rs.5 lakh. This bee had the ability to produce up to 100 kilos of honey per box/per season. The Indian bee, on the other hand, produced up to 10 kilos of honey per box/per season. However, the Apis Indica was much easier to breed and maintain. It had become resistant to Indian environmental conditions over the years and didn’t need to be migrated as often as the European bee. “Our target group comprised farmers earning Rs.18,000-Rs.24,000 annually. There was no way this group could afford the Apis Mellifera,” says Pastala. They tweaked the model in many other ways to make it feasible for on-ground implementation.
CRUCIAL PARTNERSHIP In March 2009, UTMT entered into a partnership with BAIF (Bharatiya Agro-industries Foundation) for its pilot implementation. BAIF was already working with farmers in rural Maharashtra and Gujarat and had a training center in Gujarat that Pastala’s team could use. “We started out by training farmers in BAIF-supported tribal wadis. We were clear from day one that we did not want to build our own ground-level infrastructure. There was already a strong NGO
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network in place, we simply had to tap into it and extend our reach,” says Pastala. This was the point when the firm realized that no study had till then been conducted to measure the impact of bees on cross pollination and productivity of various crops. UTMT is currently in phase II of such a study where it is trying to tabulate the impact of bees on the yield of pulses, oilseeds etc. This research is being funded by the EdelGive Foundation, the philanthropic arm of the Edelweiss Group. It is clear that Pastala’s project had many takers. The National Bank for Agricultural and Rural Development (NABARD) stepped in to offer beekeeping expertise for the pilot while UnLtd India, a seed fund and incubator for social entrepreneurs, stepped on board in 2009 to offer mentoring support and bring focus to various activities. In 2009, the UTMT society was started. “The front face of UTMT is a revenue-generating organization while at the back-end we offer all the support that farmers need,” says Pastala.
CHALLENGES CLEARED Talking about the challenges in the early stage, she adds, “The main challenge was money. You need working capital to pay salaries because we are a for-profit enterprise. And it is difficult to retain staff because we don’t have cushy jobs to offer. The other challenge was dealing with the farmer mindset. A farmer intervenes at every stage of the agricultural process except pollination. He understands pollination but doesn’t know that one can facilitate pollination. We explain how honey bees can help achieve that.” On the revenue and cash flow front, UTMT expects to break even this year. In the second half of 2010, UTMT emerged as a winner in a competition called ‘Village Capital’, incubated in First Light Ventures, a sister enterprise to seed investing firm Gray Ghost Ventures. “We got investment of Rs.33 lakh from First Light Ventures,” says Pastala. This money will be used to scale up UTMT’s operations in the next few years. “Last year, we sold about 8,000 bottles of honey. Our target for this year is to sell 4,000 a month,” says Pastala. The company is also eyeing the corporate gifting and hospitality sectors. In hospitality, the firm has just sealed its first successful deal with the Taj Group of Hotels. UTMT has also earned a Rs.25 lakh zero-interest loan from Villgro Innovations Foundation, an organization that works toward transforming innovations into a market-ready form, to upgrade and professionalize its entire bottling operation. “Honey is difficult to bottle. It falls very slowly. As a result, you can’t automate operations easily. We will use Villgro’s money to increase our staffing strength and buy more drums for the honey bottling,” she concludes. It is clear that there is no stopping this woman with a mission.
To read more, grab the May issue of Entrepreneur Entrepreneur + May 2011 To Subscribe, visit www.entrepreneurindia.in
LORD OF THE LAND
38 Entrepreneur + May 2011
Bhavarlal Hiralal Jain returned to his roots and discovered various ways to build a successful business empire. By Bindi Mehta
ucked away in the small, sleepy town of Jalgaon, 400 km north-east of Mumbai, in rural Maharashtra, Jain Hills symbolizes everything that its 73 year-old founder dreamt of when he started his entrepreneurial journey in 1963.
PhotosÂŠ Neha Mithbawkar
Why is a business plan so vital to the health of your business? By Team Entrepreneur
business plan is a written description of your business’s future. That’s all there is to it—a document that describes what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you’ve written a plan, or at least the germ of a plan. Business plans can help perform a number of tasks for those who write and read them. They’re used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers or simply to understand how to manage their companies better. So what’s included in a business plan, and how do you put one together? Simply stated, a business plan conveys your business goals, the strategies you’ll use to meet them, potential problems that may confront your business and ways to solve them, the organizational structure of your business (including titles and responsibilities) and, finally, the amount of capital required to finance your venture and keep it going until it breaks even. Sound impressive? It can be, if put together properly. A good business plan follows generally accepted guidelines for both form and content. There are three primary parts to a business plan: The first is the busines� concep�, where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success. The second is the marketplac� sectio�, in which you describe and analyze potential
46 Entrepreneur + May 2011
customers: who and where they are, what makes them buy and so on. Here, you also describe the competition and how you’ll position yourself to beat it. Finally, the ﬁnancia� sectio� contains your income and cash flow statement, balancesheet and other financial ratios, such as break-even analyses. This part may require help from your accountant and a good spreadsheet software program. Breaking these three major sections down even further, a business plan consists of seven key components:
1. 2. 3. 4. 5. 6. 7.
