I have a great start-up idea. What next?
-Mohin Shah, Peddar Road
Check your idea amongst your close community. Do some informal dipstick study amongst your friends first and then amongst some potential customers for your service. Are they equally interested about it?
The second step is secondary research. Look onto public sources of information – are there any other player offering similar or strikingly similar concept? What is their market share? How do they approach their consumers and how, what you intend to do, will bring more value on the table? This will then lead you to get some fair estimates of the market potential you plan to leverage or market to.
The third and most important step will be making the business plan – which in itself is an art as well a science. Briefly, it is a document of what exactly you intend to do, how will you do it, what resources would you require to achieve what you want and finally, how will the business be financially sustainable and profitable.
These are the basic foundations, on basis of which will your further implementation and funding strategies be decided.
Besides family and friends, what are the other sources of funding for my start-up?
Aakash
It all depends on the stage your business is at and funding quantum you require.
Assuming that you are just going to take off from the ground – obviously it helps to have your own sources of funding.
But then, there are experts who recommend against this and want you to approach seed/angel investors – as they will not only fund you, but will also help you to correct and supervise the business implementation and bring the critical network of people to sustain and grow your venture.
In India, though limited, but today you have several avenues present to help you and guide you on your entrepreneurial journey – including incubators, seed-funds, training institutes and platforms such as Grow VC India – where you can access all of these in one go.
How should my business plan be structured like?
-Varuna
There are as many possible templates of business plans as there are business ideas – and even there – you have to adapt the template depending on which you are presenting the plan to – basis what he could be interested in.
But still largely speaking, the basis constituents of a business plan are:
- Summary : which should clearly highlight what makes your concept unique; the defined market that exists; your resources and team strength which will enable you to carry it; the financial summary and what investors/team members can gain from it
- Market details : How are you different from existing players, if any and how your concept will address a latent need
- Your Core Idea : This will include opportunity analysis and Strengths-Weaknesses-Opportunities-Threats analysis
- Team: A mediocre team with a good idea is not as good as a great team with a mediocre idea. This talks about what competencies your team members bring on board
- Marketing Plan : The pricing, promotion, distribution and basic product offerings
- Financial Analysis : This calls for number crunching – your projections, expense analysis; cost of capital being brought in; key ratios and rate of return on invested capital
The above is extremely basic listing of a business plan – as it actually is an elaborate exercise which defines your direction for the years to come.
Can I start my venture part-time?
-Nikhil
Sure – as long as you can work in early morning hours and burn midnight oil everyday for the rest of your life and as long as you can work all your weekends… or if the business you are thinking of only involves your personal engagement (like being a teacher, for example) and you do not intend to ever take it beyond that.
A business, unfortunately, cannot be treated like a hobby. You cannot swim if you decide not to come down from the safe boat you are sailing in.
An expert once said – ‘Salary is like your fixed dose of opium’.
So, if you really want to make it big, really want to prove yourself and really turn from being an employee to being an employer – there is no other way but the hard way – needing you to toil and give it all that you have – and still not give up.
5. I have been trying to reach lot of fund houses to invest in my business – but all of them seem to be procrastinating in taking any decision and I have been just making rounds with them for so many past months. Where am I going wrong?
-Ankit
Investing in start-up is not an easy call and the ratio of success in raising capital is perhaps 1 in every 40 start-ups; at least in India so far.
But this should not dissuade you. Just keep the following in mind:
- Are you sure that you are approaching the right kind of funds? Do those guys make your level of investments or invest in your kind of domains. Remember, very few fund managers would clearly reject a deal – as they always want to hold onto them till the very last moment. So, chose your targets very well and do not pitch to all-&-sundry.
- Usually, if any fund is taking more than 3-4 months (yes, it normally takes 6-7 months for any deal to close) to give any clear answer, chances are that they will not be seriously interested. But still, do not close the doors – work on the feedback that you must have received from them so far, keep in the loop – but do not spend too much time and energies to follow up now.
- Ask the right questions. So, after first few rounds of presentation and revised presentation – do not shy away from asking what more will the idea now need to finally start talking term sheets with you. If you still get a non-committal response, take the cue and stay away from active follow-up.
- Are you asking for too much? Can you break your concept into benchmarks – which can be achieved by say less funding and then, on basis of same, you may seek higher funding later.
- Seek alternate funding resources: like crowd-funding, which is emerging as new funding mechanism for helping entrepreneurs.