MOVING FROM AN IDEA TO

ENTREPRENEURIAL FIRM
MOD-3
 Creating a new venture Team
• The group of people who start a firm is an
important part of the firm’s business
concept. A well conceived business plan
cannot get out of ground unless a firm has
the leaders and personnel to carry it out.
• Create a team (Production, Finance,
Marketing, Administration)
• Often, several start-ups develop what is
essentially the same idea at the same time.
* When this happens, the key to success is
not the idea but the ability of the initial
founder or founders of the firm to put
together a team that can execute the idea
better than anyone else. How it is possible?
• *At the same time- same concept, mission,
vision, objective is required.
• *and to fulfill this a leader is required to
execute the ideas.
• The characteristics of the founder or founders of a firm
and their early decisions have a significant impact on the
way a firm is received and the manner in which the new
venture team take shape.
• The size of founding team and qualities of the founder or
founders are the two most important issues in this
matter.
• Eg: Flipkart an E-Commerce co. (Founder Sachin Bansal
& Binny Bansal) with 30000 employees.
• Advantage: Burden share, Idea share( but going into
same directions)
 Size of the Founding Team
• The first decision that most founders face
is whether to start a firm on their own or
whether to build an initial founding team.
Studies show that more than one
individual starts 50 to 70 percent of all
new firms.
• Advantage of team: more ideas, more
networking.
• It is generally believed that new ventures
started by a team have an advantage over
those started by an individual because a
team brings more talent, resources, ideas,
and professional contacts to a new
venture than does a sole entrepreneur.
• In addition, the psychological support that
cofounders of a new business can offer
one another is an important element in the
firm's success.
 Advantage of having a team
• Team have worked together before, as
opposed to the team who are working
together for the first time, have an edge.
• If people have worked together before, the
team trust each other.
• They tend to communicate with one
another more effectively.
• eg: Core Indian cricket team
• Bench strength: Sanju samson, Mayank
agarwal, Abhinav manohar etc.
• Different point of view regarding technology,
hiring decision, competitive tactics, and other
important activities.
• Note : A founding team should not be too big.
A founding team larger than 4 people is
typically too large to be practical.
• Disadvantage: Different ideas, expertise,
groupism, Post & Power*, stake share,
conflict on decision* etc..
• *Late Syrus Mistry: Shapoorji Palan ji group,
Ex. Chairman TATA Group
 Disadvantage of having a team
• If two or more people start a firm as equals,
conflict can arise when a firm need to
establish a formal structure and designate
one person as CEO / chairman /Director etc..

Note :
A founding team should not be too big. A
founding team larger than 4 people is typically
too large to be practical.
 Recruitment
• Once the decision to launch a new venture
has been made, building a management
team and hiring key employees begins.
Start-ups vary in term of how quickly they
need to add personnel.
• In some stances, founders work alone for
a period of time while the business plan is
being written and the firm start to take
shape. In other instances, employees are
hired immediately.
• Founder may differ on the task of
recruiting and selecting key employees.
– Networking to identify key positions. Eg:
Linkedin
– Executive search firm. Eg: Naukri.com,
Monster. Com, etc..
• Initial hire is important, and firm may hire
a CEO rather than giving this position to
founder member.
• Eg: By hiring Executive GM of Taj Hotel as
a CEO
• Advantage: Specialized skill, Knowledge,
Networking etc..
 Professional Advisors
• A growing number of startup is forming
Advisory Board to provide them direction
and advice.
• An advisory Board is a panel of experts who
are asked by a firm’s manager to provide
counsel and advice on an ongoing basis.
• EG: IIM chairman usually comes under
MHRD
• IIM Ahmadabad (advisor) : Kr. Mangalam
Birla
• It possess no legal responsibility for the
firm and give nonbinding advice.
• It can be set for general purpose as well
as to address a specific issue or need.
 Guideline to organizing a Board of
Advisers
• First, a board of advisers should not be
organized just so a company can boast of
it. Advisers will become quickly
disillusioned if they don't play a
meaningful role in the firm's development
and growth.
• Second, a firm should look for board
members who are compatible and
complement one another in terms of
experience and expertise. Unless the
board is being set up for a specific
purpose, a board that includes members
with varying backgrounds is preferable to
a board of people with similar
backgrounds.
• Finally, when inviting a person to serve on
its board of advisers, a company should
carefully spell out to the individual the
rules in terms of access to confidential
information. Some firms ask the members
of their advisory board to sign
nondisclosure agreements*. This type of
requirement varies on a firm-to-firm basis.
* Confidential matter/Source of funding etc..
• One of the biggest challenges in managing
an advisory board is finding a time when all
the board members can meet. To deal with
this challenge, entrepreneurial companies
must often find innovative ways to make it
more convenient for the board members to
meet.
• Solution: video conferencing, virtual
meeting etc..
 Assessing Financial Strength
• Most entrepreneurial firms - whether they
have been in business for several years or
are start-ups have four main financial
objectives : Profitability, Liquidity,
Efficiency, and Stability.
• Profitability : Ability to earn profit.
Eg: Purchase/manufacturing cost: Rs.100/-
Sale price: 150/-
• Liquidity : Ability to meet short term
financial obligations like staff salary,
production cost, marketing, advertisement
etc., and for that
you should have cash in your hand.
• Efficiency : How productively a firm utilizes
its assets relative to its revenue and its
profit & for that try to keep it rolling (rs.100
to 150) and also try to reduce the
production cost(rs.100 to 90)
• Stability : It is the strength and vigor of the
firm’s overall financial posture and be
vigilant & keep an eye on Production, Sales,
Govt. legislations (switch to plastic bag to
paper bag or other available option
immediately)
 FINANCIAL FORECASTING
• Financial forecasting is the process of
estimating* or predicting how a business will
perform in the future. The most common type
of financial forecast is an income
statement(sales history, 2 yrs, 5 yrs, etc);
however, in a complete financial model, all
three financial statements are forecasted.