Executiv� summar� Busines� descriptio� Marke� strategie� Competitiv� analysi� Desig� an� developmen� pla� Operation� an� managemen� pla� Financia� factor�
In addition to these sections, a business plan should also have a cover, title page and table of contents.
How lon� shoul� your busines� pla� b�? Depending on what you’re using it for, a useful business plan can be any length, from a scrawl on the back of an envelope to, in the case of an especially detailed plan describing a complex enterprise, more than 100 pages. A typical business plan runs 15 to 20 pages, but there’s room for wide variation from that
norm. Much will depend on the nature of your business. If you have a simple concept, you may be able to express it in very few words. On the other hand, if you’re proposing a new kind of business or even a new industry, it may require quite a bit of explanation to get the message across. The purpose of your plan also determines its length. If you want to use your plan to seek millions of rupees in seed capital to start a risky venture, you may have to do a lot of explaining and convincing. If you’re just going to use your plan for internal purposes to manage an ongoing business, a much more abbreviated version should be fine.
Wh� need� � busines� pla�? About the only person who doesn’t need a business plan is one who’s not going into business. You don’t need a plan to start a hobby or to moonlight from your regular job. But anybody beginning or extending a venture that will consume significant resources of money, energy or time, and that is expected to return a profit, should take the time to draft some kind of plan. Startup�. The classic business plan writer is an entrepreneur seeking funds to help start a new venture. Many, many great companies had their starts on paper, in the form of a plan that was used to convince investors to put up the capital necessary to get them underway. Most books on business planning seem to be aimed at these startup business owners. There’s one good reason for that: As the least experienced of the potential plan writers, they’re probably most appreciative of the guidance. However, it’s a mistake to think that only cash-starved startups need business plans. Business owners find plans useful at all stages of their companies’ existence, whether they’re seeking financing or trying to figure out how to invest a surplus.
Establishe� ﬁrm� seekin� help. Not all business plans are written by starry-eyed entrepreneurs. Many are written by and for companies that are long past the startup stage. WalkerGroup/Designs, for instance, was already well-established as a designer of stores for major retailers when founder Ken Walker got the idea of trademarking and licensing to apparel makers and others the symbols 01-01-00 as a sort of numeric shorthand for the approaching millennium. Before beginning the arduous and costly task of trademarking it worldwide, Walker used a business plan, complete with sales forecasts, to convince big retailers it would be a good idea to promise to carry the 01-01-00 goods. It helped make the new venture a winner long before the big day arrived. “As a result of the retail support up front,” Walker says, “we had over 45 licensees running the gamut of product lines almost from the beginning.” These middle-stage enterprises may draft plans to help them find funding for growth just as the startups do, although the amounts they seek may be larger and the investors more willing. They may feel the need for a written plan to help manage an already rapidly growing business. Or a plan may be seen as a valuable tool to be used to convey the mission and prospects of the business to customers, suppliers or others.
Pla� a� updatin� checklis� Here are seven reasons to think about updating your business plan. If even just one applies to you, it’s time for an update. 1. A new financial period is about to begin. You may update your plan annually, quarterly or even monthly if your industry is a fast-changing one. 2. You need financing, or additional financing. Lenders and other financiers need an updated plan to help them make financing decisions.
money department [The Tax Effect]
Impact of the Direct Tax Code on SMEs With the DTC expected to be implemented in April 2012, do SMEs have reasons to be wary or relieved? By Nihar Jambusaria
he original draft of the Direct Tax Code bill (a.k.a. ‘DTC’ or ‘the Bill’) issued in August 2009 had some perilous issues that were re-considered in the new draft issued in August 2010. However, the new draft is still likely to force small and medium enterprises (SMEs) to make sure their structures and business models are well aligned to meet the DTC provisions. DTC is expected to be implemented on April 1, 2012. A sensitive issue for SMEs is the status of tax holidays for units in Special Economic Zones (SEZs). The proposed Bill provides that units in SEZs commencing operations before March 31, 2014, will be entitled to a grandfathering of profit-linked tax deductions. While this certainly acts as a carrot for SMEs, the application of Minimum Alternate Tax (MAT) is a certain stick. The Bill has proposed investment-based incentives in the infrastructure sector. Longterm capital gains on the sale of listed shares continue to be tax exempt, and short-term capital gains on the sale of such shares will be allowed deduction at 50 percent. Gains on the sale of other assets (including unlisted shares) are to be taxed fully, subject to indexation benefits. This is a welcome step. An alternative available to SMEs is to switch to a Limited Liability Partnership (LLP) structure. However, the luster of LLP is affected by the introduction of Alternate Minimum Tax (similar to MAT) in the current Union Budget and no clarity on the Foreign Direct Investment regulations in LLP. Proposals of the current Union Budget likely to be married with DTC are not ruled out. Yet another dampener is the corporate tax rate being kept at 30 percent. Further, many SMEs are considering going global. The DTC has made adequate provisions in this regard.
