Unit 1: Being an Entrepreneur

Entrepreneur

The word "entrepreneur" comes from the French verb entreprendre, meaning "to
undertake".

According to Schumpeter,” an entrepreneur is a person who is willing and able to convert

a new idea or invention into a successful innovation”.

Thus, an entrepreneur is an individual who creates a new business, bearing most of the
risks and enjoying most of the rewards. The entrepreneur is commonly seen as an
innovator, a source of new ideas, goods, services, and business/or procedures.

Lean Start –up

The word lean stands for minimising wastages. A startup is a young company founded by
one or more entrepreneurs to develop a unique product or service and bring it to market.

The Lean Startup provides a scientific approach to creating and managing startups and
get a desired product to customers' hands faster. The Lean Startup method teaches you
how to drive a startup-how to steer, when to turn, and when to persevere-and grow a
business with maximum acceleration. It is a principled approach to new product
development.

A lean startup is a method used to found a new company or introduce a new product on
behalf of an existing company. The lean start-up method advocates developing products
that consumers have already demonstrated they desire so that a market will already exist
as soon as the product is launched. As opposed to developing a product and then hoping
that demand will emerge.

Managerial resilience

Resilience was defined by most as the ability to recover from setbacks, adapt well to
change, and keep going in the face of adversity. Hence resilience is too important for
business success.

Managerial resilience means that managers always function to their peak potential despite
facing difficult challenges, and who wishes to maximise their team and corporate
resilience.
Managers have a huge role to play in relation to building sustainable resilience.

Entrepreneurial qualities:
Entrepreneurial Ecosystem:

An entrepreneurial ecosystem or entrepreneurship ecosystem is the social and economic

environment affecting local or regional entrepreneurship. Businesses located within
places serving as incubators for creativity, innovation, and entrepreneurship have a
greater chance of success.

The entrepreneurial ecosystem is a set of different individuals who can be potential or

existing entrepreneurs, organizations that support entrepreneurship that can be businesses,
venture capitalist, business angels and banks, as well as institutions like universities,
public sector agencies and the entrepreneurial processes that occur inside the ecosystem
such as the business birth rate, the number of high potential growth firms, the serial
entrepreneurs and their entrepreneurial ambition (Mason & Brown, 2014).

Entrepreneurial ecosystems are formed as combination of social, political, economic and

cultural elements within a region.

These domains show that the entrepreneurial ecosystem contains a change from a
traditional economic thinking to a newer economic view of people, networks and
institutions (Stam & Spigel, 2016).
Policy Domain

The government regulatory pillar is different across the regions of the world, and every
governmental policy can accelerate or slow down the ability to open and expand new
businesses.

Within this domain, it has components such as the ease to start a business, tax incentives,
and laws that could be business friendly. As well, physical structure is part of this
domain, where the accesses to basic infrastructure, telecommunication and transport have
an impact on businesses (World Economic Forum, 2014).

Finance Domain

For businesses, it is beneficial to have financial reserves so that they can maintain their
growth as they acquire more resources. The financial resources are a key aspect since it
gives the support to hire people, to buy or lease properties and equipment, to invest in
marketing and sales, and to keep track on customers.

The financial options that businesses have to start can be from friends and family, angel
investors, private equity, venture capital or the access to debt. The greater the availability
of financial resources, the faster is the scale of businesses (World Economic Forum,
2014).

Culture Domain
It has been debated that leading entrepreneurial ecosystems have a strong cultural support
for entrepreneurship.

The aspects that are considered within the cultural support are the tolerance of risk and
failure of entrepreneurship, the preference for self-employment, the success stories and
role models, the research culture, the positive image of entrepreneurship, and the
celebration of innovation (World Economic Forum, 2014). All of these actions create
the entrepreneurial culture.

Human Capital Domain

The human capital domain is represented by the quality and quantity of its workforce.
Depending on what are the skills that employees have, it is the type of working
environment that it could be generated.

The components of this domain are the management and technical talent, the
entrepreneurial company experience, the outsourcing availability and the access to
immigrant workforce. The combination of these components can affect the pace in how
businesses grow. Also, within the human capital domain it is considered the education
and the training.

Where on an entrepreneurial ecosystem it is believed that education can promote the

ability to get new knowledge and be able to identify opportunities and challenges inside
markets and workplaces. Education of the human capital is composed by the pre-
university and university education as well as entrepreneur-specific training.

As well as the relevance that universities take by promoting a culture of respect for
entrepreneurship, playing a key role in idea-formation for new companies and being the
source of employees for businesses (World Economic Forum, 2014).

Markets Domain

The markets domain is the representation of the customers who are willing to pay for the
companies’ products and services. Entrepreneurial ecosystems with accessible markets
that can be reached are important to help businesses grow within a region.

A key aspect to consider is also the potential of customers. The components that are in
the markets domain are the domestic and foreign market, small, medium and large
businesses as customers, as well as government purchases.

The entrepreneurial ecosystem must have an interconnected relationship and cooperative

approach between the different actors that is composed by. In order to be a dynamic
ecosystem, people and ideas exchange between themselves in order to create new
ventures, merge current businesses and bring up new innovations together (Auerswald,
2015).

The result of the interaction of the different domains of the ecosystem is the
entrepreneurial activity. This output is considered as the process in which the individuals
turn the opportunities into innovations.

Gradually, the outcome of the new service or product will bring to society new value. The
entrepreneurial activity will have form of an innovative and or high growth potential
start-up, as well as entrepreneurial employees (Stam & Spigel, 2016).

Entrepreneurial behaviour is the result of entrepreneurial motivation.

Motivation has been derived from the word ‘motive’ which implies the inner state of
mind that activates, provokes and directs our behaviour towards the goal. Motivation is a
process that motivates a person into action and induces him to follow the course of action
till the goals are finally achieved.
Strategic decision of Entrepreneur:

One of the burdens of being an entrepreneur has to make tough decisions. But since
opportunities often come disguised as decisions, it’s something business owners have
to get used to if they want to experience growth.

Over the life of your business, you’ll be faced with many decisions. Many of
these will have a relatively small impact on the success of your business. But some
can have an enormous impact.

Here are five big decisions every entrepreneur should be prepared to face head on if
they want to keep moving forward.

It’s not about ideas. It’s about making ideas happen. -- Scott Belsky, Behance co-
founder

1. Whether to turn your idea into a reality. Of course, the decision upon which the
rest of your decisions will rest is whether to start your business in the first place. This
may involve sacrificing a dependable, full-time income, or it may mean scaling back
at work to pursue your dream. Or, if you’re like many entrepreneurs, the toughest
decision may be which idea to turn into a business.

There is far more opportunity than there is ability. -- Thomas Edison

2. Whether to expand or keep the status quo. Keeping your business small may feel
more manageable and less risky, as you can personally oversee most components of
the day-to-day operations. However, the temptation to expand can be strong.
Sometimes it’s the allure of new revenue, or sometimes it’s simply the potential for
something new and exciting.

Whatever the situation, the strategic decision to expand your operations or maintain
the status quo is one of the biggest decisions most business owners will face.

It’s not a decision to be taken lightly: If you decide to expand -- whether that means
hiring new employees, increasing product selection or partnering with another
business -- making sure you grow wisely will be paramount.

Do you have the proper systems and processes in place to successfully manage the
growth? Do you have strategies in place that will ensure you maintain your current
quality of service? What market or economic conditions may influence the success or
failure of your expansion?

Don’t worry about failure. You only have to be right once. -- Drew Houston, Dropbox
founder and CEO

3. Whether to give up. Starting a business is hard work (that’s putting it mildly), and
much of the hard work you do now won’t pay off until far into the future. It may be
that financial struggles make you want to give up, or simply a lack of motivation due
to disappointing business results.

Whatever the reason, thoughts of giving up cross every entrepreneur’s mind, usually
more than once.

Legendary Swedish tennis player Bjorn Borg said, “My greatest point is my
persistence. I never give up in a match. However down I am, I fight until the last ball.
My list of matches shows that I have turned a great many so-called irretrievable
defeats into victories.”

It’s true that there are times when giving up is the best, or only, choice to be made.
But if you can summon up the gumption and courage to keep going, you may just find
your big success is right around the corner.

A truly global company is one that uses intellect and resources of every corner of the
world. -- Jack Welch, former CEO of GE

4. Outsourcing or hiring in-house. There will come a time for every business, almost
without exception, when the need for additional personnel or an influx of new skills
becomes non-negotiable. And one of the biggest decisions a business owner must face
at this juncture is whether to hire new staff or to outsource.

Unfortunately, no one can tell you what’s right for your business in this regard. Some
of the factors you’ll need to consider include:

 Payroll and benefit costs versus contractor costs

 Type of job or role. For instance, functions such as online marketing, accounting
and IT are often successfully outsourced, however, core areas such as PR and
sales are often better kept in-house.
 Your company culture: If you have a strong culture that must be evident in all
tasks and roles, in-house may be preferable.
 Your industry and the competitive environment: If you’re in a highly
competitive industry, hiring in-house may reduce the risk of trade secrets
being divulged.

If you need an important task completed, and could source it locally for $600,000, or
outsource it overseas for $37,000, which would you choose?

Should I Hire a Contractor or an Employee?

This was the decision faced by the owner of investment-tool company Born to
Sell CEO Mike Scanlin a few years back. Any guesses what he chose? In a CNN
Money article about the decision, Scanlin reported that he opted for overseas
outsourcing, and was extremely happy with his decision.
Scanlin isn’t alone: In a recent survey of US-based businesses, 36 percent of CFOs
reported that their firm was currently involved in offshore outsourcing, with
companies favoring India, Indonesia and China.

Price is what you pay. Value is what you get. --Warren Buffett

5. Product or service pricing. Determining your "sweet spot" in terms of pricing is

an enormous decision that all entrepreneurs will be faced with throughout the life of
their business. How you price your products or services will communicate the
perceived value of your offering, and will position you against certain competitors in
the marketplace.

Some of the factors you are likely to consider when determining the price of a product
or service include:

 Having a solid understanding of what your target market is willing to pay

 Understanding what you can afford to charge, taking into consideration all of
the hard and soft costs associated with producing the product
 Knowing how your product compares to other, similar products, and whether
you can legitimately charge a premium for additional features, higher quality,
etc.
 How you want to situation yourself in the marketplace: Do you want to be
known as the company that provides the highest-quality product? The cheapest?
The dependable, middle-of-the line product or service?

Being an entrepreneur will always mean having to make hard decisions, and these are
just a handful of the ones you’ll inevitably face as your business grows. Each of these
decisions comes with a certain amount of risk, but fortunately, risk-aversion is a trait
many entrepreneurs lack (or at least they don’t allow it to impede their growth).

Entrepreneurial dilemmas and ways to handle them:

Becoming a successful entrepreneur is a lot like eating a sweet-and-sour candy. It

tastes sweet at first, but then you get introduced to the sourness. It’s important to
understand the pros and cons of running a business.

Here are some challenges that entrepreneurs face and the solutions that they can use to
get past them.

The Right Time to Invest in a Start-Up

Some people start thinking about starting a business when they are in college but don’t
make up their minds. They ultimately find themselves being recruited by big
companies after graduation and perhaps abandoning their dreams of entrepreneurship.
There’s one thing to remember: There will never be a time when everything—money,
time, investment—lines up perfectly for you to start a business, but you can still make
it happen. If you do go to work for somebody else, start planning your business
without quitting your day job. Acquire the best skills, save money and learn from
other professionals. Make connections. Float your business idea when appropriate and
gauge interest. Some preparation and determination can work wonders.

Choosing the Right Administrative Team

You might want to choose family and friends as your employees and advisers, but you
should look for someone you can trust and who won’t be insulted if you have a
disagreement. In business, you will need to make tough decisions, and your partners
must understand and value those decisions. At the same time, business tensions must
not cause rifts in relationships.

Learning from Others

People who start businesses are often inspired by other successful business owners.
The dilemma is whether should we trace their footsteps or walk your own untrodden
way. What if their methods do not work for you? What if your customers do not
respond the way theirs did? Well, here’s a solution.

Set your own short-term goals. While working toward them, list the problems that
your role model might have faced and determine whether you can handle those
problems in the same way your business hero did. Do not follow everyone’s advice
blindly. Listening or learning too much from others will harm you since your
uniqueness approach be lost. Moreover, you might lose the ability to make quick and
sound decisions.

Is This What You Wanted?

This is going to be the biggest dilemma after you take up entrepreneurship. Is this the
right track? Your past successes might keep on haunting you, screaming out loud that
you should have stuck with your previous job. Cautionary words from people who told
you not to start your ventures will echo in your mind. This will be more acute when
you are not getting the expected results. Do not forget that creating an empire is not an
overnight task. It requires patience and dedication. Remember the management rules
you learned in your management school or college—or in your life experiences—and
keep working.
Whether to Be Alone or Seek a Partner

Do you want to share your profit with someone? Will you be able to work around the
clock? The answers to both these questions cannot be the same. Gauge whether you
will be able to be there for the company all the time. Otherwise, if you choose to
partner with someone, find someone trustworthy.

Entrepreneurship comes with risks, requires dedication and leads to pressure.

Major Reasons Startups Fail:

Reason 1: Market Problems

A major reason why companies fail is that they run into the problem of their being
little or no market for the product that they have built. Here are some common
symptoms:

There is not a compelling enough value proposition, or compelling event, to cause the
buyer to actually commit to purchasing. Good sales reps will tell you that to get an
order in today’s tough conditions. You have to find the ways to convert the need into
want.

The market timing is wrong. You could be ahead of your market by a few years, and
they are not ready for your particular solution at this stage.

Reason 2: Business Model Failure

Most common causes of failure in the start-up world are that entrepreneurs are too
optimistic about how easy it will be to acquire customers.

They assume that because they will build an interesting web site, product, or service,
that customers will beat a path to their door.

That may happen with the first few customers, but after that, it rapidly becomes an
expensive task to attract and win customers, and in many cases the cost of acquiring
the customer (CAC) is actually higher than the lifetime value of that customer (LTV).

The Essence of a Business Model is that CAC must be less than LTV. The Capital
Efficiency “Rule” is that if you would like to have a capital efficient business, I
believe it is also important to recover the cost of acquiring your customers in less than
12 months. Wireless carriers and banks break this rule, but they have the luxury of
access to cheap capital. So stated simply, the “rule” is: Recover CAC in less than 12
months.
Reason 3: Poor Management Team

An incredibly common problem that causes startups to fail is a weak management

team. A good management team will be smart enough to avoid all the reasons of
failure. Weak management teams make mistakes in multiple areas:

They are often weak on strategy, building a product that no-one wants to buy as they
failed to do enough work to validate the ideas before and during development. This
can carry through to poorly think through go-to-market strategies.

They are usually poor at execution, which leads to issues with the product not getting
built correctly or on time, and the go-to market execution will be poorly implemented.

They will build weak teams below them. There is the well proven saying: A players
hire A players, and B players only get to hire C players (because B players don’t want
to work for other B players). So the rest of the company will end up as weak, and poor
execution will be rampant.

Reason 4: Running out of Cash

A fourth major reason that startups fail is because they ran out of cash. A key job of
the CEO is to understand how much cash is left and whether that will carry the
company to a milestone that can lead to a successful financing, or to cash flow
positive.

Milestones for Raising Cash

The valuations of a startup don’t change in a linear fashion over time. Simply because
it was twelve months since you raised your Series A round, does not mean that you are
now worth more money. To reach an increase in valuation, a company must achieve
certain key milestones. For a software company, these might look something like the
following (these are not hard and fast rules):

Progress from Seed round valuation: goal is to remove some major element of risk.
That could be hiring a key team member, proving that some technical obstacle can be
overcome, or building a prototype and getting some customer reaction.
Products in Beta tests, and have customer validation. Note that if the product is
finished, but there is not yet any customer validation, valuation will not likely increase
much. The customer validation part is far more important.

Product is shipping, and some early customers have paid for it, and are using it in
production, and reporting positive feedback.

Product/Market fit issues that are normal with a first release (some features are
missing that prove to be required in most sales situations, etc.) have been mostly
eliminated. There are early indications of the business starting to ramp.

Business model is proven. It is now known how to acquire customers, and it has been
proven that this process can be scaled. The cost of acquiring customers is acceptably
low, and it is clear that the business can be profitable, as monetization from each
customer exceeds this cost.

Business has scaled well, but needs additional funding to further accelerate expansion.
This capital might be to expand internationally, or to accelerate expansion in a land
grab market situation, or could be to fund working capital needs as the business grows.

What frequently goes wrong, and leads to a company running out of cash, and unable
to raise more, is that management failed to achieve the next milestone before cash ran
out. Many times it is still possible to raise cash, but the valuation will be significantly
lower.
When to hit Accelerator Pedal

One of a CEO’s most important jobs knows how to regulate the accelerator pedal. In
the early stages of a business, while the product is being developed, and the business
model refined, the pedal needs to be set very lightly to conserve cash. There is no
point hiring lots of sales and marketing people if the company is still in the process of
finishing the product to the point where it really meets the market need. This is a
really common mistake, and will just result in a fast burn, and lots of frustration.

However, on the flip side of this coin, there comes a time when it finally becomes
apparent that the business model has been proven, and that is the time when the
accelerator pedal should be pressed down hard. As hard as the capital resources are
available to the company permit. By “business model has been proven”, I mean that
the data is available that conclusively shows the cost to acquire a customer, and that
you are able to monetize those customers at a rate which is significantly higher than
CAC. And that CAC can be recovered in less than 12 months.

For first time CEOs, knowing how to react when they reach this point can be tough.
Up until now they have maniacally guarded every penny of the company’s cash, and
held back spending. Suddenly they need to throw a switch, and start investing
aggressively ahead of revenue.

Reason 5: Product Problems

Another reason that companies fail is because they fail to develop a product that meets
the market need. This can either be due to simple execution. Or it can be a far more
strategic problem, which is a failure to achieve Product/Market fit.

Most of the time the first product that a startup brings to market won’t meet the market
need. In the best cases, it will take a few revisions to get the product/market fit right.
In the worst cases, the product will be way off base, and a complete re-think is
required. If this happens it is a clear indication of a team that didn’t do the work to get
out and validate their ideas with customers before, and during, development.
 Parameters to measure Entrepreneurial Profile:

Goal Tendencies toward creativity and innovation, degree of

orientation determination in reaching goals, and personal perception as to
overall handling of work situations.
Leadership aptitudes toward management and leadership
Adaptability ability to perceive environmental change and adaptability
Need for The desire for fame, success and social affirmation and
achievement respect from others
Need for self- The desire to realise oneself through one’s job which, apart
empowerment from any economic goals, must be enjoyable, satisfying and
interesting
Flexibility Tendency to reorient one’s goals according to external
situation
Innovation Curiosity for what is new.
Autonomy Necessity of having one’s own independent space to make
decisions and choices.

Legal implications for the major business types in India:

Business Types
Details Limited Liability Private Limited
Proprietorship Partnership
Company (LLP) Company
Shop Act is
required.
Shop Act is Partnership Deed
Has to be registered
required. is executed. It Has to be registered
with the Ministry of
MSME can may be registered with the Ministry of
Registration Corporate Affairs
apply for or not it depends Corporate Affairs under
under the LLP Act
Business upon the partners. the Companies Act 2013
2008
AAdhar MSME can apply
for Business
AAdhar

Not recognised
Not recognised as
as a separate Is a separate legal Is a separate legal entity.
a separate entity
entity and entity. The promoters The promoters of the
and promoters are
Legal Status promoter is of the LLP are not company are not
personally
personally personally liable personally liable
responsible for all
responsible for towards the LLP towards the company
liabilities
all liabilities
 Limited liability to
Member Unlimited Unlimited the extent of Limited Liability to the
Liability liability liability contribution towards extent of share capital
to the LLP

Minimum of two Minimum of one person

Number of Minimum of two
Can only have persons required required to start a
Members persons required to
one person to start a Private Limited
Required start a LLP
Partnership Company

Ownership can be
Not Ownership can be
Transferability Not transferable transferred by means of
transferable transferred
share transfer

Partnership
LLP profits are taxed Private Limited
profits are taxed
Taxed as as per the slabs Company profits are
as per the slabs
individual, provided under taxed as per the slabs
provided under
Taxation based on total Income Tax Act, provided under Income
Income Tax Act,
income of 1961 plus surcharge Tax Act, 1961 plus
1961 plus
proprietor and cess as surcharge and cess as
surcharge and
applicable applicable
cess as applicable

No requirement
Annual No requirement No requirement for Board and General
for annual
Statutory for annual annual statutory Meetings should be
statutory
Meetings statutory meetings meetings conducted periodically
meetings

No requirement
Must file Annual
to file annual No requirement to Must file Annual
Statement of Returns
report with the file annual report Statement of Returns &
& Solvency and
Registrar of with the Registrar Solvency and Annual
Annual Return with
Annual Filings Companies. of Companies. Return with the
the Registrar every
Income tax to Income tax to be Registrar every year.
year. Tax returns
be filed on the filed for the Tax returns must also be
must also be filed
income of the partnership filed annually
annually
proprietorship

Partnership
Existence not Existence not dependent
existence is
Proprietorship dependent on on directors or
dependent on
Existence or existence is partners. Can be shareholders. Can be
partners. Can be
Survivability dependent on dissolved voluntarily dissolved voluntarily or
dissolved at will
proprietor or by order of the by Regulatory
or upon on the
Company Law Board Authorities
death of partner(s)

Foreigners are Foreigners are not Foreigners are Foreigners are allowed
Foreign
not allowed to allowed to be part allowed in invest to invest with/without
Ownership
be sole of a partnership with/without the the approval of RBI and
 proprietors approval of the other applicable
Reserve Bank of permissions for the
India (RBI) and other relevant Government of
applicable India authorities
permissions for the depending on the
relevant Government category of business
of India authorities they are interested to
depending on the invest.
category of business
they are interested to
invest.

