by rashmi on February 14, 2009
in Business
EDIT: I’d like to introduce our readers to Rashmi Vaswani. Rashmi is a real-live successful entrepreneur. Rashmi founded and heads Rage Chocolatier, which produces some of the finest quality home made chocoloates at their “choclotory”. Rage has been nominated as one of the hottest startups of the year by the TATA-NEN hottest startups award. Her advice on startups and her intimate knowledge of the chocolate industry should make very engaging reading. She will be doing a series of posts for us over the next few months. Enjoy!
‘To be successful, you have to have your heart in your business, and your business in your heart’
Why do we work? Most would give you reasons on the lines of - to pay rent , to save up for that holiday, to pay credit card bills, to get my kid into a better school etc etc – all ideas with the underlying reason being money. Apart from our cricketers, or Willy Wonka, almost everyone works for the money.
Do you think that you have to choose between doing what you love and earning a living? Some might even think that putting a price tag on doing what you love might ruin the thing for you. I believe it’s quite the contrary. If you love what you do and do it well, the money will follow.
A good business for you would be to find your passions and build on the things you are passionate about to create a successful business.
Here are some things that one would have to keep in mind when you try to make what you love your business
The Bare Essentials
The essentials of any business, whether it is what you are passionate about or otherwise, would remain the same. You would need a to identify the opportunity & customer need, make a business plan, work out the financials and acquire the start up money, check what licenses and permits you would need in place, identify labour and location requirements amongst other things. These necessary preliminary requirements should be taken care of before you delve head first into what you love so that you don’t have to take a step back to get foundations into place. This should be a preliminary exercise on paper to work out if the business is a viable one.
Is Your Passion a Profitable One?
The next step after you know that the business is viable is to see if it would be profitable. Passion will only take you that far if it’s not lucrative. If you’re passionate about it, it will sustain you through recessions and bad times but not if the business proposition isn’t feasible in the least. So this would be a good time to do some research on the competition, market potential and growth prospects for your passion.
Are you making Rational Business Decisions?
A very important part of this is to be sure that your passions are not taking you too far. You shouldn’t get carried away with your passions and not be a calculative and rational business person.
If you build your passion into a business, you will never get tired of it. And even if you don’t get the initial rewards, you will still go on because after all, it is something you enjoy doing anyway regardless of whether you are earning money from it or not.
What we do for money and love are most often very different things — but if you can coalesce the two, so much the better. To make a living doing what you love, you need to invest financially and emotionally in the work you love, because together they are an unbeatable combination.
In my previous post, “Business Plan: The Core of Entrepreneurship” I wrote about how you should start making a business plan to sell any business idea that you have. And if you’re selling, somebody will have to buy it or in other words finance it.
Getting a new venture financed can prove to be quite a challenging task. However great your idea is, you have to be able to use your business plan effectively in order to convince that someone to buy your idea. I will subsequently write a post on perfecting your sales pitch etc. but for now lets just understand where your finance could potentially come from:
1. Your Own Money:
This is the easiest and the toughest option. Easiest because it’s your own money, may be what you have saved over the years, it is your choice what you want to do with it and you can have instant access to it. Toughest because this might be your hard earned money that you have saved over the years. Would you be willing to take a (calculated) risk? How strongly do you believe in your idea? How good is your business plan?
2. Informal Investors:
This is money from friends and family. Their expectations on returns on their money etc. are usually set informally or sometimes semi-formally. Personal trust would play a big part here.
3. Business Angels:
These are individuals or a group of individuals, who offer up their own capital to new ventures. They differ from ordinary investors in a way that they like to get involved in the venture; besides the finance they offer their skills/insights/experience/expertise, which can prove to be invaluable to you and your new venture. In return they will demand a share in your company.
4. Retail Banking:
They are banks that usually offer investment capital to new ventures and expanding small companies. They are cautious investors and would demand a personal commitment from you in terms of a collateral that is something pledged as a security for repayment of their investment. Minimizing their own risk will be priority for them.
5. Corporate Banking:
They are interested in bigger investment opportunities and may settle for longer-range returns. They would loan the money in a way similar to the retail banks but some equity or share in the company might be offered. Again a collateral would be required.