Proposed Controlled Foreign Company (CFC) rules are expected to have an extensive impact on outbound investments by SMEs, which would tax the income of foreign subsidiaries in the hands of Indian parent companies, even before such income is distributed. Other issues relevant to SMEs are the Advance Pricing Agreement (APA) and General Anti-avoidance Rules (GAAR). APA is expected to bring relief and help reduce transfer pricing litigation. However, the plenary provision of GAAR, its treaty overriding clauses, and its arbitrary application by the tax administration evokes greater fear. Guidelines on these issues are awaited. SMEs have always wanted a stable, simple tax regime. Whether the DTC meets the criteria will be measured once it is implemented. Tax authorities will play a very important role, shaping the long-term impact of the DTC. NIHAR JAMBUSARIA is National Head, Tax Advisory Services, BDO, an accounting and consultancy ﬁrm.
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THE YOUNG TURKS Young Turks, Indiaâ€™s longest-running television show on entrepreneurship, has completed a decade. Here is a look at some of the entrepreneurs who made a difference in the last 10 years and who are going to change the business horizon.
IllustrationÂŠ Chaitanya Surpur
young turks [on the road]
Mobile Matters H Naveen Tewari’s InMobi delivers 31 billion ads in 145 countries every month. By Team Young Turks
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arvard graduate and former McKinsey man Naveen Tewari claims to have created the world’s second-largest mobile ad network in just four years. What started as an SMS search network, Mkhoj, in 2007 is now InMobi and this David certainly seems to be giving Goliath Google something to think about. InMobi delivers over 31 billion advertisements to 212 million mobile users in 145 countries every month. There are 2,000 advertisers and 8,000 publishers currently on the InMobi platform. But what made Tewari change his business model? “As we entered the SMS search space, we realized that we couldn’t make it big in that specific space, so we moved out,” he says. His InMobi platform is very simple and uncomplicated. “There are many consumers in the world who browse the Internet on their mobiles either through browsers or applications. Now, you must have noticed the ads that appear next to those browsers or in those
applications. Those ads are served by us and that’s our business model,” explains Tewari. But, does he feel ads on mobile are intrusive? “User experience is of paramount importance to us, so we make sure that the ads are non-intrusive, something that the user chooses to engage with and is not forced to deal with,” explains the entrepreneur. His company is second only to Google in the mobile ad network, but how wide is the gap between the two? “It’s very hard to know how far we are from Google because the numbers are all over the place. But we know that we are seeing quick growth and are very excited about that,” says Tewari. Though mobile ad is a fairly new segment in the advertising space, Tewari feels that in the next 3-4 years, around 4-5 billion users across the world will be using mobile internet to access information and content. Betting big on the over Rs.90,000 crore mobile advertising market, Tewari and his team of 250 are now looking at entering the mobile commerce space. After building a strong presence in Asia and Africa, InMobi is gunning for the developed markets to get a larger share of the revenue pie but he will have to take on the big boys to make an impression. And what is his monetization strategy with advertisers and publishers? “We have two sides to our customer profile. On one hand we have the publishers, who are the owners of content; on the other side we have the advertiser. So, we basically sit at the center and connect the two of them,” explains Tewari. He adds that it is a 60:40 split on the revenue share. Helping advertisers target their ads to the right users, InMobi offers real time reporting on the performance of ad campaigns and even allows advertisers to make changes to give them the best return on their investments. Backed by venture capital firms like Kleiner Perkins, Caufield & Byers and Sherpalo Ventures, Tewari has already received funding of Rs.67.5 crore and is now betting big on the 3G opportunity. Tewari’s future plans with his venture include looking to enter newer markets like China and Korea very soon. He also plans to do more product development and acquisitions in order to basically expand across the entire value chain and provide more and more value to his customers.
