Thursday, March 4, 2010

Planning your business

Next Step - Planning your business

I followed your first post and got a hint of what I want to do. Cool! What next?

Now, the next questions in your mind will be:

1)      Do I need to be a management graduate to start off?
95% of successful entrepreneurs did not have a management degree when they started off. All they had was a vision, passion to chase the vision and the thrust to achieve.

2)      How do I go about registering a company?
You wouldn’t always want to have a Pvt Ltd company to start off with. Go to any bank, open a current account and that’s it! Your company is registered. Once you start earning more than Rs 12 lacs annually, opt in for a sales registration number and your done. Once business starts growing in folds, you may go ahead and register it as a Pvt Ltd company.

3)      How much will it take to register a company *?
Starting a current account is free. It differs from bank to bank however average balance you would need to maintain is Rs10000 quarterly.
A sales tax registration number will cost you approx Rs 1000 (including tea and water charges).
Registering a Pvt Ltd company would be approximately Rs 50000 along with additional fees of a CA and nomination of board of directors.

*But before you register a company read point no 6 carefully and see how much money would you be making and by when.

4)      How do I arrange for finances?
By now, I am under the impression that you are already employed and want to start off. Hold back, save the amount required and then register your business unit. If you opt in for a current account, I think it is pretty achievable to save approx Rs 3000 a month as a locked balance.

5)      How do I arrange for resources?
Thumb rule of business – Don’t invest your own money beyond your capacity. Do everything by yourself or leverage your friend or colleague circle. The second option is better since let the experts do their bit. Once you start earning money from the company, and then invest those same funds and think of having your own employees.

6)      When will I start making profits?
Tricky one! Okay, I’ll try to make this as simple as possible. Make a business case (Complicated).
What is a business case? A case is a forecast of your expenses and projection of your earnings. It does not need to be in a predefined format if you are using it for your own reference.

How do I make one? Simple! Use an excel sheet. Make two sheets – Cost and Revenue. Jot down all your items that will be a potential expense for you, for example, stationary, mobile bills, transportation, equipments, manpower, etc.
In the next sheet, jot down all the possible ways of income i.e. streams from where you are planning to earn revenue for example advertising, product sales, service sales, etc.

While entering this data, make sure you have columns or rows on a Monthly basis i.e. all costs will be shown on a monthly basis and all revenue that you expect can be shown on monthly basis.

So your cost sheet would look something like:

Sr No
Item
Month





Jan
Feb
Mar
Total
1
Equipment
20000
0
0

2
Mobile Bill
500
750
1000

3
Misc Expences
1000
1000
1000


Total
21500
1750
2000
25250

And your revenue sheet may look something like:

Sr No
Item
Month





Jan
Feb
Mar
Total
1
Advertising
500
750
1000

2
Sales
100
200
500

3
-
-
-
-


Total
600
950
1500
3050

The above is just a representation of a typical internal reference sheet. Here you see in the first month you would end up investing Rs 21500 and earn Rs 600, this is because it covers your capital expense of equipment. Moving forward  if you see in the second month you are investing Rs 1750 and earning 950 so you are almost spending double for what you are earning. In the third month you are earning 75% of what you are spending.

Go on and make this sheet and finally you will realize how much time would it take to make the money enough to cover your costs and then by when would you be playing in profits.

Caution – Make this as a very low lying plan as you know that you would be the main person driving it!

7)      Can I give up my job today?
If you are totally fed up, YES. If not, wait atleast till you earn your first buck. Again, how well you manage your time is up to you, but if you have your business case in place, it will be a good driving factor.

8)      Will I be able to make more money than my salary?
YES! But not overnight. Any business takes substantial amount of time, effort and perseverance for breaking your baby out of a cost center.

Feel free to post your comments or email me your questions. I would be happy to help you with all your queries.