6. Venture Capital:
This is one of the critical sources of investment for fast-growing new ventures. Venture Capitalists (VC) usually seek big investment opportunities with potentials for a fast and high rate of return. They therefore take more risks than banks. They insist on a clear exit strategy that enables them to quickly liquidate and recover their investment. They are one of the most aggressive types of investors and can be challenging to handle.
7. Public Floating:
This is a means of raising capital by offering shares in the venture to a pool of private investors. These shares can then be bought and sold in an open stock market. There are special stock markets for smaller business and for fast-growing ventures. The most important European small company stock market is AIM (Alternative Investments Market) based in London. Public floating is a popular option but a big no no these days due to weak global sentiments and already crashed stock markets.
There are a few more options available like the government, commercial partners and internal capital networks. The seven listed above are the key ones according to me.
When the time comes for you to choose from these options then the following questions will help you:
- What is my idea?
- How much money does is require?
- What stage of development is it in?
- What are the risks it presents?
Let me tell you something, there is no such thing as a perfect idea. DO NOT get married to your idea. What I mean by that is - be flexible. Feel free to discuss your idea with your friends and family or anyone who you think will help you to improvise on it and then fine-tune it accordingly.
There are good ideas and bad ones. Similarly, there are good business plans and bad ones. Sometimes bad ideas presented well go through to the end and good ideas fail to impress. Your aim should be to get the basics right and success shall be yours.
Eureka! You’ve got this great business idea. The next iPod or whatever and it’s going to be bigger and better, you are going to be rich and famous…OK! STOP dreaming! And start working on the first thing that you’ll need to sell this ‘great idea’ - THE BUSINESS PLAN!
This one is a logical follow up to one of my previous posts, “Are you an Entrepreneur?” because a business plan is one of the most essential tools that an entrepreneur can possess. It can also prove to be one of the most challenging concepts to master. For anyone looking to become a successful entrepreneur it is crucial to understand all aspects of a business plan. My attempt is to present you a simplified series of posts that tell you all that you need to know.
Definition: a business plan is a summary of how a business owner intends to organize an entrepreneurial venture and implement activities necessary and sufficient for the venture to succeed.
Role of the business plan: Making a good business plan takes a lot of time and effort. In most cases, a business plan is created to explain and illustrate the vision you have for your business, and to persuade others to help you achieve that vision. To accomplish this, your plan will need to demonstrate on paper that you have a firm visualization of what your business is going to be. It needs to convince others that your business concept can be successful, and that you possess the expertise-alone or collectively-to assure that it will be both successful and profitable.
While it is obviously important to be able to present your business concept in a way that allows others to understand quickly and precisely what you hope to be doing, you also need to develop a business plan for your own use. The process of developing your business plan will require you to focus on exactly what you are trying to achieve. (Bellissimo Coffee Infogroup)
This brings us to the three most important questions in business:
1. Where am I now? (’I’ here is the business/idea/concept/company)
2. Where do I want to go?
3. How am I going to get there?
Add these three questions to your business Bible. Not only will they guide you to make a successful business plan but they will also become your strategic allies while planning the future of your company at any given point of time. Businesses all over the world pay millions to consultants to draw up the answers to precisely these three questions. I will soon write a post explaining these questions in more detail.
What your business plan should include:
There are no fixed things that a business plan should include because it must be shaped to reflect the needs and requirements of the venture it represents. The information included will depend on the stage of the venture in question. A plan for a new venture will obviously be more detailed than for a yearly plan for an already established business. (Wickham, P.A. (2004) Strategic Entrepreneurship. FT Prentice Hall)
Your plan should reflect the information required by the people to whom you are presenting to and it should clearly show what you want from them.
The following is the skeleton of what a business plan should include. I will post an example and a template of a business plan, which will make it easy to understand and use:
1. Mission - this is the formal mission statement that defines the business, what it is, what it is aiming to deliver, to whom, why it makes a difference and what it aspires to achieve.
2. Overview of Key Objectives:
a. Financial objectives: the turnover and profits for the period of the plan; the growth desired over the previous period.
b. Strategic objectives: achievements in the market and gains to be made in market position.
3. The Market Environment:
a. Background to the market
b. Competitors
c. Competitive conditions
d. Competitive advantage of the venture
e. Definition of product offering
f. Definition of target markets
4. Strategy:
a. Product strategy
b. Price strategy
c. Distribution strategy
d. Promotional strategy
e. Networking
5. Financial forecasts:
a. Income
b. Routine expenditure
c. Capital expenditure
d. Cash-flow
6. Activity:
a. Major projects
7. People:
a. Key players in the venture
It is the lack of understanding of the business plan that causes many people to run away from it. Remember, the business plan is a powerful tool and an asset to you. When used effectively it can help to soften the toughest of investors/venture capitalists/banks etc.
