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The Budding Entrepreneur’s Handbook A basic guide on starting up

Some important aspects of starting up, meant for aspiring entrepreneurs who have little or no knowledge regarding how to startup.

Published by Entrepreneurship Cell, IIT Kharagpur


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A Foreword Entrepreneurs are risk takers, willing to roll the dice with their money or reputation on the line in support of an idea or enterprise. They willingly assume responsibility for the success or failure of a venture and are answerable for all its facets. They are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage. But, wait! One who fits the above description is one who can become an entrepreneur, but is not quite an entrepreneur. There are questions still plaguing his mind, constant doubts nagging his waking thoughts. This article, manuscript rather, hopes to answer some of these questions which anyone will face before starting up on their own endeavor. By the time you finish with this write-up, you will hopefully be able to confidently dive head on into an entrepreneurial venture. This article has been compiled by a bunch of not-so-jobless students of IIT Kharagpur, and they claim no rights to the originality of this work. The points put forth in this compilation have been obtained from various sources elsewhere, and none of the authors deny the same, as none of them have the resources do their own studies and come up with a thesis. Their contribution lies in compiling pieces of articles from various sources and delivering them in a convenient and comprehensive form. So then, read on and dream on!

“An Entrepreneur tends to bite off a little more than he can chew, hoping he’ll quickly learn how to chew it� -Roy Ash, Cofounder, Litton Industries

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The Product Your product defines your customers’ perception of your company. Hence, as far as the customer’s end is concerned, the product delivered by a company is the most important aspect of the company’s success.

WHAT COULD BE YOUR PRODUCT? Before you start a company, you need to have something to sell. It can be any product. You must be convinced of its utility and potential before you invest money in it. If your idea or product is a totally new one, you must patent it. "I never perfected an invention that I did not think about in terms of the service it might give others... I find out what the world needs, then I proceed to invent." - Thomas Edison

This quite accurately describes what should be the qualities of a good product. Most importantly, it should be marketable and there should be a demand, existing or created, for it. The product must be innovative and foresighted enough that no other new technology may replace it in a short time. Here is where a Market Study comes in.

MARKET STUDY To design an ideal product for the brand new company you have in mind, it is necessary to conduct a market study to know if your product is that which is suitable for your company in various respects. A market research study must be conducted to ascertain the following points: Research the market to see whether there will be a constant demand for your product Find out which target group of people you are going to sell your product to. See the opportunities and competition in the market. Sell your product with the needs of the market in mind. Thus, you can harp on the strengths of your product. Check whether the product will be profitable. You cannot afford to make a product which does not break even.

PROTECTION OF YOUR INTELLECTUAL PROPERTY RIGHTS Here are some of the common ways of procuring ownership rights to your ideas, products and services.

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Trademarks: A trademark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities. It confers the proprietor an exclusive right to use the goods/services to which the mark is registered. Copyright: Copyright is a form of intellectual property that gives the author of an original work exclusive right for a certain time period in relation to that work, including its publication, distribution and adaptation, after which time the work is said to enter the public domain. One registered, entries made in the register of copyright serves as prima facie evidence in a court of law with reference to any dispute relating to ownership of copyright. Patents: A patent is a set of exclusive rights granted by the national government to an inventor for a limited period of time in exchange for a public disclosure of an invention. Patents, unlike copyrights and trademarks, entail only a civil remedy of injunction, damages, seizure and forfeiture of infringing material upon an act of infringement.

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Financing and Managing Your Company You can approach any bank to finance your enterprise at a competitive rate of interest. Also, the Government of India has many schemes involving loans and grants for small-scale industries. Most importantly, you must obtain as much finance as possible preferably for the long-term period of say 3 years.

FINANCE Finance is the science of funds management. The general areas of finance are business finance, personal finance, and public finance. Finance includes saving money and often includes lending money. The field of finance deals with the concepts of time, money and risk and how they are interrelated. It also deals with how money is spent and budgeted.