Legal basics that start-ups and entrepreneurs should be aware of:

Successful startups are ones that are driven by passionate entrepreneurs who are
focussed on building unique solutions that deliver customer delight. While it is very
important to have a strong focus on customers and the market, it is equally critical
to have a good understanding about the basic laws, rules and regulations that are
applicable for the smooth running of the business.

Here are some important legal basics that start-ups and entrepreneurs in India
should be aware of before embarking on a business venture:
 The first thing to starting any business is to be clear about the
1. Formalizing a nature and type of the business. Founders will need to
business structure incorporate the business as a specific business type – sole
and founders proprietorship, private limited, public limited, partnership,
agreement limited liability partnership etc. It is very essential to have this
clarity at the very beginning as this will be integral to the
business’ overall vision and goals, both short term and long
term.

2. Applying for Licenses are integral to running any business. Depending on the
business licenses nature and size of business, several licenses are applicable in
India. Knowing the applicable licenses for your startup and
obtaining them is always the best way to start at business.
The common license that is applicable to all businesses is the
Shop and Establishment Act which is applicable to all premises
where trade, business or profession is carried out. Other business
licenses vary from industry to industry.
While a restaurant may require licenses like Food Safety
License, Certificate of Environmental Clearance, Prevention of
Food Adulteration Act, Health Trade License etc along with the
above mentioned licenses.
3. Understanding Taxes are part and parcel of every business. There are a broad
taxation and variety of taxes, such as, central tax, state tax and even local
accounting laws taxes that may be applicable for certain businesses. Different
business and operating sectors attract different taxes and
knowing this beforehand can prove to be useful.
4. Adhering to With regards to labour laws, startups registered under the Startup
labour laws India initiative can complete a self-declaration (for nine labour
laws) within one year from the date of incorporation in order and
get an exemption from labour inspection. The nine labour laws
applicable under this scheme are:
The Industrial Disputes Act, 1947
The Trade Unit Act, 1926
Building and Other Constructions Workers’ (Regulation of
Employment and Conditions of Service) Act, 1996
The Industrial Employment (Standing Orders) Act, 1946
The Inter-State Migrant Workmen (Regulation of Employment
and Conditions of Service) Act, 1979
The Payment of Gratuity Act, 1972
The Contract Labour (Regulation and Abolition) Act, 1970
 The Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952
The Employees’ State Insurance Act, 1948
6. Ensuring Contracts lie at the crux of running any business. A contract is
effective contract required to ensure the smooth functioning of work and is a great
management mechanism to ensure recourse in case of non-fulfillment of
work. Having basic knowledge about various aspects of contract
management can prove to be useful for entrepreneurs.
7. Details about When a startup decides to shut down, all the stakeholders from
winding down the vendors to employees to customers and investors need to
business informed in advance and the whole process must be properly
planned and executed in order to make the exit easy on
everyone.
From the legal standpoint, there are basically three ways to shut
down a startup:
Fast Track Exit Mode
Court or Tribunal Route
Voluntary Closure

Key takeaways

 A person who undertakes the risk of starting a new business venture is called
and entrepreneur.
 An entrepreneur creates a firm, which aggregates capital and labour in order to
produce goods or services for profit.
 Entrepreneurship is an important driver of economic growth and innovation.
 Entrepreneurship is high-risk, but also can be high-reward as it serves to
generate economic wealth, growth, and innovation
 Unit II: Customer Discovery

Entrepreneurial Opportunity Search and Identification

A. Introduction/definition of concepts

Opportunity refers to the extent to which possibilities for new ventures exist and the
extent to which entrepreneurs have the leeway to influence their odds for success through
their own actions. Simply put, opportunity is a perceived means of generating incomes
that previously have not been exploited and are not currently being exploited by others.
Opportunity identification can, in turn, be defined as the cognitive process or processes
through which individuals conclude that they have identified an opportunity. It is
important to note that opportunity identification is only the initial step in a continuing
process, and is distinct both from detailed evaluation of the feasibility and potential
economic value of identified opportunities and from active steps to develop them
through new ventures. It is essentially a situation in which new goods, raw materials,
markets and organizational strategies can be introduced through the formation of new
means, ends or means-ends relationships.

The focus these days is on innovative opportunities which are the ones that truly break
new grounds rather than merely expand or repeat existing business models. Opening a
new Hausa or Igbo cafeteria in a neighborhood dominated by a populace from these
extractions that currently do not have one is an example. Not everyone can identify
opportunities. Some individuals are more likely to identify and exploit opportunities than
are others. Opportunity is a major process of self-evaluation of one’s ability to start,
operate and run a business venture with the popular analysis often referred to as SWOT
(Strength, Weaknesses, Opportunity and Threat). It helps to check the chances of
succeeding in a particular choice of venture open to an individual through his
experiences. These experiences include family, religious or professional linkages,
membership of any network group.

Searching for a business opportunity that is right for them is the major challenge would-
be entrepreneurs face. New startups always focus on introducing a new product or service
based on an unmet need, select an existing product or service from one market and offer
it in another where they are not available; and sometimes the firm relies on a tried and
tested formula that has worked elsewhere in a franchise setup.

B. Theory and Practice

i. Business Opportunity Identification Process

It is pertinent to know how entrepreneurs identify and decide a new business opportunity
with the best chance to succeed. The most important part of all business attempts
common to most successful startups is answering an unmet need in the market.
Customers are always interested in products that add value. They buy products needed
only to satisfy some problems. In actual fact, there is no substitute for indulging the
unmet needs of customers.
Most entrepreneurs searching for new business ideas fundamentally consider three central
issues. The main one is the potential economic value. He first considers if the venture has
the capacity to generate profit. The second is the newness of such a venture. He/She will
prefer products, services or technology that does not previously exist in that environment.
The third is the perceived desirability whether their product has the moral or legal
acceptability in that environment.

He then considers if:

· his final business decision idea corrects a deficiency in the market.

· the resources and capability to carry out this business idea are available to him/her.
· the market for it are readily available and at profit sales.
· the new business idea can compete favourably with existing related competitors
and their market.

· this business market is growing or not and how one should prepare to join that
business.
.
ii. The Stages of Opportunity Identification process
Opportunity identification is the collection of three main factors, which are the
entrepreneur’s background, the business influence and the general business environment.
Opportunity identification has five stages that lead to ‘recognition’. The five stages are
discussed in relationship with the process of opportunity identification.These stages are:
ii.a. preparation
ii.b. incubation
ii.c. insight
ii.d. evaluation
ii.e. elaboration

ii.a. Preparation

Preparation stage is that knowledge and experience exercised just before the
opportunity discovery process. These knowledge and experience are not often
deliberately acquired. However, preparation itself is usually a deliberate attempt to widen
capability in an area and become sensitive to concerns in a field of interest. In an
organized situation, the background of the business, the products or services or the
technological knowledge must have majorly informed the main ideas of the successful
venture. One cannot however, rule out the role of new ideas and expertise originating
from individuals in the organization that will eventually result in a new business.
ii.b. Incubation

Incubation stage is the part of the opportunity identification process that involves the
consideration of a concept or a specific problem ordinarily not subjected to conscious or
formal analysis by a businessman or his team. It is usually not consciously done and
therefore more often than not, an instinctive and unempirical approach for the
consideration of several potential alternatives.

ii.c. Insight

Insight stage occurs at the moment a fundamental solution suddenly becomes

recognized unexpectedly. It is a particular moment that keeps occurring persistently right
through the process of opportunity identification. Insights have been found to be
extensive channels to the discovery of startup businesses and sometimes reveal additional
knowledge for the development of a current process of discovery. In
respect of a business venture, insight predictably encompasses the abrupt
recognition of an opportunity in business, the answer to an adequately pondered crisis
and the possession of a concept from social networks and associates.

ii.d. Evaluation.

Evaluation stage is about investigating if the recognized and developed ideas are feasible,
if the businessman has the required abilities to realize the ideas and if the idea is
sufficiently innovative for prospects. It sometime involves full feasibility analysis of the
ideas through all forms of research instruments and criticisms from relevant business
acquaintances. It is fundamental to also investigate the prospect and viability of the new
insight ideas as the spirit of entrepreneurship is to make satisfactory and sensible profits.

ii.e. Elaboration.

Elaboration is that stage that exposes the opportunity/ideas to external analysis with the
tedious and time–consuming options selection, choice decision and organization of
resources. It is customarily in search of all legalities that could build confidence and
guarantee the practicability of the business. Elaboration also reduces uncertainties
by providing the detailed planning activities after the evaluation viability confirmation.
This will eventually reveal the concept areas that still need further analysis and attention.

Marketing Intelligence:

Definition: Marketing intelligence is the external data collected by a company about a

specific market which it wishes to enter, to make decisions. It is the first set of data which
the company analyses before making any investment decision.
Description: Marketing intelligence is usually the first data set analysed by a company
about a specific market. It could be related to population age in that area, infrastructure
facilities, spending habits of consumers, state or government regulations etc. Marketing
intelligence is all about gathering information on various data sets, analysing the
information, breaking down the data into small subsets and the distribution of information
to the relevant department of the company.

A purchase department in a company would need a different data set under marketing
intelligence, while a sales department would need something different. There are four
main corner stones of marketing intelligence. The first one is competitor intelligence, the
others are product intelligence, market understanding and customer understanding. Let’s
understand each one of them in detail. Competitor intelligence is a legal method of
obtaining information about products in a competitor’s portfolio. It is about analysing
strengths and weaknesses of the competitor.

The basic goal of competitive intelligence is to make better business decisions. Product
Intelligence is related to gathering information about your own product. The focus around
product intelligence is on gathering information about the quality and performance of the
product. This is usually an automated process. With the help of this knowledge, the
company tries and makes the user experience better or makes changes in the product
itself to make it safer or add new features. Market Understanding is a concept wherein the
company tries to understand the performance of the product in which it is already
operating as well as looks at other markets where it wants to launch its product
thoroughly.

Finally, understanding the customer is the utmost important aspect in the life of any
product. It is key to the success of the product pre- and post-sales.

Market analysis; components of Market Analysis:

What if you have branded one of the best coffee shops in your home city, and in just two
years you have opened five locations and become extremely profitable? Chances are you
will want to continue expanding. In order to make the best business decision, you will
want to conduct a market analysis.
A market analysis is an assessment, which allows you to determine how suitable a
particular market is for your industry. You can use market analysis to evaluate your
current market, or look at new markets.
Whether you are a startup, looking to expand, or re-evaluating your current market, a
market analysis helps you to identify the attractiveness of a market. It also detects current
and future risks of operating in that location.
Market analysis provides you with a holistic or well-rounded picture of the markets you
are interested in operating in. The components of the analysis include several evaluation
tools, including a discussion of your industry and its outlook in the market. It also
analyses the target market, conducts a competitive analysis, and identifies cultural and
legal regulations.

Conducting Market Analysis

When you conduct a market analysis, you are going to look at several characteristics of
the market you are interested in entering. You are also going to determine how suitable
your industry is for the market.

Industry Description and Outlook

Think back to the coffee shop. When preparing to expand, you will want to conduct an
in-depth analysis of your industry and consider what the future of your industry looks
like. For example, what does the coffee shop industry look like and how large is the
coffee industry. You may also want to look at the growth rate of the industry, and the
anticipated rate of growth over the next few years.
In short, the industry description and outlook takes into consideration:

 Definition of your industry (what do you offer)

 Size of your industry
 Rate of growth
 Potential for growth
 Trends in the industry
 Sustainability of your industry
These measures provide a broad overview of your industry and its potential for growth
and profitability.

Target Market
Once you have a broad picture of what your industry looks like and what its capabilities
are, you want to identify your target market. The target market is the specific population
you want to market your products to.

 Who do you want to sell to?

 What age group do you want to sell to?
 What is the general level of income of your target market?
 Where does your target market live?

You want to dig in to specifics of which the population you are targeting is, and what
they desire out of the products you are offering.

 Do your customers like chocolate mochas, or do they prefer black coffee?

 Do they live fast-paced lives, or do they have 20 or 30 minutes each morning to
enjoy their coffee?
 Where does your target market live?
 How large is their population?

When conducting a target market analysis, you will want to find out as many specific
details as you can about your target market.
Competitive Analysis
In addition to knowing your customers, you also want to know your competitive
advantage and who your competitors are.
How quickly do you need to enter the market?
What are potential consequences of entering this market?
Who offers similar products? How many competitors are there?
What does your competitor do well?
What could your competitor do better?
How similar are your target markets?

Market research:

Definition: The process of gathering, analysing and interpreting information about a

market, about a product or service to be offered for sale in that market, and about the
past, present and potential customers for the product or service; research into the
characteristics, spending habits, location and needs of your business's target market, the
industry as a whole, and the particular competitors you face.

Accurate and thorough information is the foundation of all successful business

ventures because it provides a wealth of information about prospective and existing
customers, the competition, and the industry in general. It allows business owners to
determine the feasibility of a business before committing substantial resources to the
venture.

Market research provides relevant data to help solve marketing challenges that a
business will most likely face--an integral part of the business planning process. In
fact, strategies such as market segmentation and product differentiation are impossible
to develop without market research.

Market research involves two types of data:

 Primary information. This is research you compile yourself or hire someone to

gather for you.
 Secondary information. This type of research is already compiled and
organized for you. Examples of secondary information include reports and
studies by government agencies, trade associations or other businesses within
your industry. Most of the research you gather will most likely be secondary.

When conducting primary research, you can gather two basic types of information:
exploratory or specific. Exploratory research is open-ended, helps you define a
specific problem, and usually involves detailed, unstructured interviews in which
lengthy answers are solicited from a small group of respondents. Specific research, on
the other hand, is precise in scope and is used to solve a problem that exploratory
research has identified. Interviews are structured and formal in approach. Of the two,
specific research is the more expensive.
When conducting primary research using your own resources, first decide how you'll
question your targeted group: by direct mail, telephone, or personal interviews.

Difference between Market Analysis and Market Research:

Market Research and Market Intelligence:

Market Research vs Market Intelligence

Market research is a systematic process
of collecting and analyzing data relevant
to a specific marketing strategy.
Scope
Market research is a specific exercise
carried out as a part of marketing
strategy.
Market intelligence is the information
critical to a company’s markets,
gathered and analysed to make informed
decisions to understand aspects such as
market opportunity and business
potential.
Market intelligence is a broader concept
compared to marketing research.

Marketing Strategy
Application of marketing research Marketing strategy is decided based on
depends on the marketing strategy. market intelligence
Customer Validation

Nowadays, it is increasingly complex and competitive technology landscape. It's

become both imperative and progressively more difficult to consistently deliver
products that meet the high quality, frictionless experience, and evolving
interoperability demands of your customers. Achieving these goals increases your
profitability and strengthens your market position. Failing to do so gives your
competitors the edge they need to seize those opportunities for themselves.

In order to ensure a successful product release, it's vital to strategically engage real
customers continuously

Customer Validation (CV) evaluates the stability, satisfaction, and adoption of a

technology product before launch and throughout maturity by leveraging real
customers using the products in real environments over time. Customer validation is
done during development, testing and release stage.

Developing Business Models:

Great business models depend on developing three "green lights," or qualities that help
the business succeed: finding high-value customers, offering significant value to
customers, and delivering significant margins. Great business models also avoid three
"red lights" that can derail a business: difficulties in satisfying customers, trouble
maintaining market position, and problems generating funding for growth. The list
below outlines key factors in determining whether your model meets each green light
and avoids the red lights. Examine your own business to see if you meet the criteria
for success and, more importantly, to correct any weaknesses you might have.

Green Lights:

1. Acquire high-value customers.

High-value customers don’t mean rich customers, but customers who meet the
following requirements:

 Are easy to locate

 Allow you to charge a profitable price
 Are willing to try your product after minimal marketing expenses
 Can generate enough business to meet your sales and profit objectives

Customers don't necessarily need to be the end users of your product or service. They
could be retailers, distributors, catalogs or whomever you sell your product or service
to. If your end users or distributors don't fit this profile, you can still meet this
requirement by attracting high-value customers through partnerships or alliances with
companies in the market.

2. Offer significant value to customers.

There are a number of ways you can create significant value and competitive
advantage, including the following:

 Unique advantages in features and benefits

 Better distribution through retail or distribution

 More complete customer solutions through alliances with other companies

 Lower pricing due to manufacturing efficiencies or pricing options
 Faster delivery, broader product line or more customization options

The rise of the internet, outsourcing and, most of all, the increased willingness of
companies to partner in creative ways to serve customers has resulted in every
industry creating innovation in business strategy. This gives you opportunities, but
also makes it imperative that you stay on the creative edge to fend off competition.

3. Deliver products or services with high margins.

Better manufacturing costs due to overseas manufacturing is typically not the clear
way to higher margins, as competitors will typically match your costs in the end.
Higher margins come from having a product that can be made from an improved
process or by having features that provide significant value and allow you to charge
more. You can achieve high margins with other tactics, including the following:

 Use a more efficient distribution channel.

  Require less sales support and sales effort.
 Have an industry-leading lean manufacturing process.
 Offer more auxiliary products or other opportunities for revenue without
increasing cost.

Red Lights:

1. Provide for customer satisfaction.

Consider whether it will be difficult--and therefore expensive--to satisfy customers
once they buy. Some of the aspects of a business that create high customer satisfaction
costs include:

 High warranty costs

 Extensive technical support
 Extensive installation requirement
 Extensive customer service
 Interface problems with other equipment

Customer satisfaction costs, which occur after the sale, are red flags because the costs
are typically high and don't produce revenue or profits. If your type of product might
have high customer service costs, you need to configure your business to put these
costs on someone else, either with partnerships or alliances or by restricting your sales
to an aspect of the business that doesn't require customer satisfaction costs.

2. Maintain market position.

A good business model uses its resources to improve its market position, adding new
products, features and customers or expanding into new applications. The red flags
that indicate it will be difficult to maintain market position include:

 Two or three major customers buy most of your product.

 Major potential competitors control the distribution network.
 Technology changes rapidly and requires high-risk product development.
 There are alternative technologies being developed to meet the same need.
 You have well-funded potential competitors who could quickly move into your
market.

Long term, your ability to hold market position is determined by the characteristics of
the overall market. For example, a company involved in the semiconductor
manufacturing business must adjust and guess right on constant changes in technology
to hold market position. Sooner or later they will guess wrong and fail.

3. Fund the business.

Startup costs, operating capital, personnel costs and overhead costs are just a small
percentage of the funding requirements for any business. The question is whether the
investments will have a high return and whether the business can grow without
substantial new investments. Red flags for a business model regarding investments
include:

 ROI is less than 25 % in the first three years.

 Incremental production of products or services requires substantial additional
investments.
 Fewer than 50 % of the investment required will be used in revenue producing
areas, such as sales and production.
 Investments have to be made prior to sales commitments.
 Industry as a whole has a poor ROI or poor profitability.