There is so much more that I can’t possibly cover in this post. Look out for much more on this…
Your idea is the seed; the business plan is everything that goes into nurturing and developing that seed
Update: Also read “Who will finance your ‘Great Idea’?”
In today’s business world the concept of ‘the entrepreneur’ is very popular and highly misunderstood. I had studied this concept at Regent’s Business School London a few years ago and would like to share my thoughts with you.
An entrepreneur, quite simply, is an individual who owns and operates their own business, assuming the responsibility, risk and rewards therein. He/she is someone always searching for change, responding to it and exploiting it as an opportunity. Entrepreneurship is risky but if it is based on ‘purposeful innovation’ it can be managed successfully.
The first thing worth knowing is that anybody can start up his/her own business. Entrepreneurs and businessmen come from all walks of life and have different backgrounds and life experiences. People are often deterred from starting up their own business, as they think that this is a path exclusively open to those who have studied business. This is not true. If you look at the background of many successful entrepreneurs, one of the things that you will notice is that this is not the case. Business skills can be learnt.
Two elements are mentioned time and again by successful entrepreneurs as being crucial for success, namely the motivation and determination to succeed in your business venture and to make things happen. Successful entrepreneurs also have a healthy dose of self-confidence and an optimistic outlook to life. They must be prepared to take risks, but these are calculated risks. They don’t plunge blindly into new situations, instead, they are thorough and prepared, and weigh up the pros and cons of a situation before making a decision.
The ability to identify opportunities, learn quickly and apply this learning effectively are skills that are also important and need to be developed if the entrepreneur wishes to be successful.
Don’t be afraid of failure – this is one of the things that I learned. We should learn from Sir Richard Branson. He is respected both nationally and internationally for his entrepreneurial flair. It is often forgotten however that as well as his large number of extremely successful business ventures, he has had a number of projects that have failed (Virgin Cola). One of Branson’s particular strengths as an entrepreneur is his ability to know when to call it a day on a particular venture when it is not working. He is not afraid of admitting his mistakes (Richard Branson failed in business five times before becoming successful).
Ask yourself the following questions:
- Am I prepared to work hard?
- Am I determined?
- Am I motivated?
- Can I carry out the work with integrity?
- Can I accept uncertainty(risk)?
- Do I have the guts?
- Are my goals clear?
- Am I creative?
- Am I a (good) leader?
There are many more questions that you can ask yourself. There are no rules or preconditions to becoming an entrepreneur but if you’ve answered ‘Yes’ to most of the above questions then you can become an entrepreneur. If you answered ‘No’, it doesn’t mean that you can’t become an entrepreneur, it’s just that you must understand what it takes to become an entrepreneur. Becoming a successful entrepreneur – now that’s a totally different ball game!
I know many people who are happy working for someone else, where they don’t have to worry about risk etc., they do what they are told, get their salaries, bonuses and promotions and are satisfied with that. Well considering the current global economic meltdown, even these guys would be worried.
I prefer the flexibility of working for myself. But I only came to this after working for another company for some time. In my experience it is absolutely critical to work for someone else before starting up your own venture. The things I learnt on the job, from my boss, colleagues and other stakeholders, I could never have learned on my own. I ventured out on my own when I felt I was ready to do things my way and let me tell you I’m still struggling, but not for long. Trust me, the only place success comes before work, is in the dictionary. There are no shortcuts, be it for the entrepreneur or anyone else.
The question of – ‘Who/What is an Entrepreneur?’ has no one definition or answer. Agreeing with one particular definition/answer would restrict the understanding of (an Entrepreneur) the question. Many people are attracted to the fame, wealth and lifestyle associated with entrepreneurs but the truth is that there are only a handful of wealthy and famous entrepreneurs and they have struggled and worked extremely hard to get where they are, I would also like to believe that they have had their share of good luck. It is important for any wannabe entrepreneur to understand all the risks involved and remember, “all that glitters…
Update: Also read “Business Plan: The Core of Entrepreneurship”
“Who will Finance your ‘Great Idea’?”
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