FINANCING YOUR START-UP Once an idea is conceptualized the biggest hurdle an entrepreneur faces is getting the capital for it. Unless you have an Ambani, Mallya or Tata in your surname, it is very unlikely that you will have enough money for your venture. But there is no reason to worry for the first- generation entrepreneur. Various sources of investment are available for start-ups. Often entrepreneurs chase prospective investors who give them short- term gains but fail to think of its long-term impact. Over time they assume greater control over the management, major decisions taken and business plans. Before deciding on a source of investment, the Business Plan must be thoroughly studied. The concepts and organization must be evaluated as an opportunity. The strengths and weaknesses will define potential capital sources. Remember, capital required is always more than that is thought. As the company grows the cash needs also increases. Never risk starving the company of cash - this has destroyed many companies. The finance options available are: If enough capital is available from personal savings, there is not much to worry. Even other-wise, home-equity loans can be availed. Even credit cards can be used - This involves a lot of caution because revenues won't start flowing immediately and you don't want to be caught in debt. 'Google' founders Larry Page and Sergey Brin relied heavily on credit cards for the first two years. Look to friends and family for cash. These transactions are informal and there is usually a long period of repayment. To be on the safer side, make them sign a contractual obligation to prevent any misunderstandings in future. For most start-ups getting a bank loan is impossible. They give loans to start-ups only after at least two years of experience. Moreover, a tangible asset is required to be put as collateral for the loan. This rule is relaxed for manufacturing companies and heavy equipment. Grants are a wonderful source of funding for Tech-based start-ups. Grants may be privately funded or by the government. There is high competition involved in getting grants. Once you receive a grant, other investors may get interested in you and provide additional funds. Once the start-up has made inroads in the market, have a management team on board, it can approach 'Angel investors' - High net individuals willing to invest. They also provide their

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expertise in business and links to important contacts. However, they usually focus more on later-stage companies. Venture capitalists look for companies to invest in and take in a share of management and stocks. It is very rare to get funding at grass-root level. They get interested once your start-up develops a good track record and promises good returns. But this comes at a cost of giving up control over major decisions and products. An IPO may be considered after a few years of investment. Customer is king. After the entire product is made for them they may also be ready to invest in the product to customize it to their needs. You may also convince suppliers to hold your products provided their payments are cleared on time.

ŠForbes

Once you have managed your finances, have belief in your vision, stand by it and most important of all have patience.

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Business Plan WHAT IS A BUSINESS PLAN? Business Plan is a presentation of the vision of the entrepreneur, his ideas, and his strategies to make his venture successful. It includes background information of the management team, financial goals, and tax exemptions - anything that makes the investor trust in you. Do not exaggerate in your Business Plan; always under commit and over deliver. Using sample business plans and their structure, along with studying as many business plan examples as you can, will provide you with the necessary framework to consider your business from every possible angle. Not only will it highlight the areas you haven't fully thought through, but it will also provide you with a good idea of what makes a good business plan, and what doesn't.

IMPORTANCE OF A BUSINESS PLAN The importance of your business plan as a motivational factor in running or starting your business cannot be underestimated. Your business plan should always accompany requests for Small Business Loans, and lenders or any kind of angel investor will simply refuse to consider your business proposal without one. Lenders and investors want to see your plan with the aim of satisfying key questions before they make their decision to grant funding or not. Once you’ve commenced trading your small business plan will act as a steak in the ground, and help you measure where you expected to be against where you actually are. It will help you take corrective action as necessary.

WHAT DOES A BUSINESS PLAN CONTAIN? All plans should include at least the elements listed below, and perhaps additional sections depending on the type of industry. Executive Summary Company Background Products or Service Overview Unique Selling Proposition and competitive advantages The Marketplace Operations Leadership and management profiles including professional competencies Professional Support Risks and Threats assessment Financial forecasts including key assumptions

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Relevant appendices Business Plans are, simply put, decision-making tools. The content should be based on the goals keeping in mind the audience. It should help in deciding whether the plan is feasible or not.

WHERE IS A BUSINESS PLAN NEEDED? Business Plans can be presented in many places. For applying for a bank loan, it should build a convincing case of the organization's ability to repay the loan. The organization should particularly have no defaults. For seeking out a venture capitalist, it should focus more on primary investment, feasibility and the exit valuation. If equity funding is required, it should explain the current resources available, upcoming growth opportunities and sustainable competitive advantage of the product which should lead to high exit valuation. Preparation of a Business Plan requires expertise from various disciplines like - Finance, HR Management, Intellectual Property Management, Supply Chain Management, Operations and Marketing.