Money is available for the right plan and the right model. You'll find money available
if your ROI is right and if you have financial leverage, which means your initial
investment will allow you to double or triple sales without requiring any more
funding.

Value Proposition:
Value proposition is the foundation of your marketing. It gives customers a compelling
reason to do business with you, showing them why they need you.

A strong value proposition sets your company apart from the competition, giving your
company an unfair advantage. With a strong value proposition you’ll be able to:
 Attract and convert more customers

 Increase customer loyalty

 Command higher prices
 Outperform your competition

Unfortunately, most businesses don’t have a good value proposition. Most of the time,
value proposition is weak or non-existent.

When this happens, it’s harder for businesses to attract and keep customers.

This forces companies to:

 Offer deep discounts to attract customers

 Compete on price to close customers
 Spend more on advertising
 Spend more on incentives (free two-day shipping, buy one get one, etc.)

With a good value proposition, it’s easier and cheaper to attract more of the customers
you want.
The problem most marketers run into is the fact they don’t know how to create a value
proposition. But, before we talk about creating a strong value proposition, we need to talk
about what it actually is.

value proposition is an answer to the question: “Why should I buy from you and not your
competitor?” It’s an easy-to-understand promise from you to your customers, giving
them a clear reason to act.

It’s a unique, measurable, and specific promise that:

 Solves a customer’s problem

 Relieves a deep customer fear
 Offers customers measurable and compelling reasons to act

A value proposition is NOT:

 How many years you’ve been in business

 Fuzzy or generic (satisfaction guaranteed, we care about our customers)
 Focused on your company

Let us recall how Pepsi created their Value proposition

Pepsi asked consumers to participate in a blind taste test to see whether they preferred
Pepsi or Coca-Cola. Pepsi won but Coca-Cola’s value proposition was so strong that
customers continued to buy, even though many felt Pepsi tasted better.

This was because:

 The secret Coca-Cola formula gave their drink it’s unique flavor.
 An extensive network and partnerships with retailers and grocers gave them access to
more customers than their competitors.
 They had powerful and recognizable brand marks, like their unique bottle, font, and
colours that were recognized globally
Product development:

Product development typically refers to all of the stages involved in bringing a product from
concept or idea, through market release and beyond. In other words, product development
incorporates a product’s entire journey, including:

 Identifying a market need

 Conceptualizing and designing the product

 Building the product roadmap

 Developing a minimum viable product (MVP)

 Releasing the MVP to users

 Iterating based on user feedback

Stages in New Product Development:

Every entrepreneur knows that productivity is one of the key ingredients for successful
product development. One of the two key processes in Robert’s Rules of Innovation is
the NEW PRODUCT DEVELOPMENT PROCESS. A formalized, NPD process – also
referred to and best practice: the Stage Gate® Process – is a must, from simple to
sophisticated.
The New Product Development process is often referred to as The Stage-Gate innovation
process, developed by Dr. Robert G. Cooper as a result of comprehensive research on
reasons why products succeed and why they fail.
When teams collaborate in developing new innovations, having the following eight
ingredients mixed into your team’s new product developmental repertoire will ensure that
it’s overall marketability will happen relatively quick, and accurately – making everyone
productive across the board.
 Technicalities +
Idea Generation Product Commercialize
Development

Beta / Marketability Post Launch Review

Screening The Idea
Tests and Perfect Pricing

Testing The Concept Business Analytics

Step 1: Idea Generation

Utilizing basic internal and external SWOT analyses, as well as current marketing trends,
one can distance themselves from the competition by generating ideologies which take
affordability, ROI, and widespread distribution costs into account.
Lean, mean and scalable are the key points to keep in mind. During the NPD process, keep
the system nimble and use flexible discretion over which activities are executed. You may
want to develop multiple versions of your road map scaled to suit different types and risk
levels of projects.
Step 2: Screening The Idea
Wichita, possessing more aviation industry than most other states, is seeing many new
innovations stop with Step 2 – screening. Do you go/no go? Set specific criteria for ideas
that should be continued or dropped. Stick to the agreed upon criteria so poor projects can be
sent back to the idea-hopper early on.
Because product development costs are being cut in areas like Wichita, “prescreening
product ideas,” means taking your Top 3 competitors’ new innovations into account, how
much market share they’re chomping up, what benefits end consumers could expect etc. An
interesting industry fact: Aviation industrialists will often compare growth with metals
markets; therefore, when Boeing is idle, never assume that all airplanes are grounded, per se.
Step 3: Testing The Concept
As Gaurav Akrani has said, “Concept testing is done after idea screening.” And it is
important to note, it is different from test marketing.
Aside from patent research, design due diligence, and other legalities involved with new
product development; knowing where the marketing messages will work best is often the
biggest part of testing the concept. Does the consumer understand, need, or want the product
or service?
Step 4: Business Analytics
During the New Product Development process, build a system of metrics to monitor
progress. Include input metrics, such as average time in each stage, as well as output metrics
that measure the value of launched products, percentage of new product sales and other
figures that provide valuable feedback. It is important for an organization to be in agreement
for these criteria and metrics.
Even if an idea doesn’t turn into product, keep it in the hopper because it can prove to be a
valuable asset for future products and a basis for learning and growth.
Step 5: Beta / Marketability Tests
Arranging private tests groups, launching beta versions, and then forming test panels after
the product or products have been tested will provide you with valuable information
allowing last minute improvements and tweaks. Not to mention helping to generate a small
amount of buzz. WordPress is becoming synonymous with beta testing, and it’s effective;
Thousands of programmers contribute code, millions test it, and finally even more download
the completed end-product.

Step 6: Technicalities + Product Development

Provided the technical aspects can be perfected without alterations to post-beta products,
heading towards a smooth step 7 is imminent. According to Akrani, in this step, “The
production department will make plans to produce the product. The marketing department
will make plans to distribute the product. The finance department will provide the finance for
introducing the new product”.
As an example; In manufacturing, the process before sending technical specs to machinery
involves printing MSDS sheets, a requirement for retaining an ISO 9001 certification (the
organizational structure, procedures, processes and resources needed to implement quality
management.)
In internet jargon, honing the technicalities after beta testing involves final database
preparations, estimation of server resources, and planning automated logistics. Be sure to
have your technicalities in line when moving forward.
Step 7: Commercialize
At this stage, your new product developments have gone mainstream, consumers are
purchasing your good or service, and technical support is consistently monitoring
progress. Keeping your distribution pipelines loaded with products is an integral part of this
process too, as one prefers not to give physical (or perpetual) shelf space to competition.
Refreshing advertisements during this stage will keep your product’s name firmly supplanted
into the minds of those in the contemplation stages of purchase.
Step 8: Post Launch Review and Perfect Pricing
Review the NPD process efficiency and look for continues improvements. Most new
products are introduced with introductory pricing, in which final prices are nailed down after
consumers have ‘gotten in’. In this final stage, you’ll gauge overall value relevant to COGS
(cost of goods sold), making sure internal costs aren’t overshadowing new product
profits. You continuously differentiate consumer needs as your products age, forecast profits
and improve delivery process whether physical, or digital, products are being perpetuated.
The entire new product development process is an ever evolving testing platform where
errors will be made, designs will get trashed, and loss could be recorded. Having your entire
team working in tight synchronicity will ensure the successful launch of goods or services,
even if reinventing your own wheel. Productivity during product development can be
achieved if, and only if, goals are clearly defined along the way and each process has
contingencies must be clearly outlined.

Long tail markets:

Long tail marketing refers to the strategy of targeting a large number of niche markets with a
product or service.

It’s mainly used by businesses that are dominated by a huge market leader.

Facing a battle to grow, a company can shift their focus to multiple niche markets that have
less demand.

That might sound counterintuitive, since those low demand markets won’t be as lucrative
individually, but they might be when their total reach is combined.

For example - most of us have shopped on Amazon, and you will have been recommended
products.

• Amazon: Amazon sells more than 350 million products. I'd be willing to bet
that the number of low demand products is equal to or more than the high
demand products.

• Netflix: While Netflix carries many popular shows and movies, it also carries
just as many (if not, more) less popular titles. It has just over 4,000 movies and
1,500 shows. The less popular titles contribute to the overall watch time and
attract niche visitors..
 • HubSpot's Blog: Not only does HubSpot target long tail keywords in order to
gain traffic, but it also produces a lot of content in order to attract more unique
visitors.

Go to Market strategy (GTM):

Go-to-market strategies are very distinct from marketing strategies in terms of where
they fall in a product’s lifecycle. A go-to-market strategy (GTM) is the planning and
preparation for introducing a new offer (product or service) to a market. A marketing
strategy is the ongoing programs and campaigns that you’re running to drive demand
for that offer after it’s been introduced to a given market.

GTMs are more concrete. You only use them until you achieve product-market fit,
whereas marketing strategies are more prolific, getting refined over time as you learn
how your buyers get value out of your offer.
The following are the essential elements of a go-to-market strategy.

Define Your Market Conditions

What market growth strategy do you fall under?

In 1957, a mathematician introduced four categories of product-market introduction

methods called the Ansoff Matrix.

Go-to-market strategies apply to two of those pathways: Product Development, where

you are introducing a new product into an existingmarket, and Diversification, where
you are introducing a new product into a new market.

Thinking about where your product-market fits in will help you define who you’re
selling to and what you’re selling to them.

Who are your buyers?

Are you selling to businesses or people? Defining your buyers for your GTM is the
same as developing your buyer personas for your marketing strategies. You want to
understand what the day-to-day life of your ideal customer is like so you can
understand their challenges and determine how your offer will alleviate their pain
points.

That knowledge will set you up for success when developing your go-to-market
strategy because it’ll help you develop the value proposition of your offer.
Who are your competitors?

Who are the other key players in the market you’re entering? How will you
differentiate yourself from them?

If your offer is completely unique you want to capitalize on that, but if competitors are
offering similar products or services to you, you need to find a niche that you can
dominate.

Determine Your Selling Strategy

Value and price are the two main factors that determine whether a prospect will buy
your offer. So as part of your value proposition and go-to-market strategy, you need to
think about your pricing strategy.

A potential jumping-off point for this is analyzing the pricing strategies of competitors
with similar products. Ultimately, your pricing strategy should be centered around
your value proposition. Identifying that core value of your product allows you to
define what pricing strategy should be and build out pricing model around that.

When deciding on a pricing model, consider whether you want to introduce your
product or service through a freemium model or have customers start by purchasing
your product or service outright.

Techniques of sales forecasting:

7 sales forecasting strategies (and which one is right for your company):

Alright, now that you have data-in-hand, it’s time to get dirty.

There are many different ways to look at your sales and come up with a forecast, and
each method will depend on the info you have, the results you want to know, and how
confident you are in the information you have.

Let’s break down a few different modern methods of sales forecasting, explaining
which situation they’re best used for so you can choose the one that’s best for you.
 1. Lead-driven forecasting

Relationships are the heart and soul of sales, and the lead-driven method relies on
understanding the relationship your leads have with your company, and what they’re
likely to do based on that relationship. In essence, you’re analyzing each lead source
and assigning a value to that source based on what similar leads have done in the past.

Here’s what you’ll need to get started:

 Leads per month from the previous sales cycle

 Lead to customer conversion rate by lead source

 Average sale price by source

2. Length of sales cycle forecasting

This method uses data on how long a lead typically takes to close to forecast an
individual rep's sales. Here’s how: Let’s say your average time-to-close is four months
and a rep has been working a potential client for three months, your forecast might
suggest they have a 75% chance of closing the deal. What’s great about this method is
that it’s completely objective. Meaning your sales rep’s ‘gut’ is out of the picture and
your forecast isn’t hanging on the fact that they ‘feel good’ about this prospect, but
rather on how long it has taken similar ones in the past to close.

What’s even more beneficial is that the length of sales cycle method can be applied to
a multitude of sales cycles, depending on the source. So, if a referral client typically
takes two weeks, while a trade show source takes six months, you can group these
deal types by their source and still have an accurate picture.
3. Opportunity stage forecasting

The opportunity stage method takes your sales pipeline, chops it up, and assigns a
percentage value to each one based on how likely a lead is to close. So, a new prospect
might have a 10% potential close rate, whereas someone who has gone through a
product demo might be at 80%.

Then, you pick a forecasting period—monthly, quarterly, yearly—and multiply each

deal’s potential value by where it is in your pipeline. So, a $2,500 deal that’s gone
through a product demo is worth $2,000 ($2,500 x 80%).

4. Intuitive forecasting

When you want to know about sales, who do you talk to? Why not your own sales
team, who spend day-in, day-out in the trenches hustling up leads and closing sales?
The intuitive method is based on trusting that your salespeople are your best resource
for accurately forecasting their own sales, and starts by asking each one how confident
they are that their sale will close, and when.

5. Test-market analysis forecasting

The test-market analysis method is great if you’re rolling out a new product or
service and want to get an idea of what your sales might look like. As the name
implies, this method involves doing a limited launch of your product or service and
then analyzing the response. Using that number as a base, you can then make an
accurate forecast on the response of a full rollout.

6. Historical forecasting

As the name implies, this method takes historical sales data and assumes you’ll grow
year-on-year. If you sold $15,000 in November last year, this model assumes you’ll
sell at least $15,000 in November of this year. Add in your average or projected
growth rate and you’ll get an even better picture. So, if you grow an average of 5%
year-on-year, you can expect $15,750 in sales.

7. Multivariable analysis

As you can probably tell by now, the previous methods have their own pros and cons.
The multivariable analysis method, however, takes the best parts of all these
forecasting methods, and puts them together into one complex, analytics-driven
system.

Sales and customer behaviour: Mapping buyer response modes:

It is key for startups to understand customer responses to sales propositions and to be

able to map these buyer response modes. The term “response modes” describes a
potential customer’s behaviour or reaction to a sales proposition.

As described in the article Buyer response modes, there are four potential buyer
response modes to change:

• Growth

• Trouble

• Even Keel

• Overconfident

• As a seller, there are three phases involved in mapping buyer response modes—
for every phase you can leverage the stakeholder management chart.

Preparing for the sales call

• When planning your strategy, leverage any sources of information that can shed
light on the target customer’s overall situation. Pay close attention to areas of
 the business that do very well or very poorly. For public companies, any
information disclosed in analyst presentations or quarterly result presentations
can provide significant indicators. Any personal contacts with deep knowledge
of the company could offer even more relevant information.

During the sales call:

Look for symptoms of the customer’s particular response mode. If the buyer
suggests that everything is fine, then further probing might indicate that the
buyer is in either Even Keel or Overconfident mode.
At this point, verify that you have an accurate understanding of the buyer’s
information and ensure that the buyer understands the basics of your offering.
Read more about value proposition for more details on emphasizing the benefits
of your offering

After the sales call:

• Update your stakeholder management chart with their specific response modes.
Ask yourself: Can I close the deal without the support of those buyers in Even
Keel or Overconfident mode?
If the answer is no, then you must determine if you can develop a supporter into
a Coach who can help you convert the buyers in Even Keel mode. If that leaves
only the buyers in Overconfident mode, then do a trial close, although there is a
risk that you will have to wait.

Social media marketing tools

Utilizing social media in your business strategy is one of the best ways to get your
name out there. It's a great way to market your services, products, and help boost your
brand.

Not only that, it gives you the chance to connect with fans, customers, and prospective
customers on a more personal, human level.
Facebook
With about 2.38 billion monthly active users worldwide as of April 2019, Facebook is
one of the most popular platforms, not only for personal use but business as well.

For businesses, Facebook is a place to share photos, updates, and general news with
those who follow or “like” you. Fans of your business come to your Facebook page to
find out what’s going on with your company, see pictures of what’s going on, or
explore events.

It’s important to start by building your fan base on Facebook. Publicize your page and
post a link to it anywhere you can, including adding a social icon onto your website.

Once you’ve created a strong following it's important to use status updates or photos
to share your products, offers, services. You should also post things that get your
audience to engage with your posts.

Things that they will click, “like,” comment on, and share. The more people are
engaging, the more frequently you’ll appear in others timelines.

It’s important to keep in mind that many use Facebook as a personal network to
connect with their friends or loved ones. Your brand needs to fit into this atmosphere
naturally in order to keep people interested in what you’re posting. So don’t make it
solely about selling.

Tools to utilize: Advertising

Facebook is one of the most comprehensive online advertising platforms today.

It uses social graph and activities to pinpoint those who fall into your buyer
demographics, making Facebook Ads incredibly effective. Facebook ads are more
likely to bring in strong leads that are actually looking for your services.

They help make sure your advertising budget isn’t wasted on those who aren’t really
interested in what you’re offering and helping to put product or service put into the
hands of the exact person who wants or needs it.

Twitter
Twitter is fast-paced, concise, and easy way to connect with your audience. With over
310 million registered users (and growing), Twitter is a sea of information of 140
character or less content waiting to be read, clicked, followed, and re-tweeted.
How to use Twitter for marketing

Twitter generates over 175 million tweets daily and allows you to share quick pieces
of information and photos in an effort to drive people back to your site or landing
pages. You only get a small amount of characters, so make them count!

When marketing on Twitter, you need to have content that is enticing enough for
people to stop and click through. People are normally scrolling through quickly so it
takes more than just simple text to stop them in their tracks. Make sure when you're
constructing your tweets, you’re making people want to click through.

Try using quotes, statistics, or questions related to the link you’re tweeting as a way to
people wanting to read more. Incorporate photos, polls, GIFs, or even short
videos. (All of these are now natively supported by the platform!)

While Twitter is a great way to share quick thoughts and generate traffic to your
website and offers, it’s important to make sure you’re also building relationships with
followers.

People follow you because they like what you have to say, but often also to engage in
conversation. Like you would on Facebook, ask and respond to questions, respond to
mentions and direct messages. Twitter is as useful for driving traffic as it is for
customer service.

Tool to utilize: Hashtags

Hashtags (#) are you key tool on Twitter. These tags allow you to reach a wider
audience than just your followers by getting involved in existing conversations.

People searching for specific information will often check hashtags to see what’s out
there. Do some research what your buyer persona is hashtagging to make sure your
posts are going to be found by the right people.

LinkedIn

How to use LinkedIn for marketing

LinkedIn is different from the rest of the social media outlets because it’s specifically
designed for business and professionals. Users mainly go to LinkedIn to showcase
their job experience and professional thoughts, making it one of the more important
platforms to use for those in B2B.

Between features like LinkedIn Pulse, Company Pages, InMail, Groups, and “Get
Introduced” and the ability to see who’s viewed your personal profile, LinkedIn is a
valuable tool for not only driving traffic, but prospecting, establishing thought
leadership, as well as recruiting.

Tool to utilize: Groups

There is a lot less conversation happening directly on LinkedIn pages then there is on
other social media marketing profiles. One way around this is joining LinkedIn groups
where you can meet people from the same industry or with similar interests, ask and
answers questions, and engage in conversations. Pose a question to the group to get a
conversation flowing. It’s a great way to showcase your expertise on your industry.

YouTube
On your channel, your brand can share and edit its own videos, create playlists, and
prompt discussions.

Since it was bought over by Google in 2006, YouTube is another platform that the
search gives priority to in its search results so take advantage of it!

How to use YouTube for marketing

YouTube for your business is a great way to get your face out there. Videos are a lot
more engaging and shareable than text content and they also aid your search rank in
Google.

When creating videos for YouTube quality matters.

Make sure there’s a purpose and value to what you’re uploading and sharing. Also
make sure to pay attention to your production value.

Both the video and audio of what you upload should be crisp, clear, and easy to
understand. No shaky cameras!

Tool to utilize: Teaching opportunities

YouTube gives you a gateway to be an educator in your industry. Upload webinars or

videos speaking on important topics that further the education of your audience.

Pinterest
Pinterest is one of the more unique marketing platform on this list. Instead of posting
content for your audience to read, on Pinterest, you’re posting just a clickable picture
and a short caption. This is a very popular platform for brands with a tangible product,
i.e. clothing and food brands, restaurants, those in eCommerce, etc.
How to use Pinterest for marketing

Pinterest is a superficial platform, so every image you post has to be high-quality and
striking to stand out in your feed.

When you start posting images make sure they link back to a related blog or page on
your website. As people click through from your image to your site they want to see or
read something that’s related to the image that caught their eye.

Once you begin posting organize your Pinterest by dividing it into boards. Each board
should have a category relative to different aspects of your business. Make it simple
for your followers to find what they're looking for.

