Dreaming of being your own boss,
starting a venture? Never has the environment been more favorable
for entrepreneurship.
If there ever was a time to start a
new venture it is NOW. Never before have sectors like the internet,
software, biotechnology or even conventional areas such as retailing
and leisure provided such a myriad of business opportunities. Never
before have venture capitalists, angels and even staid business
houses been so enthusiastic about funding new ventures. Finally,
never before has even the legal and financial environment been more
favorable to entrepreneurship.
First, you need an idea, which can
be transformed into a business proposition and has a potential to
succeed. Ask yourself–Are you able to take a high level of risk,
work long hours, and be able to lower the standard of living that
you and your family have got used to? If the answer is yes, then
there are some further questions–does the business have a market
that is large and likely to grow rapidly in the future? Does it
have the ability to overcome existing or potential competition?
Will your business be able to scale up its operations to meet the
market demand without the burden of money or people?
Planning is critical
If your answer to all the questions is yes, then you have a potentially
feasible business idea. Next, you need a business plan that will
examine the feasibility of the idea. The plan will answer all the
questions that anyone assessing the viability of your project is
likely to ask. This means that it should be able to define the market
for your product or service as well as estimate the revenue or market-share
that you propose to achieve. Then, you need to assess the competition
and other market conditions and determine how you will market your
products or services. This should also address the type of promotion
you will need, the distribution structure and the people that would
be required to achieve it.
Marketing and finance
guidelines
Marketing is the most crucial element of a new business idea. In
a competitive marketplace, it is very difficult to promote a new
product or service, make the customers interested and have them
purchase it.
You should have the technology, manufacturing
or service capacity. Then, an organization to accomplish it and
broad time schedules to reach certain business goals. Finally, you
need to estimate the money that you will need to achieve all the
above. Along with this you should also be able to forecast the operating
costs that you will incur to deliver these products or services.
Based on this, what you have is a projected profit and loss, cash
flow and balance-sheet of your future business. It may be possible
for you to entirely finance the business– then you would use the
plan primarily to cross-check with people whose business judgement
you trust, to assess its viability. It would also form the program
for action when you actually take the plunge or need to employ senior
executives or induct co-founders.
Here comes the crucial question–would
you prefer to seek external funds from day one or phase your business
in such a way that you can start up with your own capital and then
seek external funding on achievement of certain goals? There are
clearly trade-offs between the two alternatives. When you start
with your own and possibly limited funds, you run the risk of being
undercapitalized to meet the business needs. On the other hand,
if with the limited money you are able to achieve a few successes,
then the external investors may be willing to put a premium on the
investment opportunity. This is a critical decision and the funding
strategy is best discussed with your financial advisors, or friends
who have some experience in the area.
Apart from venture funds, there are
some other sources like your friends, relations and business associates.
This is usually called faith money. Such people have faith in your
abilities and are willing to put up some money even though you don’t
have anything on the ground. There are also some angel investors
who would be willing to back you just on your business plan and
also be able to help you with contacts and advice, which is essential
for a new business. Depending upon the size of your business, you
may also need an external consultant who understands your business
as well as information about venture funds and angel investors who
could invest in your business.
SUSHANTO
MITRA
is the founder of Technology Capital Partners