PRESENTATION OF A BUSINESS PLAN Presentation of the Business Plan is the most crucial step. It usually consists of an oral presentation describing financial trends, decision- making benchmarks and possible demonstration of product. Its motive is to kindle the investors' interest in the plan and make him go through the detailed written plan. Of course, customer references always help. Nobody trusts the PowerPoint presentation! The written plan should include - an executive summary, industry background, competitive analysis, market analysis, operations plan and financial plans. Just make sure only what is required is revealed and not anything more. A separate Business Plan may be made for the external stockholders. At the management level an Internal Operations Plan must be submitted before the management.

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Business Loans There are nine things you must do to maximize your chances of obtaining a small business loan. To get approval for your loan application, you must be able to meet the lending criteria set down. Some organizations are more risk averse than others, and will therefore have more stringent criteria. To vastly increase your chances of a successful funding application, you will need to present the following information: The reason for the loan. The lender will be looking for something that fits within the normal range and expertise of your business. The amount may cover a number of items, so you will need to cover each. The amount required, and the repayment term of the small business loan you want. (e.g. Rs. 10,00,000 term 5 years, payable quarterly). Details of how you will repay the amount borrowed. For example, “From the increase in profits and ongoing business cash flow.” Details of security you will be able to offer to the lender. This will act as reassurance for the lender. If you’re not prepared to put up some aspect of security, then why should they? You will need to include your business plan which will serve to answer essential questions relating to management capabilities, information about the market in which you operate, and the kind of business you are etc. You will need to present quality financial information from your small business book keeping software, preferably signed off by your accountant or tax advisor. Latest Set of Management accounts. Accounts receivables (debtors) and payables (creditors) ageing reports. Principal financial statements. – Particularly required if some form of security is necessary. You must take the time to practice presenting your business loan proposal to iron out any glitches. Practice on your colleagues and family (you never know, they might be so impressed, they'll invest or lend!). It will also help if you role play the lender and come up with as many objections to accepting the deal as possible. The more time you take the better your chances will be. (But Remember don’t fall into the analysis paralysis trap!)One of the reasons why using Commercial Finance Brokers to find you a Small Business Loan is on the increase is that they are experts in packaging your request and searching out a lender that is interested in your kind of business. They will save you the time and hassle of pulling all the information above together, leaving you to get on with running your business.

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Building Credit The first golden rule to establishing business credit lines is to ask for them. If you don’t ask, no one is going to come over and offer. There are two main sources of business credit. That granted by a bank or other financial institution, or credit terms given by suppliers. Using a planned approach is essential if you are to successfully build business credit. It is important to have an idea of what you need to prove about your business, if you ever want to consider a business loan, or negotiate credit terms, or extend existing credit terms with suppliers. It is quite common when you start a business to have to pay for things before you collect monies in. This delay requires funding from somewhere, and normally, either a bank facility or some form of supplier credit will be needed to ease the strain on the owners own capital investment. Let’s look at how credit worthiness is determined. All lenders are concerned with the granting of and repayment of small business loans in accordance with their terms and conditions. They use what is commonly called the five “C’s” of credit – Cash flow, Capital, Collateral, Conditions, and Character.

THE 5 C’S OF CREDIT Business Cash Flow or Capacity to repay is always the primary factor. The lender needs to know how your business will generate the repayment. Establishing business credit needs proof of affordability, and you will often be required to provide detailed cash flow figures from the business. Your cash flow ultimately determines the timing and the probability of successful repayment of any loan or small business line of credit. A review of your past credit payment history both personal and commercial, will also be undertaken. Consider using business secured credit cards as an interim measure, whilst you build your proof of ability to repay. Capital is the money you have personally invested in your business and is an indication of how much you have at risk should the business fail. Lenders will expect you to have contributed from your own assets and to have undertaken personal financial risk to establish the business, before they will commit to providing small business loans or any other kind of business funding. In the eyes of the lender, if you have a significant personal investment in the business you are more likely to do everything in your power to make the business successful. Collateral is an additional form of security or guarantee that you will be asked to provide the lender. For a start up business, the lender may require that you pledge some of your personal assets whose titles would be handed over to the lender if you failed to repay the small business loan. As an existing small business owner you may be asked to pledge business assets such as equipment, buildings, inventory, or accounts receivable. A personal guarantee could take the place of secured business assets or could even be required in addition to them before establishing business credit. A family member or friend may need to sign a guarantee document promising to repay the loan if you can't. Conditions focus on the intended purpose of the loan and how that relates to the general business climate. Will the money be used for working capital, additional equipment, or inventory? The lender uses its’ network of information sources to determine the relative stability of the environment in which your business will operate. It often has greater insight into Entrepreneurship Cell, IIT Kharagpur