Also make sure that your caption is keyword optimized. Like any other search engine,
Pinterest cannot crawl images. This caption is how your pin will show up when people
are browsing.
 Unit 3 -The Financial Road Map

Planning and budgeting of start-up :

Fig. 1 — Planning Process for Start-ups

1 — Assess the company positioning
Often in the early stage of the company building process founders define the company brand as a logo
and forget to ask themselves much more complex questions such as: what do we stand for? What is our
positioning vis a vis existing market dynamics? Does our positioning match our internal culture?

Positioning is not a one off activity but an evolving process. This is why we think it’s good practice
for founders once a year to challenge their existing positioning and for good funders to help in the
process.
2 — Identify key milestones to be achieved before the next key corporate event

Funders have the benefit of being disconnected from the day to day business operations. Therefore, in a
healthy relationship founders tend to use funders as strategic sounding boards.

In the early stage of the company building process the next corporate key event is mostly likely a new
round of funding. Founders should be very precise in setting a few key milestones (i.e. validation points)
that must be achieved to successfully reach the next round of funding.

1 — Milestones should be <= 5. Too many milestones defeat one of key purposes of this planning stage:
to crystallise the strategic direction of the company.

2 — Each milestone should be specific and measurable to avoid any sort of ambiguity. Some examples:
3 — Define a 12 month budget
Good founders and funders know well that in any stage of the company building process the budget is not
a spreadsheet exercise but a bottom up planning activity. For early stage startups it makes no sense to try
to make the budget overly complex with impossible to validate assumptions and complex formula.
Working with founders this is what we have learned as an easy budget process:
1 — It all starts with an organizational design that can scale during the next 12 months and a clear
definition of each ‘to be hired’.

2 — A high level product roadmap is a key tool in order to be able to assess the organizational design
and the rightsizing of the resource allocation.

3 — Clear definition of a marketing plan with deep level of task definition, again to feed into the
organization design / resourcing.

4 — Depending on the characteristics of the business, a sales plan with clear drivers which is mapped
back to the organizational chart. This is also what the key revenue assumptions are built on.

A healthy founders / funder relationship is first and foremost a deep discussion about the organization and
the level of fit with: (1) the product roadmap; (2) the marketing plan and (3) the sales plan. The modelling
of the budget is then an exercise of allocating resources within the business’ current cash constraints.

Product roadmap, marketing plan and sales plan need to be directionally right and must provide the right
level of detail to allow proper resource trade-offs.

The budget is a flexible tool and as such evolves and changes during the year based on new learnings. As
soon as the learnings make the budget obsolete a new forecast should be generated and organizational
design, product roadmap, marketing plan and sales plan should evolve accordingly. Early
stage funders must feel comfortable with ongoing changes and should encourage founders to make those
changes.

The founders / funder relationship will degenerate to a lack of transparency if either side resists this
change. The budget, and the plans that it is built on, will be based on incorrect assumptions. This is
management by hope.
4 — Define Quarterly OKRs
To finish the planning process, the last step is to go deeper by zooming in on specific quarterly objectives
and quantifiable results. This quick video by John Doerr is a great inspirational message. We encourage
all founders and funders to also watch Rick Klau video and transcript on OKRs.
No two founders apply OKRs in the same way, but during the years this is what we have learned:
1 — There is a main difference between MBOs (management by objectives) and OKRs (objectives and
key results). This is a great post on the topic.
2 — When the company is still small the OKR quarterly meeting is a great forum for all the employees to
participate. It really helps to build and reinforce the company culture.

3 — A key advantage of OKRs is that they help a lot with alignment: this means better communication,
clarity and purpose for the whole team. In order to facilitate alignment the starting point is to identify 1 to
3 quarterly company wide objectives. Founders find it very difficult to define the “theme” of a quarter
with only 1 to 3 objectives. Especially in the early stage of the company building process this is an
absolute must. The best funders can be great sounding boards to founders to think through company wide
objectives.
Example

Necessity of budgeting for Start-up:

Budgeting is essential. It is the most effective way to ensure your business has a future. It allows you to
control your cashflow and make provisions for larger costs, as well as giving you an indication of when
the time is right to invest in your idea further and expand it. You have to stay in control of your
expenditure at all times, whether you are a billion-dollar multinational corporation or a small and
operational startup. The difference? How much and where budget is allocated.

A budget is a plan to control your finances. You don't want to run out of cash and fall short of payments.
Similarly, you want to know you can meet your current goals, as well as plan for future ones.

Although it works hand in hand with cashflow projections, it is important to note the distinction between
a forecast and a budget. A forecast is a very important business management tool that is essentially a cost
prediction of the future, whereas a budget is a planned outcome of this same future based on the
objectives of your business plan. To break this down even further, a budget is about profit and the
cashflow forecast is about cash.

Once your business is operational, it's essential to plan and tightly manage its financial performance.
Creating a budgeting process is the way to keep everything on track. You must focus on profits, costs and
returns on investment. Additionally, you have to factor in potential market changes, customers and their
demands, competition from rival companies, your business objectives and key performance indicators,
team management, forecasts and any obstacles you may encounter along the way.

Now, you may be wondering how to draw up a budget. Firstly, you must make sure you dedicate time to
budgeting and, if possible, seek assistance from your accountant or financial team to provide you with
estimates for your budget. As a startup business, it is likely that this role will land on you. It will be your
responsibility to make sure your budget is realistic.

In a budget, you need to include projected cashflow, typically on a monthly basis. This allows you to
pinpoint any issues immediately, rather than waiting, running the risk of making the problem far greater.
A budget must also encompass costs – fixed ones such as rent and salaries, variable expenses including
materials and products, and one-off capital costs, such as a lease or buying a computer. Finally, a budget
must take account of revenue forecasts. This means both historic sales and future ones must be included
in a budget.

It is important to note that there is no benefit to creating an artificial profit by overestimating earnings, or
underestimating costs. You have to make sure you have built in the cost of your time and the sensitivities
of seasonality from your accountant or financial team to provide you with estimates for your budget. As a
startup business, it is likely that this role will land on you. It will be your responsibility to make sure your
budget is realistic.

In a budget, you need to include projected cashflow, typically on a monthly basis. This allows you to
pinpoint any issues immediately, rather than waiting, running the risk of making the problem far greater.
A budget must also encompass costs – fixed ones such as rent and salaries, variable expenses including
materials and products, and one-off capital costs, such as a lease or buying a computer. Finally, a budget
must take account of revenue forecasts. This means both historic sales and future ones must be included
in a budget.

It is important to note that there is no benefit to creating an artificial profit by overestimating earnings, or
underestimating costs. You have to make sure you have built in the cost of your time and the sensitivities
of seasonality depending on the market you are entering. If you are selling wellingtons for example, be
prepared that summer will be a dry season – quite literally. When you grow as a business, you must also
consider staff holidays and how this will affect turnover.

Although you may not immediately need to give yourself a salary, eventually you will have to include
this in your budget, too. I can recall an enthusiastic salesman coming into the den to pitch his idea.
Although an interesting business idea, with projected profits of Rs.50,000 in year one, with a salary at the
time exceeding six figures, starting this business was not as savvy as staying in his current job. If there is
not enough money in it for you, how will an investor make money out of it?

A budget does not have to be rigid, however. Of course, the idea is once you make a budget, you should
stick to it, but you must be open to reviewing and revising it as needed – when the market, pricing, or
anything else that could have an impact on the budget you have given your business changes.

The great thing about budgeting is the ability to benchmark performance. Comparing your budget year on
year also allows you to implement your key performance indicators if they do, in fact, need revision, as
well as comparing figures for growth and projected margins with your market competitors. Remember to
always review and revise.

Ultimately, as an entrepreneur, the budget you set out is not just your business's budget – it's your budget.
Owning a small business means allowing it to impact both your business and personal considerations.
Budgeting your own expenditure could mean the difference between success and failure. So be smart
with your startup. Don't cash out before you can cash in.

Developing a business financing roadmap and financial plan:

Before you build your financing roadmap and your financial plan, you will have defined your business
model and developed an execution plan of key milestones for your venture. Additionally, you will need to
put together a list of key business assumptions.
Key business assumptions
Create a comprehensive list of key assumptions you are making about the business, such as:

 product or service performance metrics

 your customer’s business case (that is, their return on investment, or ROI)
 market size, addressable market and target number of sales units
 gross margin —for direct and indirect sales
 sales calls per salesperson
 conversion rate of prospects to customers
 length of sales cycle
 technical support calls per unit shipped
 payment cycle for receivables and payables
 compensation requirements for sales and distribution
 headcount levels and compensation assumptions for research and development, quality assurance,
marketing, customer service/operations, finance, and human resources teams
Track and test these assumptions on an ongoing basis and if they prove false, react to them quickly.
Ideally, you can link most of the major assumptions to the key milestones you have set for the business,
so that when you reach a milestone, you can test the related assumptions.

Create your financial plan

Using your key assumptions, business model and execution plan, develop a financial plan for the business
which includes:

 a cash flow forecast by month for the next 24 months that is developed from bottom-up
assumptions, and (at minimum) annual projections for three to five years thereafter
 a high-level income statement for the same three- to five-year period based on market forecasts,
gross margin targets and earnings expectations for your business
 a balance sheet may or may not be required depending on stage of the business and type of
investor; however, any cash requirements associated with the balance sheet such as capital
expenditures or repayment of debt, working capital required for inventory and accounts
receivable, and cash available from accounts payable should be considered in your cash flow
forecast, along with any sources of financing
 two alternative scenarios for your financial plan , showing an optimistic and pessimistic
outcome, with your regular set of assumptions being the most probable outcome
Determine size and timing of investment rounds
At each funding round, investors will expect companies to have achieved key milestones and to
demonstrate for sales traction. A hierarchy exists for sales traction, as follows:

 sales
 field testing and pilot sites
 agreement to field test, pilot or use prior to shipment
 establishment of a contract to pursue a field test
 references from customer proxies (used by angel and seed investors mainly)
The higher you find yourself in the hierarchy, the better for fundraising. If you do not have at least a
contract to pursue a field test, then you will have difficulty raising money from traditional venture capital
firms. You will likely need to provide references from prospective customers or their proxies to attract
angel and seed investment.

To develop your financing roadmap

1. Determine the total amount of capital your business will need until its cash flow can break even in
your probable financial plan. Everything does not always go according to plan, so most
entrepreneurs show a range of potential capital requirements, adding 10% to 25% to the top end of
the range.
2. Split the investment amount into desired rounds of financing (usually two to four rounds). Each
round of financing should provide enough cash to enable you to fund your probable financial plan
through the next major milestone for your business (for example, shipping commercial products to
customers, entering Phase II clinical trials). Again, it usually makes sense to communicate to
prospective investors a range of sizes of target investment rounds.
There are factors that may affect how much investment you raise versus your target. These include:

 How much investment is available to your business?

 What are the terms of the investment? If the valuation of your business is lower than your
expectation or the terms are onerous, you may choose to raise less money to reach a nearer-term
milestone where the valuation may improve due to either different market conditions, or a lower
perception of risk or higher perception of sales traction on the part of the investor. the
 How much investment do your investors think is required to achieve your milestones and
necessary level of sales traction? Investors will focus on how to ensure the next round will be at
an increased valuation amount and on terms that will appeal to existing shareholders.
 Four financial statements

A complete set of financial statements is used to give readers an overview of the financial results and
condition of a business. The financial statements are comprised of four basic reports, which are as
follows:

 Income statement. Presents the revenues, expenses, and profits/losses generated during the reporting
period. This is usually considered the most important of the financial statements, since it presents the
operating results of an entity.

 Balance sheet. Presents the assets, liabilities, and equity of the entity as of the reporting date. Thus, the
information presented is as of a specific point in time. The report format is structured so that the total
of all assets equals the total of all liabilities and equity (known as the accounting equation). This is
typically considered the second most important financial statement, since it provides information about
the liquidity and capitalization of an organization.

 Statement of cash flows. Presents the cash inflows and outflows that occurred during the reporting
period. This can provide a useful comparison to the income statement, especially when the amount of
profit or loss reported does not reflect the cash flows experienced by the busines s. This statement may
be presented when issuing financial statements to outside parties.

 Statement of retained earnings. Presents changes in equity during the reporting period. The report
format varies, but can include the sale or repurchase of shares, dividend payments, and changes caused
by reported profits or losses. This is the least used of the financial statements, and is commonly only
included in the audited financial statement package.

When the financial statements are issued internally, the management team usually only sees the income
statement and balance sheet, since these documents are relatively easy to prepare.

Creating start-up budget for success:

One of the most important tasks the new business owner must tackle is to create a budget for the new
company, so you can see expected income and expenses and cash needs.

Since you have no past information to go on, you must create the budget using your best guess on
income and expenses (otherwise known as a profit and loss statement). This how-to will focus on
business with an inventory of products but it will also discuss a service business with no products.

Before you begin, consider why you need to spend the time to create a budget. Even if you don't need
bank financing, creating a budget is still a valuable exercise for any new and continuing business.

A budget is a key component of your startup business plan.

Some things to think about before you begin:

 What do you need to open the doors of your business on the first day?
 What will your fixed and variable costs be on a continuing basis?
  What can you contribute to keep costs low (furniture, for example)?
 What can you get as donations from friends and relatives?
 What can you do without (pictures, decorations)?

Keep your "must-haves" to the minimum. The less you need for your business startup, the sooner you
can start making a profit.

Step 1 - Plan for "Day One" of Your Business Startup

Begin by determining what you will "day one" of your business, in order to open the doors (or to take
your website live) and begin accepting customers.

A "day one" start-up budget can be broken down into four categories (depending on your situation,
some of the categories may not apply to your business.) The categories are:

Facilities costs for your business location, including all the costs of setting up a leased location for your
store, office, warehouse, or for buying a building. These costs may be called leasehold improvements or
tenant improvements. For example, you may need walls or a bathroom or a special secure area in your
office or building.

If you are working from home, you probably won't have location costs but you may have costs to fix up
a room in your home for an office or a small production area in your garage.

Facilities costs also include lease security deposits and signage.

Fixed assets (sometimes called capital expenditures), for furniture, equipment, and vehicles needed to
set up your location and start your business. Fixed assets also include computers and machin ery,
furniture, and anything for your office, store, or warehouse that is needed to set up your business.

Materials and supplies, like office supplies, advertising and promotion materials. You will need an
initial supply of these to get started.

Other costs, like the initial fees to an accountant to help you set up your accounting system,
local licenses and permits, insurance deposits, and legal fees to register your business with government
entities (like your state) and prepare operating documents.

In your listing of these startup costs, include items you are contributing to the business, like a computer
and office furniture. Note the cost of these items in your list so you can get credit for them
as collateral for a business loan.

Step 2 - Estimate Monthly Fixed and Variable Expenses

Fixed expenses are costs that don't change and aren't dependent on the number of customers you
have. Gather information on your fixed expenses each month. Here is a list of the most common
monthly fixed expenses:

 Rent
 Utilities
 Phones (business phones and cell phones
 Credit card processing - monthly fees (transaction fees are variable)
 Website service fees
 Equipment Lease Payments
 Office Supplies
 Dues and Subscriptions to professional publications
 Advertising, publicity, and promotion commitments, like social media or continuing online ads
 Business insurance
  Professional fees (legal and accounting)
 Employee Pay/Benefits (This category is semi-fixed, because you may be able to lower your
employee costs at times.)
 Miscellaneous Expenses
 Business Loan Payment

Then add variable expenses. These are expenses that will change with the number of customers you
work with every month. These might include:

 Postage, mailing, packaging, and shipping costs

 Commissions on sales
 Production costs
 Raw materials
 The wholesale price of goods to be re-sold
 Packaging and shipping costs.

If you have a service business, you may not need many variable expenses.

Step 3 - Estimate Monthly Sales

This is probably the most difficult part of a budget because you don't know what sales will be for a new
company. You might want to do three different sales projections:

 Best case scenario, in which you show your most optimistic estimate for first-year sales
 Worst case scenario, in which you show your least optimistic scenario, with very little sales
during the first six months to a year
 Likely scenario, somewhere in between. The likely scenario would be the one to show your
lender.

To be realistic in your budgeting, you must assume that not all sales will be collected. Depending on
the type of business you have and the way customers pay, you might have a greater or smaller
collections percentage.

Include a collections percentage along with your estimate of sales for each month. For example, if you
estimate sales in Month One to be Rs.50,000 and your collection percentage is 85%, show your cash for
the month to be Rs.42,500.

Calculate the variable costs of sales for each month based on sales for the month. For example, if your
estimated sales for a month are 2,500 units and your variable costs are Rs.5.50 per unit, total variable
costs for the month would be Rs.13,750.

Add monthly variable costs to monthly fixed costs to get total monthly costs (e xpenses).

If you are selling products, you might want to calculate your break-even point to include with your
budget. The break-even point shows when you will start making a profit on each sale.

Step 4 - Create a cash flow statement

Cash flow is literally the amount of money going into and out of your business each month.

Managing your cash flow is a key tool for keeping your new business afloat. And cash flow is more
important than profits. You can be making a profit on paper, but if you don't have money in the bank,
your business won't be able to pay its bills.
Begin your cash flow statement by combining total costs with total collections of money from all sales
for each month. Remember that sales and collections might be different, unless you have a cash or
credit business. For the cash flow statement, you'll need to use collections.

The monthly cash flow totals should look something like this:

 Monthly sales Rs.50,000

 Collected Rs.42,500
 Total fixed costs Rs.26,900
 Total variable costs Rs.13,750
 Total cash balance Rs.2,150

The Rs.2,150 represents your total cash balance for the month, not your profit.

By changing your sales figures using the three scenarios above, you can see the result in your cash
balance at the end of each month. This cash balance can give you information about your cash needs
and how much you might need to borrow for working capital.

Bootstrapping financing:

When you're thinking about how to raise money, one of the first things you should
consider is bootstrap financing--using your own money to get your business off the
ground. This is one of the most popular forms of internal funding because it relies on
your ability to utilize all your company's resources to free additional capital to launch
a venture, meet operational needs or expand your business.

Bootstrap financing is probably one of the best and most inexpensive routes an
entrepreneur can explore when raising capital. It utilizes unused opportunities that can
be found within your own company by simply managing your finances better.
Bootstrap financing is a way to pull yourself up without the help of others. You are the
one financing your growth by your current earnings and assets.

There are a number of advantages to using the various methods of bootstrap financing:

 Your business will be worth more because less money has been borrowed, and
therefore, no equity positions had to be relinquished.
 You won't have to pay the high interest on borrowed money.
 Coming from a stronger position (with less debt on hand), you look more
desirable to external lenders and investors when the time does come to raise
money through these routes.
 You can be creative in finding ways to raise profits, without having to look to
external sources. It will give you the added confidence of business savvy.

Trade Credit
The first source of business money we'll discuss is trade credit. Normally, a supplier
will extend you credit after you're a regular customer for 30, 60 or 90 days, without
charging interest. For example, suppose that a supplier ships something to you, and
that bill is due in 30 days but you have trade credit or terms. Your terms might be net
60 days from the receipt of goods, in which case you would have 30 extra days to pay
for the items.
However, when you're first starting your business, suppliers aren't going to give you
trade credit. They're going to want to make every order c.o.d (cash or check on
delivery) or paid by credit card in advance until you've established that you can pay
your bills on time. While this is a fairly normal practice, to raise money during the
startup period you're going to have to try and negotiate trade credit with suppliers. One
of the things that will help you in these negotiations is a properly prepared financial
plan.

The Cost of Trade Credit

Depending on the terms available from your suppliers, the cost of trade credit can be
quite high. For example, assume you make a purchase from a supplier who decides to
extend credit to you. The terms the supplier offers you are two-percent cash discount
with 10 days and a net date of 30 days. Essentially, the suppliers is saying that if you
pay within 10 days, the purchase price will be discounted by two percent. On the other
hand, by forfeiting the two-percent discount, you are able to use your money for 20
more days. On an annualized basis, this is actually costing you 36 percent of the total
cost of the items you are purchasing from this supplier! (360 ( 20 days = 18 times per
year without discount; 18 ( 2 percent discount = 36 percent discount missed.)

Cash discounts aren't the only factor you have to consider in the equation. There are
also late-payment or delinquency penalties should you extend payment beyond the
agreed-upon terms. These can usually run between one to two percent on a monthly
basis. If you miss your net payment date for an entire year, that can cost you as much
as 12 to 24 percent in penalty interest.