young turks [on the road]
Solar Solutions Inderpreet Wadhwa’s Azure Power lights up thousands of lives in India. By Team Young Turks
his entrepreneur from Silicon Valley always wanted to return to India and create a business that was socially relevant. So, Inderpreet Wadhwa launched Azure Power in 2007 to power India’s energy needs with his solar solution. Azure Power set up its first solar power grid in Amritsar in 2009 and since then the project has generated 23 lakh KW of clean energy to light up the lives of 20,000 households in rural Punjab. The company is yet to see returns flowing in but Wadhwa is convinced that solar power in India is a long term business. Solar power is still a complementary source of energy in India, while at Azure he is trying to create solar grids to make it a primary source of energy. How exactly is the entrepreneur planning to do this? “I would still say it is a somewhat complementary source of energy. But there are many primary opportunities like areas where the grid is never going to go or it is much difficult to build a long term grid. Also, look at peak demands like opportunities where energy requirement is during the day, not at night time. The other opportunity lies in diesel gensets. India has almost 50, 000 MW of standby diesel genset capacity. So, where diesel is burnt mostly during the day and where there is power shortage, there is more requirement of energy. So, solar lends itself really well to reduce your cost of energy during peak times,” explains Wadhwa. His business model is simple. He has a 30-year power purchase agreement with the Punjab state electricity board; his company sells them energy and then from the board’s sub-station they take care of the distribution, payments and collection of those 32 villages. “We don’t get into the end point distribution, we generate the energy and give it to the nearest interconnect point,” adds Wadhwa. Today, Azure Power has under development 30 MW of solar grid power plants across
Rajasthan, Gujarat, Haryana and Karnataka. Seed money came from Foundation Capital and Helion Venture Partners and Azure’s sustainable business model has also attracted investments of close to Rs.225 crore from International Finance Corporation and Overseas Private Investment Corporation. While Wadhwa believes that being an early mover in the renewable energy sector in India has helped, doing business has not been easy. “We have to spend a lot of time educating people and even our employees who have never seen a 5 MW grid-connected solar power plant in their life,” says Wadhwa. Wadhwa has plans to set up a manufacturing facility in India, though now he is more focused on creating good assets. Targeting 100 MW capacity, he feels Azure will break even by 2017. His future plans include having a portfolio of 100 MW by 2014. “We are roughly looking to have around 20-30 projects in the country,” adds Wadhwa. And he hopes that solar power will be at par with other sources of power by 2020.
start ups UNSCRAMBLING SCRABBLE
Game On! Three IIT graduates chucked their jobs to design board games with their startup MadRat Games. By Shonali Advani
WORD POWER MadRat Games Co-founders Manuj Dhariwal, Rajat Dhariwal and Madhumita Halder
96 Entrepreneur + May 2011
PhotoÂŠ Sanjay Ramchandran
crabble is a classic board game that’s spanned generations. We wondered why it never existed in any Indian language,” says Manuj Dhariwal, Co-founder, MadRat Games, a design major from IIT Guwahati and an avid fan of the word game. Manuj, with brother Rajat Dhariwal, a computer science major (IIT Bombay) and sister-in-law Madhumita Halder, were collectively unenthused by the corporate world. When they decided to explore teaching as a career option, the family of three designed Aksharit, a Hindi variant of Scrabble as a project and tested it in schools. Optimistic about its potential, it was presented at IIM Calcutta’s B-plan competition. The idea got phenomenal response and, needless to say, they won. This victory led the entrepreneurs to evolve the business plan into an actual venture.
THE BEGINNING One year of R&D resulted in prototypes for 11 Indian languages, and the Bengaluru-based startup launched in January 2010. “This game can be played by anyone and our basic aim was to make it reachable to all,” mentions Rajat. Since India lacked the culture of board games, which is abundant in the west, the three knew they needed a definite strategy to sell. B2B was the way forward. “We needed to marry it to a need,” explains Rajat. The most promising way was with Indian language teachers in schools. MadRat Games rolled out six educational versions of Aksharit for different age-brackets. The target within this space was government schools, because of the volumes they brought. The entrepreneurs narrowed down schools in Chhattisgarh to run a pilot, and shared the product with the Education Officer who was looking for aids for a teacher training program. The end result: MadRat Games sold 6,000 games across 1,000 schools. “It was affordable and every school could buy and use it from the funds allocated by the department,” says Venkatesh Malur, Education Specialist, Unicef, India Country Office.