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local and regional issues that could affect your industry. To be successful in establishing business credit you’ll need to persuade a lender of the merits of a small business loan. Character is also a critical factor in establishing business credit. Character is how you present yourself to the lender along with your credentials, your educational background and experience in your industry. The lender will form a subjective opinion as to whether or not you are not only sufficiently trustworthy, but professionally competent enough to repay the small business loan and generate a return on funds invested in your company. Character plays a large role in negotiating credit terms with suppliers. Before granting you terms, you will have to fill out a business credit application, and give trade references from suppliers who will vouch for your repayment record. At first you will be granted maybe only a small limit (low risk to the supplier) on short payment terms. Pay this on time; every time and after a number of months you’ll be in a position to negotiate a larger limit or longer terms. As a small business owner be conscious of the fact that establishing business credit is not something that needs to be done once, but it is a part of an ongoing process, which will contribute significantly towards any business success. A history of steadily improving business cash flow as a result of effective business cash controls, retained capital in the balance sheet from making profits, and a clean payment history to your trade suppliers will rapidly build your creditworthiness.

Business Grants Everyone likes the idea of small business grants. Free money for your business has an everlasting appeal. The reality of obtaining a business grant is more like the quest for the Holy Grail, and often fraught with the perils of bureaucracy along the way. Be under no illusion that it will take time and effort to search out and apply for any kind of grant. Grants are generally awarded by local, regional or national government. Sometimes (but much more rarely), they come from industry bodies, foundations, trusts and educational establishments. Finding a small business grant is difficult because schemes normally have a limited amount of funding distributable within a definite time frame, they are normally targeted at local areas, with specific aims (e.g. urban regeneration) and change over time to reflect different objectives. Because they are aimed at different and ever changing target groups the amount of information available about them becomes layered and confusing. Furthermore, it is unlikely that you will be allowed to use any granted funds for any purpose you wish, they nearly always are constructed with restrictive criteria. Perhaps the most common ones are: Encouraging investment in areas of poor economic standing, including assistance for relocation, creation of jobs etc. Agricultural, farming or fisheries assistance. Aims of increasing overseas exports Entrepreneurship Cell, IIT Kharagpur

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Investment in new technologies or ‘state of the art’ plant and machinery Research and Development Besides the restrictive end use, there will be qualifying criteria which will depend upon the location of your business, its legal form, and the size of it. Almost always you will be expected to produce your business plan with any application and contribute a “matching element” of funding.

Controlling Cash Cash is King. Without money you can't run your enterprise leave alone making profit out it. It is extremely important to note how money is being invested and how it is being earned. As a business owner you’ll have a pretty good idea of the business cash flow in your business, maybe to the point where you don’t feel it’s necessary to put anything down on paper. Its easy with the distractions of day to day business to overlook, or simply forget essential cash related aspects, and it is important to recognize you need good cash flow analysis on a continual basis, as this is the key to saving money on interest and unnecessary expenses, and your grip of the situation will determine your long term business survival.

“It has taken me twenty-five years to become an overnight wonder” -N.R. Narayana Murthy, Founder, Infosys

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Marketing Strategy Let us have a sneak-peek into how a finished product is marketed and presented to the consumers. Marketing is the art of presenting your idea/product in such a way that it sells!