Effective use of trade credit requires intelligent planning to avoid unnecessary costs
through forfeiture of cash discounts or the incurring of delinquency penalties. But
every business should take full advantage of trade that is available without additional
cost in order to reduce its need for capital from other sources.

Factoring

This is a financing method where you actually sell your accounts receivable to a buyer
such as a commercial finance company to raise capital. A "factor" buys accounts
receivable, usually at a discount rate that ranges between one and 15 percent. The
factor then becomes the creditor and assumes the task of collecting the receivables as
well as doing what would've been your paperwork chores. Factoring can be performed
on a non-notification basis. That means your customers aren't aware that their
accounts have been sold.

There are pros and cons to factoring. Many financial experts believe you shouldn't
attempt factoring unless you can't acquire the necessary capital from other sources.
Our opinion is that factoring can be a very good financial tool to utilize. If you take
into account the costs associated with maintaining accounts receivable such as
bookkeeping, collections and credit verifications, and compare those expenses against
the discount rate you'll be selling them for, sometimes it even pays to utilize this
financing method. After all, even if the factor only takes on part of the paperwork
chores involved in maintaining accounts receivable, your costs will shrink
significantly. Most of the time, the factor will assume full responsibility for the
paperwork.

In addition to reducing your internal costs, factoring also frees up money that would
otherwise be tied to receivables. Especially for businesses that sell to other businesses
or to government, there are often long delays in payment that this would offset. This
money can be used to generate profit through other avenues of the company. Factoring
can be a very useful tool for raising money and keeping cash flowing.

Customers

Customers are another source of bootstrap financing, and there are several different ways to take
advantage of these valuable assets. One way to use your customers to obtain financing is by having them
write you a letter of credit. For example, suppose you're starting a business manufacturing industrial
bags. A large corporation has placed an order with your firm for a steady flow of cloth bags. The major
supplier from which you will obtain the material the bags is located in India. In this scenario, you obtain
a letter of credit from your customer when the order is placed, and the material for the bags is purchased
using the letter of credit as security. You don't have to put up a penny to buy the material.

In your personal financial dealings, you may have had a builder, or someone else working for you, ask
for money up-front in order to buy the materials for your job. That contractor used your money to get
started on the job. You were actually helping to finance that business. This is how customers can act as a
form of financing.

Real Estate

Another bootstrap financing source is real estate. There are several ways to take advantage of this
source. The first is simply to lease your facility. This reduces startup costs because it costs less to lease a
facility than it does to buy one. Also, when negotiating a lease, you may be able to arrange payments
that correspond to seasonal peaks or growth patterns.

If you enter a business for which you will need to buy the facility, your initial cost will increase but the
cost of the building can be financed over a long-term period of 15 to 30 years. Again, the loan on the
facility can be structured to make optimum use of your planned growth or seasonal peaks. For instance,
you can arrange a graduated-payment mortgage that initially has very small monthly payments with the
cost increasing over the lifetime of the loan. The logic here is that you have low monthly payments,
giving your business time to grow. Eventually, you can refinance the loan when time and interest rates
permit.

Another advantage that the outright purchase of the facility will provide you is continuing appreciation
of the property (hopefully) and the decrease of your principal amount to create a valuable asset
called equity. You can borrow against this equity. Lenders will often loan up to 75 or 80 percent of the
property's value once it's been appraised.

This applies to any private real estate you might own. If you have a desire to get into business and you
need startup capital you can't get in any other way, you may have to borrow against the equity in your
home or sell it altogether. If your home is appreciating in value, real estate is a good venue to choose. If
it's depreciating, it won't be quite as attractive.
Equipment Suppliers

If you spend a lot of money on equipment, you may find yourself without enough working capital to
keep your business going in its first months. Instead of paying out cash for your equipment, you can
purchase it with a loan from manufacturers; that is, you pay for the equipment over a period of time. In
this way, equipment suppliers are a source of bootstrap financing.

Two types of credit contracts are commonly used to finance equipment purchases:

1. The conditional sales contract, in which the purchaser does not receive title to the equipment until it
is fully paid for.

2. The chattel-mortgage contract, in which the equipment becomes the property of the purchaser on
delivery, but the seller holds a mortgage claim against it until the amount specified in the contract is
paid.

By using your equipment suppliers to finance the purchase of equipment you need, you reduce the sum
of money that you need upfront. There are also lenders who finance 60 to 80 percent of the equipment
value. And then, of course, the balance represents the borrower's down payment on a new purchase. The
loan is repaid in monthly installments, usually over one to five years, or the usable life of that piece of
equipment.

Leasing

Another thing for you to consider is to lease instead of purchasing. Generally, if you are able to shop
around and get the best kind of leasing arrangement when you're starting up a new business, it's much
better to lease. It's better, for example, to lease a photocopier, rather than pay Rs.3,000 for it; or lease
your automobile or van to avoid paying out Rs.8,000 or more.

Leasing has been around for a long time. It's common for businesses to lease real property for retail
facility, office space, production plant, farmland, etc. There are advantages for both the small-business
owner using the property or equipment (the lessee) and the owner of that property or equipment
(the lessor.) The lessor enjoys tax benefits and may gain from capital appreciation on the property, as
well as making a profit from the lease. The lessee benefits by making smaller payments, retains the
ability to walk away from the equipment at the end of the lease term, and may be able to negotiate build-
in maintenance provided by the lessor.

Still, there are many ways that a lease can be modified to increase your cash position. These
modifications include:

 A down payment lower than 10 percent or no down payment at all.

 Maintenance costs that are built into the lease package, thereby reducing your working-capital
expenses. If you needed employees or a repair person to do maintenance on purchased equipment, it
would cost you more than if you had leased it.
 Assignment of all executory costs such as insurance, property taxes, etc. While this will initially increase
your cash-flow, it will reduce the amount of taxable income the business generates.
 Extension of the lease term to cover the entire economic life of the property. Use of the property can be
guaranteed for as long as you wish to use it.
 A purchase option, which can be added to the lease allowing you to buy the property after the lease
period, has ended. A fixed purchase price can also be added to the option provisions.
 Lease payments that can be structured to accommodate seasonal variations in the business or tied to
indexes that track interest to create an adjustable lease.
Avoid the Need for Financing

Bootstrap financing really begins and ends with your attention to good financial management so your
company can generate the funds it needs. Be careful and aware when you buy. Make sure that you don't
go top dollar when you don't have to, and that you aren't in an overly expensive office or location, unless
it's really going to pay off in dollars and cents. If a new desk isn't necessary for your business, and you
have an opportunity to buy a used desk, then by all means do so.

Also, keep a close watch on operating expenses. If interest rates are high, it won't take too many unpaid
bills to wipe out your profits. At an 11- or 12-percent interest rate, carrying an unpaid Rs.10,000 is
costing you as much as Rs.120 per month.

One way to foster a profitable cash flow for your firm is to start each production order off on the right
track. Implement this three-step payment plan . Negotiate terms and conditions that require payments
when you want them. Profitable cash flow will occur when you establish and execute timely cash-flow
concepts into every order.

Optimal financing mix:

Finding the optimal mix of financing—the capital structure that results in maximum value—is a key
challenge you’ll have to face in starting and operating your business.

Your financial mix will typically be composed of two components: Debt and equity.

Using debt

Debt can take many forms, but for most entrepreneurs, it will take the form of bank loans or loans from
friends and family.

The main advantage of financing your business through debt is that your ownership interest doesn’t get
diluted. There are also tax advantages to using debt to finance your business. You can deduct the interest
charged on the money you borrowed from your business income and, if your business takes a loss, from
any other income you may have.

Debt can be a good way to add discipline to your management team. That’s because you’ll have to make
sure you’re managing the company in such a way as to have enough money available to pay your
obligations.

The risks of using debt financing

If your business cannot meet your debt obligations, you risk bankruptcy and losing the capital you or
your investors have injected into the company.

Using debt may also reduce your ability to borrow money to finance other projects and thus lead to the
loss of opportunities.
Using equity

For entrepreneurs, equity usually takes the form of owners investing their savings into the business.
Some businesses might also be able to attract private investors such as angel investors and venture
capital or private equity funds.
The main advantage of using equity financing is that you don’t have to repay it. This makes equity
financing a much safer choice than debt financing with respect to the risk of bankruptcy.
And since you don’t have to use your cash flow to repay the money you borrowed, you can use that
money to reinvest in your business and pursue growth. A low debt-to-equity ratio also makes it easier to
borrow money in the future if you need to.

The downside of equity financing

Equity financing dilutes ownership, which in turn could lower your level of control over decision-
making and reduce your share of earnings.

Evaluating your capital structure

To maximize the value of your business, you should try to find a financial mix that minimizes both
the cost of capital and the risk of bankruptcy. Your capital structure can quickly be evaluated by
calculating your debt-to-equity ratio.
The degree of stability in your business, its ability to provide suitable collateral as security, the interest
rate you are charged as well as legal or contractual restrictions on debt are all factors that will influence
your optimal debt-to-equity ratio.

For example, a company operating in an unpredictable business environment where a future downturn
could impact its ability to repay lenders should have a low debt-to-equity ratio.

Conversely, a company with long-term capital assets, such as buildings or equipment, and predictable
cash flows can be more highly leveraged.

The Funding Continuum

Creating a funding strategy is a challenging, yet crucial step for any business. Most experts agree that
the key to a successful financing plan is understanding the different sources of funding, and pursuing
those that are applicable to the company’s stage of growth.

The diagram above sets out the different sources of funding at each stage of growth.

There is no doubt that government funding is a critical source of funding for many organizations and
should be included in any business financing plan. It is an important source of financing in its own right
and can often be used to leverage additional private funds.

In particular, government funding is important for two reasons:

1. It is often designed to fill the gap when private sources of financing aren’t available, and can in
fact fill that gap; and

2. It can often be leveraged to attract private funding—investors will often respond more
favourably to an investment pitch from a company that has a government funding commitment
from a prestigious government sector funding agency. Wouldn’t you?
Personal Resources

Using personal resources is often the first step in starting a business and it shows investors that you are
committed to your business. Entrepreneurs can invest some of their own money through cash or
collateral assets, or get loans or use personal credit. Entrepreneurs can also devote non-cash or “in-kind”
resources to their business, such as time, expertise, services or a car, credit facility or home office.

Friends and Family

Friends and family may be willing to provide funding, and will often be patient in terms of repayment.
In exchange for funding they may seek equity in the company, but it’s wiser to consider the funding a
loan. Often friends and family are a great resource for in-kind services, such as helping to write a
business or financial plan, building a website and marketing. These services can save your business
thousands of dollars.

Government Funding

For early-stage companies, government funding will tend to be a pre-condition or path to private and
commercial financing. For mature companies, government funding will tend to supplement revenues and
corporate resources to finance a specific project that has strong public benefits, such as market-leading
R&D, job creation or regional economic development. There are many types of government funding,
including grants, repayable contributions, tax incentives, vouchers, and job creation programs. Searching
for government funding is facilitated by ordering a custom report on your top sources of funding.

Equity or Debt Crowdfunding

Crowdfunding is the process by which a business raises capital or debt from individuals using online
crowdfunding platforms. Each platform has its own variation of crowdfunding, so it is important to
verify that the terms provided by the operator are suitable for your purposes and are in line with the
regulations put in place by your regional securities authority.
Accelerators and Incubators

A business incubator is a centre that encourages early-stage businesses to accelerate their development
by providing an array of support services. Accelerators provide debt or equity financing in addition to
support services, such as office space, guidance and shared administrative services.

Angels

Angels are often wealthy individuals, entrepreneurs and business people or groups of investors who
provide capital to early-stage businesses for ownership equity or convertible debt. Traditionally, this
funding ranges from between Rs.25,000 and Rs.100,000 on a per angel investor basis. Along with
providing funding, angels often offer knowledge and guidance to businesses, and may ask for or be
willing to take a seat on the company’s board. Angels often focus on sectors in which they have
previously worked and can bring experience and networks, as well as cash, to the table. Because angels
expect a return on their investment – something more than they could get in the market or in the bank –
they look for companies that have compelling prospects for capital growth and returns. Angels often
have a relationship with the company they are investing in, usually through both industry and business
networks and geographic proximity. Because angels do not want to be inundated with requests for
capital, angels often work below the radar and can be difficult to identify.

Strategic Corporate Partners and Investors

Considering partnerships is an important part of developing a financing strategy as the right partners can
accelerate product commercialization and create market leadership. Traditionally, a strategic partner is a
large company or association that has a commercial interest in the project’s outcome. In their heyday,
Nortel and BNR were strategic partners for a generation of venture companies within the telecom sector,
often providing them with access to labs, office space, capital and knowledge in return for an ownership
stake. Very little is achieved in business without strategic partnerships. When searching for a strategic
partner, consider which complimentary businesses or associations could increase the value of your
product or service. Will your partner increase your credibility? Help customize your technology?
Introduce you to a new market? Then, think about how the partner will benefit from its relationship with
you in order to create a proposal of mutual value to both parties. In doing so, be a bit wary. Often there
is a clear inequality in bargaining power and many companies that are desperate for financing make
deals-giving up enormous ownership or control in return for relatively small sums of cash-and come to
regret them years later. This is why government funding can be so attractive, providing seed or R&D
financing without having to take on debt, or give up ownership of the company or its IP.

Venture Capital

Venture capital firms (VCs) provide significant financing to companies in return for significant
ownership stakes. Most will not take on the costs of due diligence unless the investment range or “deal
size” is Rs.5M+ and many start at Rs.50M+. The VC space or “sweet spot” is companies that present
high risk-and high reward. Generally, VCs seek an exit-a way to liquidate their shares through a
strategic sale or initial public offering (IPO) within five to 10 years. Venture capital is only applicable to
a tiny percentage of companies with business plans that suggest capital returns well in excess of the
public market returns. The VC portfolio is designed to complement yields from more reliable sources
such as bond markets. VCs tend to favour proprietary technology companies that almost uniquely have
the potential to generate these stratospheric returns. VCs generally invest in early-stage companies to
open themselves up to the longest possible growth run. VCs get intensely involved in their portfolio
companies — wouldn’t you if you had millions on the line? – and only entrepreneurs who are willing to
share and perhaps relinquish decision-making control over key decisions should consider going “the VC
route.” The positive side of that coin is that VCs bring extraordinary knowledge in areas that tend to
complement in-house expertise and their thirst for high returns can be of great financial benefit to the
company and its shareholders.

Banks and Commercial Lenders

Banks and commercial lenders should be the last stop on the funding continuum because they usually
deal in debt. Bankers look for companies with a strong business plan, a good track record and good
credit. Each bank presents its own advantages to customers, so businesses should review their options to
find the best fit.

Pitch:
If you’re raising money for your business, having an impressive elevator pitch deck is a key part of your
fundraising toolkit. A great pitch deck and presentation gets potential investors excited about your idea
and engages them in a conversation about your business, hopefully leading to an investment.
Remember, your pitch deck and pitch presentation are probably some of the first things that an investor
is seeing when they're starting to learn about your company and business idea.
And, because investments are rarely made after just one meeting, your goal is to spark interest in your
company. You want investors to ask for more after they hear your pitch, and not just show you to the
door.
How to use the pitch deck templates to make your pitch stand out:

1. Tell a story: Nothing will hook investors more than a story that they can relate to. That's why your pitch
deck should start by defining the problem you are solving. Make sure your audience can easily understand
that there's a real problem that your company can solve by making your story real and relatable.
2. Show that there's a market: You may have a great idea to solve a real problem, but unless enough
people have the problem, it's going to be hard for investors to consider your pitch. Your presentation
needs to show that there is a market, but don't exaggerate the size or make the classic mistake of saying
that you're going to, "get 1% of a trillion dollar market."
3. Keep your solution simple: You don't have a lot of space in a pitch presentation to go into detail about
your company and your product, so keep the description of your solution simple and straightforward.
Getting a second meeting with investors is your goal, so it's fine if not all questions are answered on the
slide that describes what your company does.
4. Show how you make money: Surprisingly, many pitch presentations skip one of the most important
parts—how your company actually makes money. Don't forget this critical slide in your presentation.
5. Show that you have traction: Traction is proof that you have a good idea. Whether you have early
customers, or other evidence that your target market is interested in your solution, make sure to share that
evidence. It can be in the form of a timeline of milestones you've achieved, or a list of evidence that your
company is likely to be successful.
6. Have a marketing and sales plan: You don't need to have all of the details fleshed out, but your pitch
deck should include some details on how you plan on marketing and selling your product. Investors will
want to know that you've thought about this aspect of the business.
7. Explain why you are the right person: You, and your team, are what investors are really investing in.
There are always great ideas, but only so many people who are qualified to turn those ideas into
successful businesses. Your presentation should show why you and your team are the right people to build
a successful business.
8. Know your numbers: Even though any forecast is just educated guess, potential investors will want to
understand your thinking on how the business will grow over time and what it's going to take to be
profitable. Be sure to include a brief summary of your sales forecast, expense forecast, and anticipated
profits. Just be sure to be realistic.
9. Know the competition: Every business has competition, so don't make the mistake of saying that you
don't have any. Your presentation should show who your competition is and why your product is better.
10. Have a spending plan: If you do get investment, how will you plan on spending it? Investors don't just
write checks because you have a great pitch deck. They are going to want to know how you plan on
spending their money to build your business.

Ways to give the perfect elevator pitch:

1. Identify Your Goal

Start by thinking about the objective of your pitch.

For instance, do you want to tell potential clients about your organization? Do you have a great new product idea
that you want to pitch to an executive? Or do you want a simple and engaging speech to explain what you do for a
living?

2. Explain What You Do

Start your pitch by describing what your organization does. Focus on the problems that you solve and how you
help people. If you can, add information or a statistic that shows the value in what you do.

Ask yourself this question as you start writing: what do you want your audience to remember most about you?
Keep in mind that your pitch should excite you first; after all, if you don't get excited about what you're saying,
neither will your audience. Your pitch should bring a smile to your face and quicken your heartbeat. People may
not remember everything that you say, but they will likely remember your enthusiasm.

Example:

Imagine that you're creating an elevator pitch that describes what your company does. You plan to use it at
networking events. You could say, "My company writes mobile device applications for other businesses." But
that's not very memorable!

A better explanation would be, "My company develops mobile applications that businesses use to train their staff
remotely. This results in a big increase in efficiency for an organization's managers."

That's much more interesting, and shows the value that you provide to these organizations.

3. Communicate Your USP

Your elevator pitch also needs to communicate your unique selling proposition , or USP.

Identify what makes you, your organization, or your idea, unique. You'll want to communicate your USP after
you've talked about what you do.

Example:

To highlight what makes your company unique, you could say, "We use a novel approach because unlike most
other developers, we visit each organization to find out exactly what people need. Although this takes a bit more
time, it means that on average, 95 percent of our clients are happy with the first beta version of their app."

4. Engage With a Question

After you communicate your USP, you need to engage your audience. To do this, prepare open-ended questions
(questions that can't be answered with a "yes" or "no" answer) to involve them in the conversation.

Make sure that you're able to answer any questions that he or she may have.

Example:

You might ask "So, how does your organization handle the training of new people?"

5. Put It All Together

When you've completed each section of your pitch, put it all together.

Then, read it aloud and use a stopwatch to time how long it takes. It should be no longer than 20-30 seconds.
Otherwise, you risk losing the person's interest, or monopolizing the conversation.

Then, try to cut out anything doesn't absolutely need to be there. Remember, your pitch needs to be snappy and
compelling, so the shorter it is, the better!

Example:

Here's how your pitch could come together:

"My company develops mobile applications that businesses use to train their staff remotely. This means that
senior managers can spend time on other important tasks.

"Unlike other similar companies, we visit each organization to find out exactly what people need. This means that,
on average, 95 percent of our clients are happy with the first version of their app.
"So, how does your organization handle the training of new people?"

6. Practice

Like anything else, practice makes perfect. Remember, how you say it is just as important as what you say. If you
don't practice, it's likely that you'll talk too fast, sound unnatural, or forget important elements of your pitch.

Set a goal to practice your pitch regularly. The more you practice, the more natural your pitch will become. You
want it to sound like a smooth conversation, not an aggressive sales pitch.

Make sure that you're aware of your body language as you talk, which conveys just as much information to the
listener as your words do. Practice in front of a mirror or, better yet, in front of colleagues until the pitch feels
natural.