ORDER, ORDER! The founders monitored the initiative closely for six months, visiting schools and integrating the game with curriculum. The effort led to useful insights. “Teachers never felt it was above their curriculum, plus the game allowed
for peer learning and minimum teaching support,” says Rajat. So positive was the feedback that it didn’t take much convincing for the state government of Madhya Pradesh to order 2,400 games for 200 schools. The state government of West Bengal followed suit with 600 games in the Bengali version for 100 schools. The startup is still negotiating the number of games required for 60 schools with the state government of Rajasthan.
‘BENEFICIAL TEACHING AID’ Once they had the government on their resume, the entrepreneurs tapped private schools where they found an immediate need as well. The focus here was visionary schools which give importance to teaching aids. “Aksharit has been a very beneficial teaching aid to us, since it comes as a game which students find exciting,” says B. Ramani, Hindi teacher for Std III-VIII, N.H. Goel World School, Raipur. “They should bring out versions for sentence-making for older children,” she adds. MadRat Games approached NGOs working in the education space as a third distribution channel, given the alignment of ideology between the two. On the side, the startup has also custom-made teaching aids for Azim Premji Foundation. “The games showed a fine understanding of science as well as pedagogy; the owners were professional and open to revising it, and setting right minor glitches,” says Dr. Neeraja Raghavan, Consultant, Azim Premji Foundation. Gautam Gandhi, Head, New Business Development, Google India and advisor to MadRat Games for over a year, agrees with the startup’s strategy to tap multiple distribution channels to achieve its ultimate goal of reaching the game to many before maximizing prof profits. He feels the venture has potential to scale given its intrinsic value for schools as an aid. “India has plenty of children, but not as many educational games nor does our system make learning fun,” says Gandhi.
GOING MOBILE Persistent about their goal, the entrepreneurs decided to tap other channels which have already penetrated the masses. No guesses then why they developed a mobile version of Aksharit, tweaked to suit the platform! They approached Nokia for the same and the game has been pre-bundled on Nokia touchphones
start ups RUSHING TO RESCUE
They tied up with garage owners and started offering services to 40-50 members sought through friends and family. It wasn’t a foolproof model and a pilot program over four-five months brought up several loopholes. “Our first breakdown was a nightmare, the mechanic refused to go and we had to attend to the customer personally,” recalls Sivan, Co-founder and Chief of Marketing, Rescue First. After 10-15 complaints the entrepreneurs realized this method wasn’t wise as mechanics were giving their own customers priority. Also, the startup had negotiated low rates on the promise of volumes, this was taking time to build up. The answer was clear, the model needed to change. The attraction was money this time. The founders hired one sales guy to identify area specific garages (two-wheelers) to add to Rescue First’s network. “We offered Rs.150Rs.200 for every complaint,” notes Sivan. In addition, they appointed two in-house wo-and-a-half years back, Bopanna mechanics to service vehicles. Witnessing a B.P. found himself with a flat tyre demand for four-wheelers, by the third quaron Bengaluru’s Inner Ring Road, ter of 2009, the entrepreneurs forayed into Koramangala and he instinctively called Rescue the segment. Sourcing quality manpower was First, referred by a friend. “The mechanic a natural hurdle and the men lay first bets at reached in 20 minutes and I was satisfied with industrial training institutes. Selling their the promptness of service,” says Bopanna. So concept of on-the-spot service was a chalhappy was he that he signed up immediately as lenge as it didn’t seem to gel with a mechana member for both his two- and four-wheelers ic’s mindset. “Most mechanics were not open to with three breakdowns being serviced since. new ways of doing things and convincing them Co-founders Prasanna Sivan and P. Sanju was a tough part,” says Sanju, Co-founder and too had found themselves in similar situations Chief of Operations, Rescue First. Marketing on numerous occasions. These instances often the venture was easy enough. Flyers, referral made them wonder why campaigns and kiosks in big Bengaluru, a city known IT parks and MNCs created to have a significant initial buzz. “Admin/HR WHEEL DEAL number of two-wheelers, heads considered our didn’t have anyone providservice as good incentive INITIAL INVESTMENT: Rs 4.5 lakh ing 24/7 support on the for employees and we gave NO. OF OWN MECHANICS FOR TWOspot. This was in 2007 5-10 percent discount WHEELERS: 7 and within a year, they during this period,” says NO. OF GARAGES IN NETWORK: 15 (min 1 chucked their corporate Sivan. This means they mechanic per garage) jobs to address the issue. had to increase their core NO. OF OWN MECHANICS FOR FOURRescue First was launched mechanic base as well over WHEELERS: 2 in 2008 as a 24/7 vehitime. NO. OF COMPLAINTS IN A MONTH: 200 cle breakdown service Since then, the founders approx company for Bengaluru, have identified mechanNO. OF MEMBERSHIPS FOR TWOearning revenues through ics on the basis of number WHEELERS: 4,000-4,500 an annual membership of potential customers in NO. OF MEMBERSHIPS FOR FOURmodel, Rs.444 for twoeach area after which each WHEELERS: 1,000-1,200 wheelers and Rs.888 for employee is provided a REVENUES 2010-’11: Rs.21 lakh four-wheelers. shed and tools. Plus, they