PRE-REQUISITES FOR MARKETING Before you can embark on a marketing strategy for your product, you must have the following very clearly in mind: A fully developed and if possible, patented product to market An unbiased view about the strengths and weaknesses of your products Information about the competitors of your product and the advantages of your product versus the rivals’. The target group to which you are going to market the product. For example, if you were pitching a new video game console game to the public, your consumer market would probably be the adult male Video Game market (depending on the type of game). Likewise, a massage chair would probably not appeal to younger children, so you would market your product to an older generation. Conduct a feasibility study or research the market. This is essential to know what your target customers

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want. Product marketing in a business addresses five important strategic questions: What products will be offered (i.e., the breadth and depth of the product line)? Who will be the target customers (i.e., the boundaries of segments to be served)? How will the products reach those (i.e., the distribution channel)? How much the products should be priced at? How to introduce the products (i.e., the way to promote the products)?

the

market

MARKETING FOR START-UPS Start-ups usually have low budgets so marketing strategies must be very clear. We must know to which group we aim to sell the products to so that no resources are wasted promoting the product to people who are not going to buy the product. The following steps must be taken for proper marketing of your product/idea:

Feasibility study A market research study must be conducted to ascertain the following points: To confirm whether your product caters to your targeted consumer market. To see if the consumers have a need for the product. This is to check that there is a constant demand for what you produce. To seek improvements for the product. Data collected from the consumers will help in improving the product and in addressing consumer needs. To check whether the product will be profitable. Based on the demands of the customers and by proper pricing of the product, we can determine whether the product will make profit. If you are marketing a new product/idea which has not been heard of by consumers, you must start an awareness programme to tell people about your product and its benefits. This is very important to create awareness about your product market. A Product Market is something that is referred to when pitching a new product to the general public. The people you are trying to make your product appeal to is your consumer market.

Marketing plan This is the core of your promotion campaign. It is the message you aim to give the people about your product. Prepare a full-fledged case-study covering short-term and long-term aims along with present status of your product market. (Refer to a sample case study given at the end of this article.) The plan should be clear and well-defined. You must convey all the benefits of the product. You must press the advantage of your product over that of the competitors. The punch-line should be short and effective.

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Advertising the product After the marketing strategy has been decided, the product must be promoted through a campaign which ensures that it is presented to as large number of people as possible. Low-cost advertising can be done through various media. Let us have a look at them: Pamphlets and flyers These media offer a detailed view of your product and can either be handed out during events or can be distributed with newspapers. They are also cost-effective. Advertisements in newspapers and periodicals Publishing ads in the relevant periodicals can quickly inform your target market about the product you aim to sell. Conferences and live-demonstrations Seeing is believing! What better than to actually show the consumers the working demo of your product? Better still, invite them to ask questions and dispel their doubts. But organizing such events could be a strain on the resources. Internet Aha! Last but not the least, the net. It has now become the most powerful media for conveying your views. You can create blogs, communities, and forums and address grievances on the spot. Also, most of these can be done free of cost. Prudent use of the net can catapult a product to fame! But one must also be careful of deliberate abuse of the internet which could be done by rival brands. It must be noted that proper marketing of products can be outsourced to special marketing agencies. This trend has become very popular among start-ups today.

Listening to consumer feedback This is one of the most essential steps you have to take if you want your product to grow into a brand. Customers are the best judges of their needs. Therefore, in today’s “customer is king” era, it is best to constantly redevelop your product according to their changing needs. Here are a few tips from the start-up guru Paul Graham, the world famous programmer and essayist:

I’d like to high light 5 lessons from the article that marketers should pay attention to. All are readily transferable to any business, regardless of industry. Product Development vs. PR. Graham encourages founders to spend all their energy on product development, not on PR. In most cases, companies are expected to release a finished version of something — whether it is an iPhone app or a photo-sharing widget — before the three-month program is over. Speed to Market Graham encourages companies to release products quickly. Doing so, he says, is the best way to turn a bad idea into a good one. “As long as you pay attention to your users, you can change a bad idea,” Adapt. “A lot of great companies started with different ideas,” Graham says, noting that Steve Jobs’ first plan for Apple was to sell do-it-yourself plans for building computers. Make something people want. This is the real kicker. “You need to listen to your users, figure out what they want, and do that.” When founders are accepted into Y Combinator, they are given a gray T-shirt that says, “Make something people want.” When a company sells, the founders get a black shirt that says, “I made some thing people want.”