As you get used to delivering your pitch, it's fine to vary it a little – the idea is that it doesn't sound too formulaic
or like it's pre-prepared, even though it is!

Prime Minister’s Employment Generation Programme (PMEGP)

Details of Scheme Eligibility Criteria Target Beneficiary

Any individual above 18 years of

age as on the date of making the
The maximum cost of the project/unit application can apply. The The scheme is implemented by
admissible in manufacturing sector is beneficiary must have passed at least Khadi and village Industries
RS.25 lakhs and in the business/ service VIII standard for projects costing Commission (KVIC) functioning
sector, it is Rs 10 lakhs. above RS. 10 lakh in the as the nodal agency at the national
Categories of Beneficiaries Rate of manufacturing sector, and above Rs. level. At the state level, the
Subsidy under PMEGP (of project cost) 5 lakh in the business/ service scheme is implemented through
Area(Location of project/unit sector. Only new projects are State KVIC Directorates, State
General Category 15% 25% considered for sanction under Khadi and Village Industries
Special 25% 35% PMEGP. SHGs (including those Boards (KVIBs), District
(including SC/ST/OBC/ belonging to BPL, provided that Industries Centres (DICs) and
Minorities/Women, they have not availed benefits under banks. In such cases KVIC routes
Ex-servicemen,Physically Handicapped, any other scheme), Institutions government subsidy through
NER, Hill and Border areas, etc. registered under Societies and designated banks for eventual
The balance amount of the total project Charitable Trusts are also eligible. disbursal to the beneficiaries/
cost will be provided by the banks in the Existing units (under PMRY, REGP entrepreneurs directly into their
form of term loan and working capital. or any other scheme of Government bank accounts.
of India or State Government are not
eligible.
Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT SME):

Details of Scheme Eligibility Criteria Target Beneficiary

Ministry of Micro, Small and Medium

Enterprises and Small Industries
Development Bank of India (SIDBI) jointly
established a Trust named Credit Guarantee
Collateral free loan up to a limit of Rs Fund Trust for Micro and Small Enterprises
Both existing and new
100 lah is available for individual MSE (CGTMSE) in order to implement Credit
enterprises are eligible
on payment of guarantee fee to bank Guarantee scheme for Micro and Small
under the scheme.
by the MSE. Enterprises. The corpus of CGTMSE is
contributed by Government of India and
SIDBI. 75% of the loan amount to the loan
amount to the bank is guaranteed by the
Trust Fund.,

Market Promotion & Development Scheme (MPDA)

Details of Scheme Eligibility Criteria Target Beneficiary

The Market Promotion and Development

Assistance Scheme (MPDA) has been launched
The Khadi institutions,
as a unified scheme by merging different
having valid Khadi
Modified MDA (MMDA) shall be schemes implemented by the khadi sector
certificate and
allowed @30% on the Prime cost of including publicity, marketing, market
categorised as A+,
Khadi (cotton, silk, woollen) and promotion and marketing development
A,B and C only are
polyvastra. assistance. Further, grant/subsidy will also be
eligible to avail MMDA
available for construction of Khadi plazas. The
grant from KVIC.
overall objective of the scheme is to ensure
increased earnings for artisans.
Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

Details of Scheme Eligibility Criteria Target Beneficiary

The main objectives of the scheme are

to:
. To organize the traditional industries
and artisans into clusters in order to
make them, competitive and provide
Scheme would cover three types of
support for their long term sustainability;
interventions namely:
. To provide sustained employment for
‘Soft Interventions’,
traditional industry artisans and rural
‘Hard Interventions and
entrepreneurs;
‘Thematic Interventions’.
. To enhance marketability of products
The project outlay for various clusters is
of such clusters by providing support for
as follows:
Non-Government new products, design intervention and
Heritage cluster (1000-2500 artisans*):
Organizations (NGOs), improved packaging and also the
Rs. 8 cr; Major Cluster
Institutions of the Central improvement of marketing
(500-1000 artisans*): Rs. 3 cr;
and State Governments and, infrastructure;
Mini cluster (Up to 500 artisans*):
Semi-Government . To equip traditional artisans of the
Rs. 1.5cr.
institutions, field associated clusters with the improved
* For NER/J&K and Hill States, there
functionaries of state and skills and capabilities through training
will be 50% reduction in the number of
Central Govt., Panchayati and exposure visits;
artisans per cluster.
Raj institutions (PRIs), and . To make provision for common
Soft Interventions: A maximum ceiling
similar agencies, with facilities and improved tools and
of Rs 25.00 lakhs (100% scheme
suitable expertise to equipments for artisans;
funding)
undertake cluster . To strengthen the cluster governance
Hard Interventions: As per project
development. systems with the active participation of
requirement (75% scheme funding)
the stakeholders, so that they are able to
Cost of Technical Agency is calculated
gauge the emerging challenges and
at 8% of Soft and Hard Interventions
opportunities and respond to them in a
(100% scheme funding). Cost of
coherent manner;
Implementing Agency/ Cluster
. To build up innovative and traditional
Executive is fixed at a ceiling of Rs.
skills, improved technologies, advanced
20.00 lakhs (100% scheme funding).
processes, market intelligence and new
models of public-private partnerships, so
as to gradually replicate similar models
of cluster- based regenerated traditional
industries.
 Uinit-4 : Entrepreneurial Leadership

Importance of building team:

No matter how brilliant your mind or strategy, if you‟re playing a solo game, you‟ll always
lose out to a team ~ Reid Hoffman, Entrepreneur Study says that about 60 percent of
startups fail to take off due to poorly constituted teams! This statistic establishes the fact that
behind every successful startup is a team of passionate individuals who work tirelessly
towards a common goal. Regardless of how awesome your idea may be, building a team for
your startup lays down the stepping stone to success.

Importance of team building in a startup

Teamwork makes the dream work, but a vision becomes a nightmare when the leader has a
big dream and a bad team" ~ John Maxwell, Author According to a study conducted by the
Rotman School of Management, the ability of a founder to attract a great team determines
the success of the startup. While the founder’s traits are vital, it is the diversity offered by an
experienced founding team that adds dimension to shape up the startup. As such, no
successful startup rests on the shoulders of an individual. It is the team that translates an
entrepreneur’s dream into a reality.

According to a study conducted by the Rotman School of Management, the ability of a

founder to attract a great team determines the success of the startup. While the founder’s
traits are vital, it is the diversity offered by an experienced founding team that adds
dimension to shape up the startup. As such, no successful startup rests on the shoulders of
an individual. It is the team that translates an entrepreneur’s dream into a reality.
 The following points outline the team building benefits that every founder should know about:

Execution of the great vision

Defines startup culture

Adds complementary skills

Support structure

Venture capitals assess your teams

Execution of the great vision

Your core team is responsible for breaking down the founder‟s vision into short-term,
realisable, and scalable goals. Each unit will take on separate roles and these goals will be
assigned to them. The team will put together their attitude, aptitude, skill, knowledge, and
competence to meet these small targets. Collectively, you will have multiple operations
taking place at the same time. On the other hand, you can focus on the larger goal and
macro-level decisions. As your startup touches one milestone after the other, the startup will
accelerate to success.

Defines start up culture

When it comes to team building, you are not only building a team in the workplace but you
are also establishing your startup‟s work culture. It is a combination of the vision, mission,
beliefs, values, and the natural personality of all the individuals involved. These qualities of
the core team form the foundational beliefs of the entire startup. Even years later, these
ideals will continue to permeate through the structural hierarchy of your company.

Adds complementary skills

There are multiple aspects of a business and not every founder is multi-faceted to tackle
them all. Therefore when it comes to building a team for a startup, it is imperative that the
gaps may be filled by an experienced team or individual. Having a perfect team that
balances out all the necessary skills will synergies your collective efforts.
Support structure

The story of a startup may be a roller-coaster ride of ups and downs. Team building and
leadership go hand-in-hand as you steer the ship of your startup through the uncharted
seas. Your team will act as your rudder and as your anchor. Hence, building a team at work
helps build your support system through this journey. The team will keep the moral high and
share the exhilaration of touching each milestone. A good team will stick by you even
through unprecedented setbacks, funds crunch, or delay in product development. Since the
core team shares your passion, they will always have your back. Their trust and belief in the
idea that founded the startup will drive everyone to work harder towards success.

Venture capitals assess your teams

This is one of the most practical reasons to build teams. VCs decide on funding a startup on
the basis of various factors, and having a solid core team is one of them. While the startup
idea may be sustainable, investors know that it is subject to market conditions, which are
dynamic in nature. Thus, they seek out startups backed by teams that possess the potential
to adapt to the changes.

How to build your team

"There‟s nothing wrong with staying small. You can do big things with a small team" ~ Jason
Fried, Entrepreneur

By far, it has been confirmed that building effective teams have a remarkable effect on the
startup. This fact just makes it all the more important to implement the best in class team
building strategies to avoid complications. Each of the team building stages has to be
thoroughly planned and well executed. Keeping everything in mind, here is a list of team
building steps that will guide you through the team building process:
 Identify the
key
… And then
Start with the co- positions
yourself founder(s)

Identify the Key Positions

Hiring

Training

Role assignment

Employee satisfaction
Start with yourself

As cliche as it may sound, the beginning of a team-building approach starts with you. Be
prepared to don a leader‟s hat and be unafraid to make some tough decisions. As you are
the head of the team, everyone will heavily rely on you. Being the epicentre of your startup,
you need to begin by analysing yourself. Since you will be playing a leadership role, you
need to identify the core strengths and weaknesses that you possess. Evaluate what you
bring to the table and how it will benefit your startup. Your skill set does not necessarily have
to be technical in nature. In fact, in the current scenario, soft skills garner a greater weight
than mere hard skills.

… And then the co-founder(s)

You may have noticed that founders and co-founders are often well-acquainted with each
other. They could be friends or roommates or work colleagues, or any other informal relation.
This may work really well for startups as it eliminates miscommunication due to familiarity
 with each other‟s work ethics. Such individuals have great chemistry and can work like a
well-oiled machine, which is important as there is a lot at stake.

However, successful startups stand out because of one common thing - they have
complementary founders and co-founders. One could be a technical whiz while the other is a
marketing expert.

Each founding member should contribute something essential to the startup. A good
example of complementary founders is in the case of Intel where Gordon Moore had
expertise in Chemistry while Bob Noyce was well-versed in Physics.

Identify the key positions

Once you have the top brass sorted, you need to identify the lower but significant rungs of
your startup. Normally, a startup would need the following types of team members for
building the basic blocks: An innovator for conceptualising the idea behind any product or
service A designer for designing and perfecting a product or a service; and An executor who
brings the product or service to life The principal positions in your startup could be in SEO,
research and development, programming, sales and marketing, project management, and
account management sectors. Identify the void and formulate a team composition. Prioritise
these sections on the basis of your startup‟s requirements and the corresponding budget.
Shortlist the candidates

While shortlisting the candidates, the answer to the following questions

will help you determine if the candidate is worth one‟s salt:

Does the candidate possess the right set of tools for your startup?

Will they fit in your startup‟s culture?

Are they passionate about what they do?

Hiring

After you have zeroed down on some qualifying candidates, you can proceed to the
interviews. An interview will give you an insight into their attitude towards their work. You can
also take this opportunity to discuss their salary expectations in the early stages of your
startup. At this stage, do not be shy from being picky.

Even if you are hiring a friend, make the employment formal by extending an offer of
appointment and other documentation. When it comes to hiring for a startup, follow the
mantra of “Less is more.” The team building objectives that come into play while hiring are
that you have to give preference to quality over quantity.
Training

Once the individuals have been on-boarded, team building training can get them in tune with
other members. Certain team building activities will focus on technical aspects while some
team building activities for corporates could stress on improving interpersonal
communication. On the whole, the team building workshop will help the new recruits to
acclimatise to your startup environment.

Role assignment

Now that the initial stage of the team building programme is almost complete, start by
assigning roles and responsibilities to the team members.

You can start by assigning small projects and increasing the complexity progressively. This
is one of the most reliable team building methods to test out the pressure handling capacity
and team involvement of the individuals.

Employee satisfaction

You may have worked hard towards building a winning team, but what happens next? To
ensure that the team members are motivated, you need to incentivise goal achievement.
Outline promotional aspects and career growth and development opportunities to get the
best from the team members. A happy team is a necessary ingredient for your startup‟s
success.

Constant assessment

If you are wondering how to build an effective team, the secret is continuous assessment.
Situations change and accordingly, so will the course of your startup and your requirements.
Further, knowledge gaps may creep up in due time, which will have to be plugged at the
earliest. Thus, assessing your team is an indispensable component of staying on top of your
game.

Attracting and retaining the right talent:

Successful businesses that have flourished and grown over decades, built enviable
reputations, have something in common. They all have a consistent record of delivering on
“pairs” of discrete parameters – Revenues and profits, market share and growth, products
and innovations, customer acquisition and retention, business ethics and practices and such.
What is also common to these companies, though not written about often, is the consistently
high quality of their human assets. As a company moves ahead on the path to greatness, its
workforce needs to acquire new skills, knowledge and ability to lead the way. Getting the
right talent might be easier. Grooming, growing and retaining them, is however a different
ball game altogether. This is the single-most important success mantra common to all the
great companies across the world.
Workforce and business environments have long since moved from the concept of
„employment for life‟. Today‟s workplaces are dominated by millennials for whom the current
role is often a stepping stone to career growth. For both old and new companies that seek to
join the pantheon of great companies, attracting and retaining talent is the biggest challenge.
Though financial remuneration plays a big role, HR‟s approach needs to be in tune with the
changing times.

Tips To Attract and Retain the Right People

Cognitive abilities, technical skills, domain expertise, experience et al can be assessed well
at hiring stage. Determining the level of passion, purpose and ambition and their match with
organisation‟s requirements is more of an art than science. Employee on-boarding process
plays a critical role in ensuring compatibility. Some of the best practices used in HR strategy
at great companies include:

Matching vision
statements to
actions

Rewards and Commitment on

career growth
recognition and development

Training and
Flexibility and mentoring
independence

Innovation,
creativity and Communication
handling and trust
challenges

* Matching vision statements to actions: An organisation‟s culture decides the team. Values
embodied in a company‟s vision determine the talent it will attract. A management that encourages
diversity and creativity will be a magnet for building a wider and deeper talent pool
* Commitment on career growth and development: Great companies provide defined
roadmaps, resources and infrastructure for professional and personal growth of people. Giving the
prospective/new employee a clear idea of growth possible over next 2/3 years will bring on board
enthusiastic people
* Training and mentoring: Companies that have successfully survived and grown over decades
have a strong culture of skilling and guiding their people continuously. An enabling environment
which encourages people to augment their skills, empowering them to self-build individual career-
paths, will always be a hot spot for talent
* Communication and trust: Transparency and consistency in dealing with employees is a
hallmark of a truly great company. Inculcating trust, creating a work environment based on mutual
respect, keeping communication channels open, with positive affirmations and regular two-way
feedbacks, promotes team work and cooperation, building a cohesive and united work force
 * Innovation, creativity and handling challenges: An environment that empowers people to
innovate and be creative builds a team of confident problem solvers. Conformity, though necessary
at times, is often overrated. Encouraging independent, out-of-box and diverse thinking within the
overall framework on an on-going basis fosters a culture of accepting responsibility and responding
smartly to challenges. Inspire the team to ideate. And watch the team flourish!
* Flexibility and independence: The Millennial workforce thrives on flexibility. Encourage
work-life balance. In a digitally connected world, flexible hours and work-from-home options
offer employees a choice. Delegating responsibilities and allowing autonomous decisions
creates an enviable workplace which attracts the best. Deliverables matter more than a rigid
insistence on work hours/location. Empathy plays an important role here
* Rewards and recognition: Feeling appreciated is a fundamental expectation of every
person. R&R is an implicit certificate of that appreciation which is cherished by every
employee. It is also a great motivation for people to continue working and to grow in the
company. An innovative and multi-faceted incentive program that includes financial
compensation, benefits and rewards such as gift cards and vacations, public
acknowledgement and recognition of contributions and performances is essential to retain
talent. And an inimitable, unique way of showing appreciation and recognizing an
employee‟s contribution is through personalized gifting. An exclusive gift card personalized
with the employee‟s name, for instance, would spell, loud and clear, the employee‟s
contribution and the appreciation and gratitude of the company

Qualifications, expertise and knowledge apart, the best people to have on a team are those
with the passion and drive to deliver, who are aligned and committed to the company‟s
values and vision. And these best practices encourage people to grow, seeking and
overcoming fresh challenges on the road to success.

Good Governance of the Board :

Board is the foundation of any organisation. They play a pivotal role in an organisation. Any
organisation success purely depends upon the Governance of the board.

1. Understand their role and responsibilities

Great boards are packed with board members who are really clear about their role and their
responsibilities to the organisation. They know they are there as directors, rather than an
executive team, and are committed to fulfilling their legal duties. There is a clear
understanding of the authority that lies with the board, and what has been delegated to
board committees or staff.
2. Lead, not manage
Great boards lead the organisation. They delegate effectively, have honest conversations,
are committed to the organisation, can inspire others and are creative and innovative,
particularly when it comes to problems solving.

3. Engage with others

Great boards talk, and more importantly, listen to others. They know what staff, investors,
funders and clients think of their organisation, and value their opinions. This is demonstrated
by stakeholders having a real say in the strategic direction of the organisation.

4. Provide strategic, rather than operational support

Great boards know the difference between strategy and operations, and stay much more in
the strategic realm. That‟s not to say they don‟t oversee performance. However, great
boards really focus on strategy and policy areas, and are confident that the staff has the
abilities, aptitudes and delegated authority needed to ensure operations run smoothly.
 Understand their role and responsibilities

Lead, not manage

Engage with others

governanace Provide strategic, rather than operational support

Have regular board turnover and great succession

planning
Good

Commit to ongoing learning and development

Commit to ongoing learning and development

Get the right information at board meetings

Work as a team

Challenge appropriately

Review their own performance

5. Have regular board turnover and great succession planning

We all have a tendency to resist change, particularly if you have a great board that’s working
well. However, study after study has shown that a more diverse board makes better long-
term decisions. Great boards plan for this by having fixed terms of office and regular board
turnover to introduce fresh thinking and new opinions.
Allied to regular board turnover is the need for strong succession planning. Great boards
have a balance between fresh, new board members, and those who have been there for a
while who hold knowledge of the history of the organization. Both are needed for a really
effective board.
Perhaps the most important task for a board is to choose the organization’s CEO. Having the
right person in this key role is vital for organizational success. Great boards plan for this by
having open communication with the current CEO, developing internal candidates, and
spotting potential external candidates.

6. Commit to on-going learning and development

There is no doubt that the best boards are those that are committed to ongoing development
of their own members, both as individuals and as a team. This ensures that knowledge is up
to date with modern governance requirements, that skills are continually developing, and it
also sets a great example for the rest of the organization from a „learning board‟.
7. Get the right information at board meetings
Great boards are those that know what information they need to make decisions, and insist
on getting it in the right format, and at the right time. They ensure that the senior
management team develops a robust reporting framework, and make sure information
presented is accurate, complete, focused and understandable.
8. Work as a team
The best boards we work with are those which have a clear sense of shared purpose, even
when they have healthy disagreements about the best course of action. Knowing that your
colleagues have the best interests of the organization at heart leads to great team spirit
among the board team. They also tend to enjoy their role a lot more!

9. Challenge appropriately
Whether senior managers are part of the board, or are reporting to the board, there is a need
for healthy challenge in the boardroom. Great boards have frank, open, and respectful
conversations to get the best results. The boards that develop a culture of healthy challenge,
both among board members and of the senior management team, make much better
decisions, as they test assumptions and the information presented to them.
10. Review their own performance
While a vital element of board work is ensuring the organisation as a whole is performing
well, it‟s also really important to review the work of the board regularly. Great boards carry
out a self-assessment review at least annually, and have it externally facilitated every 3
years. It‟s a great way of reminding everyone of their roles, reflecting on what‟s going well,
and getting agreement on the actions needed for further board improvement.