ROAD ONE FOR THE
Two Bengaluru-based entrepreneurs left the world of ﬁnance to bootstrap a business in vehicle breakdown assistance. By Shonali Advani
102 Entrepreneur + May 2011
are tested on the basis of their experience and trained for soft skills like dealing with customers, communicating via SMS etc. Rescue First’s Head Mechanic is in charge of background check of all new candidates and the firm has a strict policy of hiring teetotallers. “We pay them Rs. 6,000-Rs.7,000 per month, double the wage at other garages, plus conveyance, vehicle maintenance and a handset with a SIM connection,” Sivan adds. Mechanics are free to service any vehicles they find on their own, in addition to the startup’s customers, provided they aren’t secured through outside employment. On an average, their staff services fourfive vehicles a day, and end up putting in less hours than a job at any garage. The only pitfall is they can be called for duty anytime. So far the firm has covered 22 locations between the city’s periphery and center. Once a complaint is registered with a customer care executive (placed at a friend’s BPO), the rescue team takes 20-30 minute to reach the breakdown site. It’s taken a fair amount of time to streamline logistics. The wait time for customers has not always been by the clock. “Now we call the customer after 20 minutes to check if our mechanic has reached,” notes Sivan. For reasons of scalability, the startup has been working on tie-ups with corporate firms to increase its customer base. Yamaha was one such client. In December 2010, they struck a deal with Yamaha customers through its dealer network. “We were giving a month’s free service with each purchase of a Yamaha two-wheeler,” mentions Sivan. “We are trying to convert this segment into customers,” he adds. So far the conversion rate has been 10 percent. “Their service goes well with our product and the partnership has been beneficial to us,” says Manu Choudhary, Senior Sales Executive, Orion Motors, dealers for Yamaha. Orion tied up with the startup two months back and has sold 25-30 memberships till date. Pharma company AstraZeneca signed a contract with Rescue First starting July 2010 until August 2011 for 100 employees. So far it has serviced 30 complaints in six months. “Majority of our staff own two-wheelers. We were looking for initiatives to make things easier for them,” explains Anu Elisha, Manager Safety, AstraZeneca. Since February 2011, the firm’s focus has been on marketing. They plan to use the time Photo© Shrikanth S. Y.
till mid-year on radio advertising, more referral schemes and hiring additional staff. This has been possible because of an angel funding of Rs.15 lakh which was received through family and friends. In March 2011, Rescue First entered the retail space with pre-paid temporary membership cards. The entrepreneurs hired interns to identify feasible retail locations, including the unorganized market which includes kirana stores and local garages. “We tried this model earlier at modern retail chains but it failed as commissions were as high as 50-60 percent,” exclaims Sivan. Looking to expand their reach, Sanju has been on a road trip lately identifying garages in parts of Kerala and frequently-traveled routes within Karnataka, seeking garage tie-ups. “By mid-2011, we plan to offer services in these regions as well,” points out Sanju.
CAR CARE P. Sanju and Prasanna Sivan
start ups SELL WELL
With brands increasingly competing for consumer attention at retail stores, Channelplay’s Sundeep Holani makes it easier for them by offering sales and marketing services. By Sana Salam
ow often have we, having seen the ad fair idea of how retail marketing worked outside of that fancy, gleaming new gadget out India. Soon enough, his two colleagues who had in the market, wanted to lay our hands a grasp of the market in India, were comparing on it? That’s the power of ads—it convinces us notes and a business plan was thrashed out. “At that we have to possess a particular thing, never the time we started, we didn’t have a solid idea mind if we really need it or not. Understandably, as to what we would do within retail marketthe services of advertising agencies in the couning. So, when we made presentations, we talked try are highly sought after and creative hotshops about the general idea we had—what was wrong are popping up a dime a dozen to cater to the and how it could be fixed, our backgrounds and increasing need. how we could add value,” relates Holani. Clearly, Thirty-one-year-old Sundeep Holani, along they did something right because within three with two of his friends Tushar Chauhan and months of being operational full-time, they Suhas Mishra, realized the opportunity to create bagged their first client. a dent lay in not making mass-media ads but In the beginning, Channelplay was all about in below-the-line advertising or retail marketthe selling aspect or sales but they have since ing. “Consumers often branched out into change their buying