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Get out there and make something - start now. Too many firms are scared to move away from core business and embrace new products. The metaphor, are you making type writers, when your customers want PC’s? These five lessons should be heeded by all start-ups. It’s not capital that drives success it’s “making something people want”.

Is there something your customers want/need now? {Tick} Can you make it? {Easy} Will it work? {Who knows? Give it a crack}

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A Case-Study Here are a few case studies about start-ups and entrepreneurs, courtesy www.inc.com. Case Study #1: The Reluctant Entrepreneur The Start-up Nanda Home The Founder Gauri Nanda <http://www.inc.com/topic/Gauri+Nanda> The business proposition Part iRobot and part Kate Spade Nanda Home creates cute, clever products that are intended, in the words of its founder, to "humanize technology." The company already has one hit: Consumers have snapped up more than 9,000 units of a $50 plastic alarm clock. Set the alarm for 6 a.m. When the time comes, the clock wheels itself off your bedside table and rolls around the room, emitting R2D2-like squeaks. Dubbed Clocky, the little robot is manufactured in China and sold online and in design boutiques. The company also has a line of handbags designed to accommodate laptops. The founder, Gauri Nanda designed Clocky as a graduate student in MIT's Media Lab. The daughter of entrepreneurs – her parents recently sold their small weekly newspaper in Detroit – she aspired to become a designer at a large technology company. "I was opposed to the idea of starting a company," says Nanda. "I saw the hours my parents worked." After presenting Clocky to her class in the fall of 2004, she threw it in the back of her closet. She'd almost forgotten about it until the next spring, when several tech bloggers stumbled upon a photo of her invention online. Suddenly, Nanda was getting contacted by reporters and TV producers. Good Morning America called. She scrambled to fix the buggy prototype in time for its debut on network TV. Nanda, now 27, left MIT with a master's degree that fall and began considering her options. Licensing the clock seemed like the easiest move, but she couldn't bring herself to give up control. "I had all these ideas about how it should look and behave," she says. After finding a manufacturer on AliBaba.com, a Chinese business-to-business website, she went to Hong Kong to oversee production. The first run of 500 clocks sold out almost immediately online. No. of full-time employees None. The company outsources manufacturing, fulfillment, and some design. In addition to one part-timer, Nanda's parents have been helping her run the company. Capital raised to date $80,000 from family Market potential The market for gadgetry is large, accounting for $145 billion in the U.S. last year, a 13 percent increase from 2005, according to the Consumer Electronics Association. The group estimates that the average American spends $1,200 on electronics annually. Meanwhile, consumers seem to be ncreasingly willing to pay a premium for design – witness the proliferation of iPods, Razr phones, and Design Within Reach stores.

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Revenue projections 2007: $1 million 2008: $3 million 2009: $4 million Cash-flow picture The company broke even in February, after only two months of sales, and Nanda expects to have cash flow of $650,000 this year. In 2008 she's projecting $2.1 million in cash flow and by 2009 $3 million. Competition Knockoffs are inevitable. Plus there are similar products, such as the Blowfly Alarm Clock, an invention that shoots a ball into the air when it's time to wake up. Fashionable laptop bags exist, but no company yet dominates the market. Seattle-based LaLa laptop offers a line of laptop handbags starting at $150. Nanda's bags cost $58. Growth strategy Right now, Nanda is trying to expand retail distribution. She's talking to Brookstone and Target, and hopes to sell Clocky through these and other retailers by the end of the year. With the laptop bags, Nanda is focusing on small design stores. "The bag is about building a brand," she says that is, she wants to communicate to consumers that she's more than just a funny alarm clock. To that end, she's hoping to add more colors and styles, including a men's bag. Challenges Is it a product, or is it a company? Nanda says she hopes to have a number of new products launched by 2009, but she's not saying what they will be. New versions of her current offerings are in the works, but with no full-time designers and no sales force it's impossible for Nanda to guarantee that she'll be able to duplicate Clocky's success. Returns could be another challenge. So far, only a few defective clocks have been returned, but a run of shoddy product could overwhelm Nanda's paltry customer service operation. Finally, the ability of Nanda to juggle all aspects of running the company is reaching its limits. "You can pretty much outsource anything today," she says. "But I'm getting to the point where I'm micromanaging everything." She plans to hire a sales and marketing manager in the near future. Opportunities Don't underestimate the power of a single hit product. Five years after the release of the Roomba, iRobot's vacuum cleaner line still accounts for 60 percent of the company's annual sales of $189 million. Meanwhile the Sharper Image has made a business milking one-hit wonders like the Razor scooter, which accounted for $48 million in sales in 2000. What You Can Learn From Nanda Home If you have to choose between paying customers and a fleshed-out business plan, choose the paying customers. Yes, you can outsource a lot. Charisma can be a powerful competitive advantage. For more such stories, refer to www.inc.com/magazine20070701 and http://www.inc.com/resources/startup/ for a guide to start-up resources.