Role of the Board:

The standard for the Board do attempt to highlight the broad tasks that are pertinent to every
board and also the indicators of good practice that can help them reflect on how they are
fulfilling those tasks. Hence, it is argued, boards can be helped greatly by focusing on four
key areas:

 establishing vision, mission and values

 setting strategy and structure
 delegating to management
 exercising accountability to shareholders and being responsible to relevant
stakeholders

The effective board

Within a company, the board of directors is the principal agent of risk taking and enterprise,
the principal maker of commercial and other judgements. Discharging these responsibilities
means thinking not only about particular tasks but also about ways of working as a board,
and ensuring individual directors can be fully equipped to play their part. Again, there are
four particular areas worthy of time and energy:

 determining board composition and organisation

 clarifying board and management responsibilities
 planning and managing board and board committee meetings
 developing the effectiveness of the board
 Tasks of the board and indicators of good practice

Establish vision, mission and

values

Set strategy and structure

Delegate to management

Exercise accountability to
shareholders and be responsible
to relevant stakeholders

Establish vision, mission and values

 Determine the company's vision and mission to guide and set the pace for its current
operations and future development.
 Determine the values to be promoted throughout the company.
 Determine and review company goals.
 Determine company policies.

Set strategy and structure

 Review and evaluate present and future opportunities, threats and risks in the
external environment; and current and future strengths, weaknesses and risks
relating to the company.
 Determine strategic options, select those to be pursued, and decide the means to
implement and support them.
 Determine the business strategies and plans that underpin the corporate strategy.
 Ensure that the company's organisational structure and capability are appropriate for
implementing the chosen strategies.
 Determine the company's appetite for risk and to engage in the process of backing arobust
risk management programme focused in the company‟s business and the area(s) of its
activities.

Delegate to management

 Delegate authority to management, and monitor and evaluate the implementation of

policies, strategies and business plans.
 Determine monitoring criteria to be used by the board.
 Ensure that internal controls are effective.
 Communicate with senior management.
Exercise accountability to shareholders and be responsible to relevant stakeholders

 Ensure that communications both to and from shareholders and relevant

stakeholders are effective.
 Understand and take into account the interests of shareholders and relevant
stakeholders.
 Monitor relations with shareholders and relevant stakeholders by the gathering and
evaluation of appropriate information.
 Promote the goodwill and support of shareholders and relevant stakeholders.

Different board governance models for different ventures:

Operating a business in today’s society is increasingly complex and full of risks. The
complexity of the business world, combined with the current unstable economic climate,
places elevated demands on boards of directors in the nonprofit and for-profit worlds. These
are just a couple of reasons that boards need to select a board governance model that
aligns their work with the goals of the organization.

Governance is an amalgamation of policies, systems, and structures, along with a strategic,

operational framework that aligns organizational leadership to take action, so that they can
make effective decisions with accountability. A model for governance refers to how those
policies, systems, structures, and framework interface with each other and whether the
responsibility for them lies with the board as a whole, or with the individual board members.

Board governance models for nonprofit and for-profit organizations are as different as the
organizations that boards serve. Nonprofit organizations generally start up to serve a
humanitarian or environmental need. For-profit companies generate income for the
company, its employees, and its shareholders. While many board governance models can
be used for either nonprofit or for-profit entities, depending upon the needs of the
organization, certain types of models may be amenable to nonprofit organizations, while
other models are more appropriate for for-profit organizations. It‟s common for a board to
adopt a combination of board governance models that caters to the feature of the
organization and the composition of the board.

Non-profit Governance Models

Nonprofit boards keep the organization’s mission at the forefront when directing the affairs of
the organization. Incoming funds are used to support the organization’s work. Most board
members for nonprofit organizations serve on the board because of their passion and
commitment to a cause. While serving on a nonprofit board carries a certain level of honor
and prestige, board members need to take an active approach to overseeing the
organization to prevent problems and legal issues. Nonprofit boards hold responsibility for
fiduciary matters, as well as matters that have been delegated to others.
 Advisory Board Governance Model

Non-profit
Cooperative Governance Model
boards

Policy Board Model

Governance
Models
Traditional Model

Carver Board Governance Model

Profit Boards -
Competency Board Governance Model

There are five common board models for non-profit boards:

1. Advisory Board Governance Model

A CEO who founds an organization will soon find that he needs help in running the
organization. An advisory board serves as the primary resource for the CEO to turn for help
and advice. Members of an advisory board are trusted advisors who offer professional skills
and talents at no cost to the organization. Advisory boards may also be formed in addition to
an organization’s board to help and advise the board, as a whole. Advisory board members
typically have established expertise or credentials in the nonprofit’s field. An organization
that is visibly connected to an advisory board’s name can increase the organization’s
credibility, fundraising efforts, or public relation efforts.

2. Patron Governance Model

The Patron Model is similar to the Advisory Board Model. The main difference between the
two models is that the primary purpose of the board members under the Patron Model is to
perform duties related to fundraising. Patron Model boards are typically comprised of board
members who have personal wealth or influence within the field. The primary role of board
members under the Patron Model is to contribute their own funds to the organization and to
use their network to gain outside contributions for the organization. Under this model, the
board members have less influence over the CEO or organization’s board than in the
Advisory Board Model.
3. Cooperative Governance Model:

A board that operates without a CEO uses a Cooperative Model. The board makes
consensual decisions as a group of peers, making it the most democratic governance model.
There is no hierarchy and no one individual has power over another. The board exists only
because the law requires its formation. This model requires that each member be equally
committed to the organization and willing to take responsibility for the actions of the whole
board.

4. Management Team Model

The most popular governance model for nonprofit organizations is the Management Team
Model. This model is similar to how an organization administers its duties. Rather than hiring
paid employees to be responsible for human resources, fund-raising, finance, planning, and
programs, the board forms committees to perform those duties.

5. Policy Board Model

John Carver, author of “Boards that Make a Difference,” developed the Policy Board Model,
which quickly became a staple platform for nonprofits. The board gives a high level of trust
and confidence over to the CEO. The board has regular meetings with the CEO to get
updates on the organization’s activities. Under this model, there are few standing
committees. Board members should have a demonstrated commitment to the organization
and be willing to grow in the knowledge and abilities regarding the organization.

Many nonprofit organizations will adopt one main model, such as Carver’s Policy Board
Model, and add one or more boards to round out the needs of the organization. For
example, a health organization may form an advisory board to advise them and a charity
board to work on fundraising. Religious organizations operate under different rules than
other non-profits. Churches, faith missions, and other religious organizations may add a
religious board, so that they may be better stewards of their organization’s assets.

Corporate Governance Models

Adopting an appropriate governance model is only one step in setting the stage for good
governance. Organizations need to establish guiding principles and policies for the
organization, delegate responsibility and authority to individuals for enacting principles and
policies, and to identify a path for accountability.

There are five notable corporate governance models in today’s business establishments:

1. Traditional Model

The Traditional Model is the oldest model for corporate governance. It‟s a bit outdated by
today‟s standards, but it includes a useful template that continues to be used for establishing
articles of incorporation. The Traditional Model gives legal responsibility to the collective
board and the board speaks as one voice on all matters. The model identifies the structures,
but the board outlines the processes as stated in the bylaws.
2. Carver Board Governance Model

As noted in the section on nonprofit models, the Carver Model works for nonprofit and for-
profit organizations. The Carver Model places its focus on the “ends” of the organization‟s
purpose. This means the organization actively works towards what it needs to achieve or
what it needs to do to put itself out of business. Within defined limits, the board gives the
CEO the bulk of the responsibility for using the means to get to the ends.

3. Cortex Board Governance Model

The Cortex Model is a model that focuses on the value that the organization brings to the
community. The board defines the standards, expectations, and performance outcomes
according to the aspiration of the organization. Clarifying and setting outcomes to achieve
success become the primary duties of the board under this model.

4. Consensus Board Governance Model

The Consensus, or Process Model, is a form of the Cooperative Model that nonprofit
organizations use. It gives all board members an equal vote, equal responsibility, and equal
liability. The Consensus Model is appropriate for corporations without major shareholders.

5. Competency Board Governance Model

A corporate board that is interested in developing the knowledge and skills of the board
members will benefit from the Competency Model, a model that focuses on communication,
trust, and relationships to improve overall board performance. The organization‟s bylaws do
the work of outlining practices and strategies.

While many board governance models can be used for either nonprofit or for-profit entities,
depending upon the needs of the organization, certain types of models may be amenable to
nonprofit organizations, while other models are more amenable to for-profit organizations.
It’s common for boards to adopt a combination of board governance models that cater to the
features of the organization and the composition of the board.
 How to Assemble a Board of Advisers or How to set up a board of advisers
to help you run your small business

An advisory board is a rare species in the small-business ecology, yet assembling such a
board may be one of the most important steps a CEO can take to assure an enterprise's
success. Besides offering credibility and contacts, advisers working together provide
guidance sharpened by boardroom debate, something individual mentors can't match, says
Corey Hansen, a financial adviser specializing in small businesses at Smith Barney in
Bellevue, Washington. For family businesses, boards are invaluable, particularly when it
comes to the delicate matter of succession. "A board has the willingness to bring the subject
up, in a supportive and patient way," says John L. Ward,

Unlike a board of directors, which has formal legal authority over a company and a fiduciary
duty to its shareholders, an advisory board won't make decisions for you and has no
obligation to the owners or liability for the company's actions. That said, "if you're not willing
to execute the advice of the board, then you'd better not put one together," warns Tony
Eisenhut, managing director of KensaGroup, which forms companies to commercialize
technologies developed by universities. "Because the greatest disrespect to a board, having
given you a commitment of their time, is taking their time and doing nothing with it. Not only
will you lose credibility with that board but with future board members as well."

Building a Better Board

1. Whom Do You Want?

Though we often think of sound business advice as universal, a good board is tailored to the
opportunities and obstacles in the path of your specific company. Ward suggests starting the
process by defining your company's key success factors -- the characteristics that most
determine whether the business will thrive and the strategic challenges the company will
face.

The Right Level of Experience

"The advisory board should be at the level you want to go to, rather than the level you're at,"
says Hansen. Members, he adds, should have experience building a business, not merely
running one. Don't make the mistake of recruiting a highly visible executive from a big
company. "You want somebody who's beyond -- but just beyond -- where you want to be,"
says Eisenhut. "Billion-dollar experience might be great for attracting VCs, but if you're going
 for $10 million in sales, you want some $10 million to $20 million experience." You're looking
for people who know how to execute with the resources you have available. Though you
may not know personally someone who is a perfect fit, such people are probably closer than
you realize. Your local networks -- business organizations, Small Business Development
Centers, and professional advisers can provide the introduction.

The Right Number

A board should be made up of three to five outsiders. Two people "are always trying to find
mutual agreement," says Ward. With three, an adviser "can afford to take chances." And "a
group of more than five tends to dramatically reduce productivity," says Hansen. "With every
person you add, it becomes a geometric increase in interaction; you want to keep things
simple."

Whom to Avoid
Most counselors recommend against asking professional advisers, such as lawyers,
accountants, and bankers, to join your board, unless their fields dominate your strategy -- as
an intellectual property lawyer's would in the case of a tech company. Even in those
instances, though, don't impanels the pros you've hired (though there may be a place for
them in a more limited board; see "Advisory Alternatives"). Instead, find advisers "who have
full-time jobs and who are intrigued by what you're doing," suggests Meriby Sweet, director
of the Maine Small Business & Technology Development Center. "You want somebody
who's not making a living from your business." And a board generally shouldn't include
friends, family, or anyone with an emotional interest in the business.

2. How to Get Them Aboard

Solicit candidates with a two-page prospectus describing the business. Explain why you
want a board and what you're looking for. Then detail how it will operate, including
compensation. Describe your initial discussion with prospective members as exploratory,
because even as you solicit them you should be evaluating them. "Make sure that they're
sharp and experienced but also willing to share," says Eisenhut. And that they'll mesh with
the personalities in the room, including yours. It can be uncomfortable to kick someone off a
board, so as a fail-safe, institute short terms of service. "I typically ask for one year at a
time," says Hansen. "Those I want to keep, I ask to renew; those I don't, their terms expire."
The Pay The matter of compensation is tricky. Some experts say it's entirely unnecessary,
and nearly all warn against advisers who take the position for the money. "You can attract
 anybody for pay," says Hansen. "But you're not necessarily going to get the kind of advice
you want. You want people who are attracted to the type of business that you're building."
On the other hand, some form of compensation -- even token -- tends to sharpen an
adviser's sense of responsibility and commitment. Hansen suggests a modest payment once
an adviser serves for a sustained period -- three years, say. Ward's formula is to calculate
your base hourly or daily salary (excluding bonuses) and pay your board members for their
time at that rate. (Assume prep time is equal to meeting time.) "You're telling them, 'I value
your time as much as my own," says Ward. "And it should hurt enough that you make sure
to get as much out of the investment as you can."

3. How to Run the Meetings

Your board should meet two to four times a year. Try mightily to maintain the board's
strategic focus: If you can't meet at the company offices without interruption, borrow a
meeting room from another company or a hotel or restaurant. Meetings should seldom last
more than three hours.

Structuring the Conversation At each meeting, focus the board's attention on a few core
strategic matters. Don't follow the stultifying pattern, set by large corporations, of reading the
minutes, reviewing the previous quarter, etc. Eisenhut suggests devoting an hour to each of
two major topics and half an hour to each of two follow-up or future topics. That topic starts
the meeting. In any case, put the agenda in writing, and state clearly what you expect the
board to contribute to each item. Help your advisers prepare by sending a week in advance
the information they need to digest. Keep it short, thoughtful, and processed -- don't send
raw data. Between meetings, keep them updated on any developments.
It can be difficult for an entrepreneur to face a board frankly over difficult issues. But the
advisers, having been there themselves, will recognize this and guide the CEO, says Ward.
He suggests asking one to co-facilitate the meetings, at least to start. "After the first meeting,
it gets easier."

Advisers or Directors?

The Case for Directors: If you can spare the time and the expense of the reporting
requirements that accompany a statutory board of directors, then you might consider
establishing a directorate, says Northwestern's Ward. "When it's a legal commitment, the
directors feel a deeper, broader sense of responsibility to the company, to all the
 stakeholders, and the well-being of the company and the institution -- to the continuity of the
enterprise," he says. "Especially when there's an emergency."

The Case for Advisers: Still, Ward concedes that you'll get 80 percent to 90 percent of the
benefit of a directorate from informal advisers, and most of the long-time small-business
counsellors. Even a company with a corporate structure that requires a formal board of
directors might still want an advisory board, says Hansen. "On a board of advisers, I can
give my best advice and not be constrained by the possibility that it's going to come back
and bite me. It does change people's perspectives."

Advisory Alternatives

If you are unable to devote the time and resources necessary to a full-fledged board of
advisers, there are alternatives:

A board of professional advisers:

If nothing else, convene your paid, professional advisers (including, perhaps, your banker
and a consultant if you have one) a couple of times a year just to bring them up to date on
the business. Some entrepreneurs may find this threatening (and expensive, if the advisers
are billing). But, Ward is quick to add, "these are smart people who see lots of businesses
and are going to raise questions." Moreover, preparing for the presentation forces you to do
your homework. Because you are already a client, the arrangement can also ease disclosure
fears.

The ad hoc board:

 Instead of constituting a board with regular meeting times, approach potential mentors
individually, meeting with each for coffee occasionally or corresponding by e-mail. Or recruita
board for a short-term project. Either approach can serve as a tryout of sorts for a more rigorous
approach later on.
The task-specific board:

Some experts, including Eisenhut, believe advisory boards are best constituted for a specific
purpose and a limited time. In this view, when convening a board for a strategic objective,
"you need to have 60 percent to 80 percent of the framework in place," he says. "Then you
go back to the board and have them put the final touches on." Each member of the board
should have a particular area of expertise: finance, operations, purchasing and supply chain
logistics, and a variable--regulatory, say, or real estate knowledge.
Difference between Sole Proprietorship and Partnership

Sole proprietorship is a form of business organisation in which an individual

introduces his own capital, uses his own skill and intelligence in the management of
its affairs and is solely responsible for the results of its operations.

Partnership is a voluntary association of persons who have come together to carry

on business with the vision to earn profits.

Individually each person is known as partner, relationship between or among them

is known as partnership and name given to such a relationship is known as
partnership firm.

Particulars Sole Proprietorship Partnership

Governing There is no separate Act, which It is governed by Indian
Body governs sole proprietorship Partnership Act, 1932.
Registration There is no need for registration It is optional but it is desirable
that a partnership firm should be
registered
Number of It is owned and managed by one Minimum-2; Maximum-50.
members person
Agreement No agreement is required. Express or implied agreement
among the partners is essential.
Capital Owner contributes the entire capital Capital is contributed by the
contribution partners.
Sharing of –The owner earns all the profits and Profits and losses are shared by
profits/losses the partners in an agreed ratio.
bears all the losses.

Risk Bearing The owner bears all the risks The risks are borne by the
himself. partners jointly and individually.
Secrecy There is complete secrecy as it is a It is difficult to maintain full
secrecy as business secrets are
one man show.
known to all partners.
Management Full control of management in the Every partner can take active part
hands of the owner as he is the sole in the management of business.
judge of his business.
The legal costs for start-up:

Entrepreneurs might need legal advice from day one, when deciding how to
incorporate their business. Finding the right legal structure for your startup may
entail getting some legal input from an attorney. If you've got a new idea, new
product, or new technology you want to protect, you'll also want to make sure they
have the right intellectual property rights in place. And before your startup's first
sale, you might want to confirm you've got the proper permits for operations.

Services that can be hired for start-up:

After you have owned your own business for a while, you know how to run it.
You've probably done everything from answering the phones to hiring a general
manager, and you can justly claim to know your business inside and out, in general
and in detail. In case there's any operation you can't personally undertake, one of
your employees probably can. There are, however, exceptions to this rule. Highly
technical matters of law, accounting, management and marketing are usually best
handled by outside experts. Attorneys, accountants, and management and
marketing consultants have specialized knowledge about niche areas that you
couldn't--and shouldn't--hope to duplicate either personally or in the form of an in-
house employee.

Having access to legal, accounting and other expertise is important to help your
business grow as rapidly and efficiently as possible. Besides, your skills are needed
in helping your business expand.

Legal and Accounting Help

Why do you need a lawyer to grow? It's generally worthwhile to consult an

attorney before making any business decision that could have legal ramifications.
These decisions could include setting up or altering the terms of a partnership or
corporation, checking for compliance with regulations in new locales where you
hope to do business, negotiating loans to fund expansion, obtaining trademarks or
patents, preparing buy-sell agreements, tax planning, drawing up or revising
pension plans, reviewing business forms, negotiating and drawing up documents to
buy or sell other companies or real estate, reviewing employee contracts, exporting
or selling products in other states, and collecting bad debts. Many of the same
considerations apply to the use of accountants by growing firms. You should at
least consider running by an accountant any decision that could have accounting,
financial or tax ramifications.

You probably started your business with a lawyer and an accountant available to
answer questions, help draw up documents, and solve the inevitable problems of
launching a new company. Now that you've been underway for a while and success
 seems to be a given, shouldn't you keep working with the professionals who helped
you get here? Not necessarily, because the needs of a growing business are different
from those of a start-up. The professional service providers who aided you in the
beginning may not be good matches for your current needs.

Giving your professionals a check-up is largely a matter of assessing your need for
professional services and judging whether your current advisors measure up.
When you were starting up, issues such as the legal form your business would take-

-sole proprietorship or partnership, for example--were pressing. Today, you may

be looking at how you should structure an international subsidiary. The odds are
good that the attorney you started with won't be able to provide you with one-stop
service as your business grows.

Likewise, accounting problems in the beginning, when your business was funded
entirely with your own personal savings, may have revolved around little more
than making sure you filed state and federal payroll tax forms and income tax
returns properly. As you grow, however, you'll have to deal with depreciating
plant, equipment and real property; setting up financial controls; and, most likely,
the tax laws of entities beyond your startup state and city. Even if your original
accountant was a whiz at the jobs you needed early on, it's not likely that you and
your accountant will continue to grow in the same directions.

Marketing and Management Consultants

When it comes to marketing and management, many entrepreneurs are on firmer

ground than when venturing into accounting and law. But nobody knows
everything, even about general management and marketing. There's nothing
wrong with admitting that and seeking outside help in an effort to execute your
company's management and marketing as skillfully as possible. In narrow
disciplines, such as managing mergers and acquisitions and marketing to ethnic
groups, the use of an experienced specialist makes even more sense. And even if you
feel there's nothing you don't know about a topic, hiring outside experts will allow
you to do things you wouldn't ordinarily have time for and don't want to hire
permanent employees for.