marketing as well. After decisions at the retail months of trials and store. Companies have errors, Channelplay NUMBER CRUNCHING begun recognizing this zeroed in on the line fact and started to shift a of services they would INITIAL INVESTMENT: Rs.10 lakh large percentage of their offer clients. With retail SOURCE OF FUNDS: Self-funded budgets towards retail itself being dependent CURRENT REVENUE: Rs.45 crore marketing. But this was on availability, visibila very unorganized and ity and advocacy of the ESTIMATED REVENUE BY 2015: unprofessional space in products, Holani and Rs.300 crore-Rs.500 crore India,” explains Holani. his colleagues decided Recognizing the potento offer services for the MANPOWER: 3,000 tial, in 2006, Holani latter two (since availand his friends set up ability is a distribution Channelplay, which has issue). Within visibility, quickly grown to be one of India’s largest retail Channelplay offers visual merchandising and marketing companies. Their clients include retail audit. While one ensures that the clients’ some of the global leaders in the telecom and products have maximum visibility in stores, the IT industry. other measures how effectively it has been done An MBA graduate from IIM Calcutta, Holani (even if the visual merchandising hasn’t been was working with Cognizant Technology done by the company). Solutions as a retail consultant when he decided The company also does direct advocacy for it was now or never. Having worked in the U.S. for its clients. This essentially means that sales and three years and in China for six months, he had a marketing staff are deployed inside stores on
106 Entrepreneur + May 2011
behalf of the brands. The next time you go to an electronics store, notice the guy wearing a T-shirt with a particular brand’s logo, trying his best to sell you the product. There’s a chance he has been deployed by Channelplay. The company also trains and develops the skills of shopkeepers and their staff on behalf of a particular brand. The other vertical where Channelplay operates is in events and promotions. So, what is the value proposition that the company offers vis-a-vis what brands can do in-house? “Most of our clients are big MNCs who want to establish a wide retail footprint but do not have the reach or scale to do their own activities in India. That is what we offer; the capability to sell in any corner of India and the ability to hire hundreds of people to do work on their behalf,” says Holani. Technology is a strong point of Channelplay and what, Holani says, sets them apart from competitors. “We have an Enterprise Resource Planning software system—whether it’s in recruitment, HR management system, sales, visual merchandising etc,” says Holani. So a brand manager in Gurgaon can get up-to-minute visibility of what’s happening across his 40 stores in Madurai. Photo© Shamik Banerjee
It may be smooth sailing today but there was a time when Holani harboured serious doubts about the venture. The doubts, as he says, were two-fold. The trio had collectively taken personal loans worth Rs.10 lakh to start up Channelplay. And with the company growing rapidly, all the revenue earned was being put back into it, which effectively meant that Holani and his colleagues weren’t taking any home. Apart from challenges on the personal finance front, Holani also found himself questioning whether the venture was intellectually stimulating enough. “There was a point where we thought this might not be the best industry for us to be in. In retrospect, though, that was rather shortsighted,” he says. And true to the spirit of an entrepreneur, Holani has a big dream. Five years from now, he hopes that Channelplay will be considered the O&M of retail marketing. In revenue terms, he is predicting that the company will increase from the current Rs.45 crore to about Rs.300 croreRs.400 crore. “A lot of people say that selling is an art that one is born with and can’t be taught. We have proven that that art can be converted into science—it can be taught and it can be practised,” says Holani.
how to [... do just about anything]
Form a Limited Liability Partnership The LLP offers many advantages for entrepreneurs looking to start a business. By Hrishikesh Datar
he Limited Liability Partnership (LLP) Act 2008 was published in the official Gazette of India on January 9, 2009. After the rules were notified on April 1, 2009, the first LLP in India was incorporated in the first week of April, 2009.
112 Entrepreneur + May 2011
to start a business. It offers the flexibility of a partnership along with the limited liability protection of a company.
FEATURES OF THE LLP ACT, 2008
2.The partners in an LLP are shielded from the actions of other partners. The liability of a partner in an LLP is limited only to the extent of his/her contribution in the LLP.
1.The major advantage of an LLP is that it offers a great combination for those looking
3. An LLP is not in any way controlled or IllustrationÂŠ Chaitanya Surpur
affected by the Indian Partnership Act. In fact, an LLP is registered and the legal process is controlled by the Registrar of Companies (RoC). The only exception is that as regards taxation, an LLP is treated like a partnership firm. 4. An existing partnership firm, company or unlisted public company can be converted into an LLP by following the procedure laid down under the Act.