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Company Management Once the market study has concluded and all doubts about your products have been dispelled, you must set up your company. Carefully chalk out a finance plan in accordance with your market study. Do not underestimate the costs of any asset required like office-space, employees, computers, etc. Hire people only according to your need. Hiring too many people leads to high running costs. Similarly, be prudent while buying infrastructure, especially office space. You do not want to pay a high proportion of your limited funds for a space you do not use. Have contingency (or back-up plans) ready in case of probable disasters like market collapse, withdrawal of bank funding, worker strikes and so on. Always have a plan B ready! Manage your entire company; do not spend too much time on a particular section. Neglecting any aspect of your company like accounts, administration, sales or marketing can bring down your company. Be perseverant. Do not give up because of minor setbacks. Have a clear long term aim. You should know how long you are going to run the enterprise, be focused on the product you are developing, instead of trying to half-heartedly trying to sell too many products. When you are starting up, it is best to focus on a single product as the flagship brand of your company.

MANAGEMENT AND ADMINISTRATION There is a saying in Sanskrit, which goes, "a person without proper refinement is like a cow with neither tail nor horns". Same could be said of a business without a proper management. An effective enterprise is one which is managed properly. Proper administration is necessary in order to exploit the full potential of any business.

Choosing the Right Partners The first step lies in choosing the right business partner. Many a business venture has failed because of a misunderstanding among the founding partners. The following may be helpful in choosing the right business partner: You should be able to communicate freely with your partner. A good business partner should have skills that support and compliment your own. The person should be financially sound and stable. He/ She should not already have any financial problems. The person must be someone in whom you trust and can confine in. You must be able to respect him/ her, and agree with their ideas, as it is essential for the future of the business.

Insurance It is vital to have the business insured, in order to counter unforeseen circumstances, which may result in heavy losses. There are risks that, while they may never occur, are so destructive that it

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makes sense to plan ahead and manage the risk. All types of businesses insurance cover one or more of property, Liability, People or Income. The various types of insurance required by a company are: Property insurance It protects the property, structure, vehicles, etc used in the business. Liability insurance It protects against being held liable for an error or injury, which may be caused to the public. Workers' insurance It protects the employees of the company, who are the company's greatest asset. It includes workers compensation policies, health insurance and life insurance policies. Income insurance It is vital to protect the income of the company, in order to be able to redress losses made in case of a severe damage. It is necessary to choose the right kind of professional to insure your business. You may choose an agent or a broker. The credentials and certificates of the insurer should be thoroughly checked, are huge amounts of money are at stake. They have to be verified against the records available in the government agencies.