Hiring a consultant is different from hiring almost any other kind of employee, and
it's different from purchasing most outsourced services, too. For one thing,
consultants are expensive. They can cost anywhere from several hundred to several
thousand dollars a day. Make sure you know what the consulting fees will be and
exactly what you will get for paying them. Consultants should provide a more
customized solution to your business problem than most outsourced providers.
Make sure any consultant you hire asks lots of questions about your needs and
listens to your answers. Be sure your description of your needs is specific, and
avoid consultants with preconceived notions about solutions.
Upgrading Professional Service Providers

Referrals are the best way to get a new professional service provider. The best
source of referrals is other entrepreneurs. Make a point of asking people in the
same business sector (service, retail, restaurant, manufacturing, etc.) for referrals.
You can also get good referrals from other professionals. That is, ask your
accountant for an attorney's name and your attorney for an accountant's name.
Other service providers, such as recruiters and bankers, are also good sources.
Don't forget to ask suppliers and customers. Trade associations can also be good
places to find names of professional service providers.

Q12. Explain the process of developing HR department?

Developing a new HR department is a challenging endeavour, but there are some

great advantages, such as the ability to determine and outline your company
culture from the ground up. When you start entirely from scratch, you can help set
the vision for your company and mould the company culture however you want.

Now that you’ve gone through our HR department start-up checklist, here are a few
more tips for developing a successful HR department.

 Create an intentional company culture: Your company culture will be

there whether you establish it or not. Company culture relates to the
personality of founders. Think about your company personality and how it will
mesh with your own personality.

 Determine core values: Define your company’s core values and let HR know
your expectations. A good HR department will recruit and hire new employees
that reflect your company values.
 Start at the top: Building a great company starts with developing and
retaining top talent in leadership.
 Simplify: Startups pivot and change quickly. Keep your HR department
simple so it can keep up and match the maturity of the organization. There’s no
need to complicate things.
 Match expertise with culture: Consider who you’re hiring for your HR
team just as you would any other position. Hire an experienced HR
professional who reflects your company culture.
 Stay consistent: Your HR department should reflect your company values,
mission, and vision in all of its job descriptions, benefits, and policies.
  Create leaders: HR should focus on hiring great leaders that are aligned with
company values and HR strategies. Great leaders train new leaders and
promote success within your growing start-up.
 Count the total cost: Having an internal HR department is great, but start-
ups should consider the overall cost and determine whether HR software can
help them streamline their operations and save on costly mistakes.
 Create a culture of learning: HR departments that implement training
programs from the get-go help create a strong company environment.
 Focus your energy on your people: Processes are necessary and
important, but they’re not everything. Streamlining processes can help HR
departments focus on employee development and maximizing human capital.
 Stay involved: Make sure you stay involved in the HR department processes.
While you shouldn’t micromanage HR, you should be aware of HR operations.
 Create a culture of clarity: HR can help create actions and policies that
promote trust and encourage transparency in the workplace.

Recruitment and selection for start-ups: Key steps to hire the best
candidate

Start-ups have several options available to them to fill a vacant position. If your
best business solution is to recruit additional staff, there are some key steps in the
recruitment and selection process to make sure you hire the best possible candidate.
These are listed below.

Note that your start up may also be able to meet your staffing needs by
reorganizing work, engaging consultants and contractors, and by training and
developing existing staff.

Recruitment: Attracting a pool of qualified candidates

Recruitment is about building a pool of qualified applicants. There are a few steps
to follow to recruit effectively:
 Define the job:

1. Develop a thorough understanding of the position you have available, so you

can target your recruiting efforts as clearly as possible
2. Document this information in a position description, which defines the title,
responsibilities and qualifications for the position
3. To build a strong job posting, include some information about your company
and how to apply
4. Before posting, determine the value of the position and create a salary range
5. Clarify performance expectations so you can share this at the appropriate
time during the selection process—typically during the interviews with your
top candidates
6. Based on your understanding of the job and labour market, determine
the best methods for sourcing qualified candidates
7. Use the most appropriate process to collect applications. If possible, limit
your recruitment to online submissions.
Doing so may be as simple as creating a separate email account to receive
applicant resumes. This account can send an automatic response to the applicant to
confirm the resume has been received.

Over time, as the volume of your startup’s recruitment activity increases, other
more sophisticated resume management and applicant tracking systems are
available (at a cost)

Selection: Finding the right fit

The selection process is about screening your candidates to determine the

right fit for your startup. The following steps will help you streamline your
selection process:

1. Review all resumes received, and screen out candidates who do not meet
your minimum requirements. If too many resumes remain, tighten your
screening criteria to focus on only top applicants.
How the candidate presents themselves in writing through the cover
letter and resume is important. Relevance, timeliness, and even grammar
and spelling can give you insights about the person

2. Create a shortlist focused on the top three to five candidates.

Consider conducting phone or video interviews to determine if a face-to-
face interview wouldbe a good investment of your time.
Questions asked during these phone or video interviews will help screen
out candidates on the basis of unrealistic salary expectations,
questionable employment history, and poor communication skills or
interest

3. Evaluate the shortlisted candidates to identify the leading

candidate(s). At this point, you are ready to conduct face-to-face
interviews.
Consider including an assessment test, if appropriate. When properly
administered, assessment tests can introduce a high level of fairness,
accuracy and validity into the selection process. However, it is difficult
for untrained people to judge the quality of psychometric testing tools.
And a lack of proper training is also a risk in the use of psychometric
testing. Use careful consideration when exploring whether to include
assessment testing

Once a leading candidate emerges, perform reference checks to validate

the results of your screening efforts. This will help your startup determine
if it would like to proceed with an offer of employment.
 Unit 5 – Business Plan

Business Plan:

A business plan is a written description of your business's future. It is a

document that describes what you plan to do and how you plan to do it.

Business plans can help perform a number of tasks for those who write and
read them. They're used by investment-seeking entrepreneurs to convey their
vision to potential investors. They may also be used by firms that are trying
to attract key employees, prospect for new business, deal with suppliers or
simply to understand how to manage their companies better.

Simply stated, a business plan conveys your business goals, the strategies
you'll use to meet them, potential problems that may confront your business
and ways to solve them, the organizational structure of your business
(including titles and responsibilities), and finally, the amount of capital
required to finance your venture and keep it going until it breaks even.

A good business plan follows generally accepted guidelines for both form
and content. There are three primary parts to a business plan:

 The first is the business concept, where you discuss the industry, your
business structure, your particular product or service, and how you
plan to make your business a success.
 The second is the marketplace section, in which you describe and
analyze potential customers: who and where they are, what makes
them buy and so on. Here, you also describe the competition and how
you'll position yourself to beat it.
 Cover page and table of contents

Executive summary

Description of the current situation

Basic Company Information

Product and Services

Management Team

Business Organisation

Future Goals

Vision Mission of the organisation

Description of opportunity and market:

Who are the buyers, who are the competitors competitive advantages

Description of the business model

Market Plan and Marketing StrategiesCompetitive analysis

Design and development plan

Operations and management plan

Financial Projection
Cash flow income statement profit and loss balance sheet

funding requirements,

Risk analysis

possible exit strategies.

Conclusion

Appendix
Résumés, literature, technical descriptions
  Finally, the financial section contains your income and cash flow
statement, balance sheet and other financial ratios, such as break-even
analyses. This part may require help from your accountant and a good
spread sheet software program.

Objectives of the Business Plan:

The goals and objectives of the business plan are

1. Outline how determined you are to succeed. If your determination isn’t

strong enough or you are nursing fears of obstacles ahead, you are less
likely to succeed.
2. Define whether you are willing to invest your own money and time for
no pay and carrying on with this sacrifice for many months, at least.
3. Define how many employees your business will have when your
efforts start paying off.
4. Define what you want your annual revenue to be after one year, five
years, ten years, and so on.
5. Define what would be your market share in that time frame you have
set.
6. Define whether your business will concentrate on just one niche or it
will offer a wide range of products and services.
7. Outline your plans for geographic expansion; local, national, or global.
8. Define whether you will be in charge of most tasks or you will delegate
most tasks to others.
9. Ask yourself if you are comfortable taking direction from others or
working with partners or investors who may have some input in the
management of the business.
10. Define whether your business will remain privately owned or it
will go public after some time.
Elevator pitch:

An elevator pitch is a brief, persuasive speech that you use to spark interest
in what your organization does. You can also use them to create interest in a
project, idea, or product – or in yourself. A good elevator pitch should last no
longer than a short elevator ride of 20 to 30 seconds, hence the name.

They should be interesting, memorable, and succinct. They also need to

explain what makes you – or your organization, product, or idea – unique.

Creating an elevator pitch

Some people think that this kind of thing is only useful for salespeople who
need to pitch their products and services. But you can also use them in other
situations.

For example, you can use one to introduce your organization to potential
clients or customers. You could use them in your organization to sell a new
idea to your CEO, or to tell people about the change initiative that you're
leading. You can even craft one to tell people what you do for a living

Creating an Elevator Pitch

It can take some time to get your pitch right. You'll likely go through several
versions before finding one that is compelling, and that sounds natural in
conversation.
Follow these steps to create a great pitch, but bear in mind that you'll need to
vary your approach depending on what your pitch is about.

1. Identify Your Goal

Start by thinking about the objective of your pitch.

For instance, do you want to tell potential clients about your organization?
Do you have a great new product idea that you want to pitch to an executive?
Or do you want a simple and engaging speech to explain what you do for a
living?
2. Explain What You Do
Start your pitch by describing what your organization does. Focus on the
problems that you solve and how you help people. If you can, add
information or a statistic that shows the value in what you do.
Ask yourself this question as you start writing: what do you want your
audience to remember most about you?

Keep in mind that your pitch should excite you first; after all, if you don't get
excited about what you're saying, neither will your audience. Your pitch
should bring a smile to your face and quicken your heartbeat. People may not
remember everything that you say, but they will likely remember your
enthusiasm.

Example:
Imagine that you're creating an elevator pitch that describes what your
company does. You plan to use it at networking events. You could say, "My
company writes mobile device applications for other businesses." But that's
not very memorable!

A better explanation would be, "My company develops mobile applications

that businesses use to train their staff remotely. This results in a big increase
in efficiency for an organization's managers."

That's much more interesting, and shows the value that you provide to these
organizations.

3. Communicate Your USP

Your elevator pitch also needs to communicate your unique selling
proposition , or USP.
Identify what makes you, your organization, or your idea, unique. You'll
want to communicate your USP after you've talked about what you do.

Example:
To highlight what makes your company unique, you could say, "We use a
novel approach because unlike most other developers, we visit each
organization to find out exactly what people need. Although this takes a bit
more time, it means that on average, 95 percent of our clients are happy with
the first beta version of their app."

4. Engage With a Question

After you communicate your USP, you need to engage your audience. To do
this, prepare open-ended questions (questions that can't be answered with a
"yes" or "no" answer) to involve them in the conversation.

Make sure that you're able to answer any questions that he or she may have.

Example:

You might ask "So, how does your organization handle the training of new
people?"

5. Put It All Together

When you've completed each section of your pitch, put it all together.

Then, read it aloud and use a stopwatch to time how long it takes. It should
be no longer than 20-30 seconds. Otherwise, you risk losing the person's
interest, or monopolizing the conversation.

Then, try to cut out anything doesn't absolutely need to be there. Remember,
your pitch needs to be snappy and compelling, so the shorter it is, the better!

Example:

Here's how your pitch could come together:

"My company develops mobile applications that businesses use to train their
staff remotely. This means that senior managers can spend time on other
important tasks.

"Unlike other similar companies, we visit each organization to find out

exactly what people need. This means that, on average, 95 percent of our
clients are happy with the first version of their app.

"So, how does your organization handle the training of new people?"
6. Practice
Like anything else, practice makes perfect. Remember, how you say it is just
as important as what you say. If you don't practice, it's likely that you'll talk
too fast, sound unnatural, or forget important elements of your pitch.
Set a goal to practice your pitch regularly. The more you practice, the more
natural your pitch will become. You want it to sound like a smooth
conversation, not an aggressive sales pitch.

Make sure that you're aware of your body language as you talk, which
conveys just as much information to the listener as your words do. Practice in
front of a mirror or, better yet, in front of colleagues until the pitch feels
natural.
As you get used to delivering your pitch, it's fine to vary it a little – the idea
is that it doesn't sound too formulaic or like it's pre-prepared, even though it
is!

Ways of presenting B-Plan:

Competition is fierce and many ambitious individuals have the same vision of
success as you do. And the best place to start beating the competition (after
coming up with a killer idea) is with a well laid out business plan.

Now if you’ve looked into the topic, then you know that there’s a lot of debate
on whether or not the traditional business plan is still effective. For budding
entrepreneurs today, the business plan is out dated, overly complex and
unnecessary. This leads us to ask the obvious question: If you still need to map
out your business idea for others, where does this leave you?
If you’re looking to create a business plan that can impress investors, here are
some modern ideas and innovative services you should consider.

Use A PowerPoint Slide Deck For Effective Pitch Meetings

PowerPoint has always been the tool of choice for presenting ideas. Why not
use it for pitching your business?
Walking potential investors through a PowerPoint presentation on your iPad can
be very effective. Take Tim Young, founder of Social cast, for example. He
used 5 slides for a business pitch in 2010 and managed to raise over 10 million
in investment funds for 2 startups.
From his experience, he found that a presentation can help your pitch because
“by sharing a screen and sitting in close proximity to each other, the
environment naturally becomes more comfortable and relaxed.” Certainly an
idea worth considering if you get nervous while presenting.

Create A Successful Business Model With LaunchBoard

With Launch Board, you can create, both simple or complex business models in
no time. The tool is a perfect solution when you need to define your business
and understand your customers. With several important features, such as
analyzing data and deciding the best way to move forward, the tool has all the
necessary options for any companies to succeed.

Image Source: LaunchBoard.io

You can track your team’s progress with an easy access to members KPI’s and
the ability to get involved in every decision-making process. Discover and
develop new market opportunities, brainstorm and test ideas, organize files
quickly and make all information understandable to everyone.
Use A Lean Canvas For Concise Business Plans
Just because your business plan is short doesn’t mean it isn’t well thought out.
When you create one with Lean Stack, you can boil down the essentials down to
a one page blue print for quick at-a-glance reading.
Using a Lean Canvas is best for those situations where you’re making a pitch to
investors who have very little time and can’t go through all the nitty-gritty
details. This is a paid service, but offers free 30-day trials for both individual
and team plans.

Grow Your Busines With Strategyzer

Image Source: Strategyzer.com

With Strategyzer’s business model canvas, you are getting a platform and
services that understand their customers. The numbers speak for themselves —
over 5 million active users. With Strategyzer you can easily create better
products and quickly grow your business. Moreover, with this app, you can
analyze any business idea and identify its market potential. It offers training
options for the entire companies or simply one person.
Create A Visual Business Plan With Pinterest
This idea may go against what you know about best business plan practices, but
using Pinterest can be a creative way of visualizing your idea for others. In fact,
Tim Berry, angel investor, business planner and entrepreneur, stands behind the
idea.

According to him, a business plan created with Pinterest is more accessible

than a slide deck and is helpful in steering your business in the right direction.
This method doesn’t describe your business; it focuses on the output of the plan.
As Tim Berry points out, “a business plan is worthwhile because of the
decisions that result from it. If the Pinterest plan helps you organize a team and
set the main points so you can move forward logically, why not?” I think that
sums it up exactly.

Use Live Plan For Easy To Read Business Plans

Like the other suggested ideas, Live Plan tries to combine the serious nature of
business plans with easy to read formats. It offers everything needed to keep
your financials, business pitch and plan in check with an admin dashboard and
support for team collaboration.

LivePlan Explainer from Palo Alto Software, Inc on Vimeo.

Live Plan makes it easy for you to forecast and prioritize the main financial
elements of your business strategy like value propositions, key partnerships,
cost structure and so on. This service is perfect for pitching a concise business
plan investors and banks can instantly understand.

In this day and age, packaging and presenting your business plan effectively is
becoming increasingly important if you want to stand out
Creating mind map for B- Plan:
Tips for drafting Business plan:

Think about what products and services you will provide, how you will
provide those items, what you need to have in order to provide those items,
exactly who will provide those items... and most importantly, whom you will
provide those items to.

Consider our bicycle rental business example. It's serves retail customers. It
has an online component, but the core of the business is based on face-to-face
transactions for bike rentals and support.

So you'll need a physical location, bikes, racks and tools and supporting
equipment, and other brick-and-mortar related items. You'll need
employees with a very particular set of skills to serve those customers, and
you'll need an operating plan to guide your everyday activities.

Sound like a lot? It boils down to:

What you will provide

What you need to run your business

 Who will service your customers, and

 Who your customers are

In our example, defining the above is fairly simple. You know what you will
provide to meet your customer's needs. You will of course need a certain
quantity of bikes to service demand, but you will not need a number of
different types of bikes. You need a retail location, furnished to meet the
demands of your business. You need semi-skilled employees capable of
sizing, customizing, and repairing bikes.

And you know your customers: Cycling enthusiasts.

In other businesses and industries answering the above questions can be more
difficult. If you open a restaurant, what you plan to serve will in some ways
determine your labor needs, the location you choose, the equipment you need
to purchase... and most importantly will help define your customer. Changing
any one element may change other elements; if you cannot afford to purchase
expensive kitchen equipment, you may need to adapt your menu accordingly.
If you hope to attract an upscale clientele, you may need to invest more in
purchasing a prime location and creating an appealing ambience.

So where do you start? Focus on the basics first:

 Identify your industry: Retail, wholesale, service, manufacturing, etc.

Clearly define your type of business.
 Identify your customer. You cannot market and sell to customers until
you know who they are.
 Explain the problem you solve. Successful businesses create customer
value by solving problems. In our rental example, one problem is
cycling enthusiasts who don't--or can't--travel with bikes. Another
problem is casual cyclists who can't--or choose not to--spend
significant sums on their own bikes. The rental shop will solve that
problem by offering a lower-cost and convenient alternative.
 Show how you will solve that problem. Our rental shop will offer
better prices and enhanced services like remote deliveries, off-hours
equipment returns, and online reservations.

If you are still stuck, try answering these questions. Some may pertain to
you; others may not.

 Who is my average customer? Who am I targeting? (Unless you plan

to open a grocery store, you should be unlikely to answer,
"Everyone!")
 What problem do I solve for my customers?
 How will I solve that problem?
 Where will I fail to solve a customer problem... and what can I do to
overcome that issue? (In our rental example, one problem is a potential
lack of convenience; we will overcome that issue by offering online
reservations, on-resort deliveries, and drive-up equipment returns.)
 Where will I locate my business?
 What products, services, and equipment do I need to run my business?
 What skills do my employees need, and how many do I need?
 How will I beat my competition?
  How can I differentiate myself from my competition in the eyes of my
customers? (You can have a great plan to beat your competition but
you also must win the perception battle among your customers. If
customers don't feel you are different... then you aren't truly different.
Perception is critical.)

Once you work through this list you will probably end up with a lot more
detail than is necessary for your business plan. That is not a problem: Start
summarizing the main points. For example, your Business Overview and
Objectives section could start something like this:

History and Vision

Blue Mountain Cycle Rentals is a new retail venture that will be located at
321 Mountain Drive, directly adjacent to an extremely popular cycling
destination. Our initial goal is to become the premier provider for bicycle
rentals. We will then leverage our customer base and position in the market
to offer new equipment sales as well as comprehensive maintenance and
service, custom equipment fittings, and expert trail advice.

Objectives

1. Achieve the largest market share bicycle rentals in the area

2. Generate a net income of $235,000 at the end of the second year of
operation
3. Minimize rental inventory replacement costs by maintaining a 7%
attrition rate on existing equipment (industry average is 12%)

Keys to Success

 Provide high quality equipment, sourcing that equipment as

inexpensively as possible through existing relationships with
equipment manufacturers and other cycling shops
 Use signage to attract visitors traveling to the national forest,
highlighting our cost and service advantage
  Create additional customer convenience factors to overcome a
perceived lack of convenience for customers planning to ride roads and
trails some distance away from our shop
 Develop customer incentive and loyalty programs to leverage customer
relationships and create positive word of mouth

You could certainly include more detail in each section; this is simply a
quick guide. And if you plan to develop a product or service, you should
thoroughly describe the development process as well as the end result.

The key is to describe what you will do for your customers--if you can't, you
won't have any customers.