CONCEPT OF A DESIGNATED PARTNER From the description above, it is clear that the partners in a LLP have their liability limited to the extent of their contribution to the venture. However, it was felt that there should be two special partners among the partners in the LLP for two reasons: To be responsible for all actions and things which the LLP has to do to comply with the provisions of this Act. There was a need for a partner who would be liable for all penalties imposed for the contravention of the provisions of the Act. The partner who performs this function is called the Designated Partner of the LLP. In order to become a Designated Partner, an individual has to give his consent to the LLP and has to obtain a DPIN (Designated Partner Identification Number). The LLP Act requires that at least two designated partners be present in every LLP. Additionally, these two designated partners have to be individuals (as opposed to a company) and at least one of the designated partners has to be a resident of India. Section 10 of the Limited Liability Partnership Act states that any LLP not appointing two designated partners can be punished, along with every partner in the firm, with a fine of no less than Rs.2,000 and going up to Rs.5 lakh. If at any given point there cannot be two designated partners for any reason or if no Designated Partner is appointed when a vacancy arises, every partner becomes a Designated Partner.
MAJOR DUTIES OF A DESIGNATED PARTNER To notify any changes in the LLP to the RoC
To produce for inspection all the books and papers of the LLP To sign all the e-forms filed with RoC
HOW DO I REGISTER MY LLP? The Ministry of Corporate Affairs has made the process of registering an LLP mostly possible online. A step-by-step process is available on the LLP portal of the Government of India (llp.gov.in).
DIGITAL SIGNATURE CERTIFICATE Partner/Designated Partners, whose signatures are to be affixed on the e-forms, have to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorized certifying agency.
RESERVATION OF NAME Log on to the LLP portal to follow the steps to reserve a name for your LLP. Check status of your application by logging on the portal.
INCORPORATION OF LLP Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement.’ Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP. On submission of complete documents the Registrar, after satisfying himself about compliance with relevant provisions of the LLP Act, will register the LLP within a maximum of 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16.
FILING OF LLP AGREEMENT AND PARTNERS’ DETAILS Form 3 (information with regard to LLP agreement and changes, if any made therein) and Form 4 (Notice of Appointment of Partner/ Designate Partner, his consent etc.) may be filed with the prescribed fee simultaneously at the time of filing Form 2 or within 30 days of the date of incorporation or within 30 days of such subsequent changes. HRISHIKESH DATAR is the CEO of vakilsearch.com.
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how to [â€Ś do just about anything]
Insure Your etc, whatever runs your business) 4. Materials (in stock and transit) 5. Intellectual property 6. Trust: Promises made by your employees can be trusted and that is why other entities deal with you.
Insurance is essentially hedging your risk against chance events, largely outside your control. By Yashish Dahiya
you have insurance, other people will bear the cost of unforeseen and detrimental chance events which may pose a threat to your business. Otherwise, you will have to bear the cost of such chance events. So, how do you decide when to take insurance and when to self insure? Let me start with a few examples to make a salient point.
SELF INSURANCE VS INSURANCE Say, your income is Rs.15 lakh a year. You are unwell, end up staying in hospital, and the cost is Rs.20,000. Should you have insured against such an event? Well, you can easily handle the Rs.20,000 burden. Now, say you are a gardener with a family and monthly income of Rs.10,000. Now, if you are hospitalized and cough up Rs.20,000, it will not be so easy to pay up this amount. You better have insurance, else it will damage your life. The point is, insurance should be taken for eventualities that you may find hard to handle. Now, look around and see which these risks are, or bring in a professional broker to assess your business to check the risks. For impacts you think are big and beyond your means, get insured. Let's look at a typical business and check its assets as well as risks.
ASSETS: THINGS THAT ARE OF VALUE 1. Key employees 2. Major contracts 3. Major equipment IllustrationÂŠ Chaitanya Surpur
RISKS: WHAT CAN GO WRONG 1. Key employees (die, leave). Try key man insurance. This should only be taken for someone who is irreplaceable. 2. Major contracts (lost to competition, you are unable to deliver owing to reasons beyond control etc). There are insurance options for multiple eventualities here. 3. Equipment (breaks down, catches fire, is stolen etc). Basic fire, theft or marine insurance if in transit, also applies to next point. 4. Materials (fire, theft, accident in transit) 5. Intellectual property is lost, stolen etc 6. Your employees make a promise, which now costs you money to honor, or employees make a mistake. Try professional indemnity insurance. Remember to get a professional to assess your business and report all risks he can spot. With common sense review it, and discuss additions. Assess likely impact and classify it into four categories: Likely-unlikely, and high impact-low impact. See what you can do by way of precaution. For example, do not keep key equipment next to an acid tank. Insure high impact ones, especially the less-likely ones, as this can happen. In case of the low impact ones, try self-insurance. YASHISH DAHIYA is CEO, Policybazaar.com.