Accounting and Record-Keeping Proper maintenance of accounts is vital in order to know the health of your business. It helps you know if your business is being run properly. There are various statements, which have to be recorded, in order to indicate the health of your business. The following are especially important for start-ups and newly established companies: Profit and loss statement As the name indicates, it shows the profit or loss made by your company It does not say about all that needs to be known. It only serves as an overall indicator, and not as an actual indicator of the status of your company. It is possible that, even though your business shows a small profit, you do not actually have the cash to meet your requirements. This occurs when you are not actually paid for services you have rendered to a client. This is where a cash flow statement comes in handy. Cash flow statement It shows the present status of physical cash in your company, i.e., the amount of money actually in your hands at the end of a term. This is very important as start-up companies have very less cash at hand at a given time. The aim of a cash flow statement should be to assist users: a) to assess the company's ability to generate positive cash flows in the future b) to assess its ability to meet its obligations to service loans, pay dividends, etc. c) to assess the reasons for differences between reported and related cash flows d) to assess the effect on its finances of major transactions in the year. The statement therefore shows changes in cash and cash equivalents rather than working capital. Budget statements This keeps a record of your budget for a time period be it a week, year or month. This can help avoid bad financial crunches and unforeseen cash shortfalls. Purchase records Keeps track of purchases you have made on a daily basis. This will help cut down on unnecessary purchase, resulting in lesser expenditures. Customersâ&#x20AC;&#x2122; list Keep a list of all of the customers whom you have dealt with, however briefly. The list should include all details of the customers, so that the next time they approach you for

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your services, they have as little inconvenience as possible. Thus, they will have more pleasure in dealing with you in the future.

Upkeep of Labour Having a good workforce is more important than having a large workforce. This is because, fewer number of dedicated and sufficiently motivated employees will ensure higher productivity than a large number of non-working employees. There are several laws which govern the wages, working hours and statutory holidays of the employees of a company, which vary from one country to another. These laws have implemented properly, in order to avoid problems with the employeesâ&#x20AC;&#x2122; unions and also the regulatory bodies. They have to be adequately insured for health and accident to keep them in a proper state of physical and mental health to ensure proper productivity. Strict rules and regulations have to be drawn up regarding termination of service and lay-offs, on account of various reasons like unsatisfactory performance, etc. in order to weed out the unwanted elements in the workforce, which may vary depending on the type of company. Employee Motivation The entire company is one big family. Give every employee their due respect if you want them to hang on and cooperate with you. However, you must still be able to have the authority and ability to take your own decisions. It is after all, your company! Look out for training programs offered by your infrastructure- and service- providers in order to keep those who are using them updated with the latest developments and changes. Apart from this there might be training programs organized by various private companies to improve other skills such as teamwork, customer relations, soft-skills etc. There are also certain specialized employee motivation programs. Incentives over and above the basic salary they are paid, for extra work they put in, or other reasons will ensure that the cream of the employees stay with the company, rather than look for other prospects. Give them due credit. For example, if your company bagged a major contract or shown a sizable profit and it is due to the work of one employee, it would be good if you can show him/her some appreciation monetary or otherwise. Give them a list of tasks to be finished every day and in a month. This will ensure timely completion of work.

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Customer Relations If you want your company to grow into a good brand, it is necessary to have the right customers. To have the right customers, it is necessary to have good relations with all your existing customers. To keep customers satisfied is the most important task of any company aspiring to be successful. Some points, which, if followed, can help in having a good relationship with your customers, follow.

The Customer is your God. They are the ones who feed you, clothe you and ensure a roof over your head, and that of your employees as well. So, treat them with proper respect. Never give them the impression that you are better than them (even if you actually are!) Never argue with the customer. It is a bad idea to argue with a customer, as it may leave an indelible mark in their minds, and the instance might never leave their memory. They might be hesitant dealing with you in the future. It is worse if you win the argument, as it may affect their ego and again, make them the aforesaid hesitant specimens. The customer is always right, even though you win all arguments. As said before, never argue. However, if an argument does occur, remember this. Never tell the customer that he/she is wrong agreeing with them completely, at the same time maintaining your end of the argument. After all, the customer has to give up sometime! Offer Discounts. Even if it is small, it may attract new customers and ensure that old ones stay on too. Keep a complete record of all your previous customers so that you may feel easier dealing with them in future and also save them hassles like paper-work etc. this will please the customers to a very high extent.

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Sources As we admitted before, we have used various sources for the compilation of this article. Here, we list those sources we have used, and thank them for providing the world with such a wonderful database. www.google.com www.wikipedia.com www.smallbusinessfinancetips.com www.start-upmarketing.com www.inc.com www.cgd.com www.about.com

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The Budding Entrepreneur's Handbook  

A publication by Entrepreneurship Cell, IIT Kharagpur, aimed at helping aspiring entrepreneurs with little or no knowledge related to starti...

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