*Financial forecast for co. in next year turnover

(1000 crore / 1500 crore)
Six Steps to Financial Forecasting in
Business
• Step 1: Define Revenue Forecast (quarterly/ monthly/
yearly)
• Step 2: Create a 12-month Revenue. ideally it should be
12 months.
• Step 3: Add Direct Costs. (fix expenses/variable
expenses)
• Step 4: Add Fixed Expenses( salary, stationary, electricity,
daily expenses etc.)
• Step 5: Add “Discretionary/Variable” Fixed Expense.eg:
RBI Rapo rate @5% that will effect your loan amount
similarly Dollar against Rupees.
• Step 6: Add Other Items That Impact Cash. . Eg:
changing in crude oil price, petrol price increase /
decrease
 PRO FORMA
• A pro forma* financial statement* leverages
hypothetical data or assumptions about
future values to project performance over a
period that hasn't yet occurred. In the online
course Financial Accounting, pro forma
financial statements are defined as
“financial statements forecasted for future
periods.
* Written data, profit, loss, Investors,
shareholders, Future prospect for trust
building of investors.
• There are three major pro forma
statements:
• Pro forma income statements (income
from all sources)
• Pro forma balance sheets.(debit, credit)
• Pro forma cash flow statements.(liquid
transaction)
 LEGAL ETHICS
• Principles of legal ethics, whether written or
unwritten, not only regulate the conduct of
legal practice but also reflect the basic
assumptions, premises, and methods of the
legal system within which the lawyer operates.
Eg: Legal ethics- To regulate the organization
there is a legal ethics which is based on basic
assumptions.
Eg: left hand drive car in Europe, Right hand drive
in India
• Premises: Europe, India
• Legal system: Eg: “Declaration” Under the
jurisdiction of Ranchi high court.
• Ethics/ morality:
• Cigarette smoking is injurious to health
• Gambling is not good/ Rummy circle
promote gambling with a note to market
risk.
 Lead by Example

• Leading by example is the most important

thing that any entrepreneur, manager, or
supervisor can do to build a strong ethical
culture in their organization for staff/
employees .
• Communicate ethics as a priority
• Set a good example of ethical conduct
• Keep commitments
• Provide information about what is going
on
• Support following organizational
standards
• Employees also have responsibilities. The
most important things that employees can
do to support a strong ethical culture in an
organization and to obey the leader.
• Consider ethics in making decisions
• Talk about ethics in the work (they) do
• Set a good example of ethical conduct
• Support following organizational
standards
 Establish a Code of Conduct

• A code of conduct (or code of ethics) is a

formal statement of an organization's
values on certain ethical and social issues.
The advantage of having a code of conduct
is that it provides specific guidance to
entrepreneurs, managers, and employees
regarding expectations of them in terms of
ethical behaviour.
• Eg: BIT, Power driven vehicle is strictly
prohibited inside the campus.
 choosing an attorney
• Much like CA, accountant, Legal advisor,
Company secretary, you should approach
choosing an attorney wisely. Not only will
you be sharing confidential information
with this person, but you will also be
entrusting them to offer you proper legal
advice and guide you through a situation
you wouldn’t otherwise be able to navigate
on your own.
Here are 10 factors you should think
about when searching for a lawyer:

• 1. Long or short term?

• Before you begin looking online, or asking
colleagues, friends, or family for referrals,
you need to address your own needs first.
Why do you need an attorney? Do you have
a legal problem that you cannot solve on
your own? If so, would a professional be
able to help?
 2. Area of law

• Lawyers tend to specialize in certain areas

of law, as it is a very large field of study,
similar to medicine. Some cover real
estate law, while others pursue business,
family, intellectual property, immigration,
employment, accident/injury, bankruptcy,
criminal, or civil rights law.
 3. Are they highly regarded?

• When you hire someone to perform a service

or offer advice, you want to ensure that they
know their stuff. You may need to ask for
referrals from people who have worked with
them before. You can also seek out referral
services online who can pair you with a
locally certified lawyer suited to your needs.
• Personal recommendations or connections
can also be valuable, such as friends or family
who have worked with a specific attorney.
 4. Location

• Laws vary by state. This means you should

look for someone in your area who is familiar
with the region’s legal requirements. 
• If you happen to live in a rural area with
limited resources, you can use other methods
of contact, such as phone or email, to discuss
smaller issues. With larger legal matters, or
for long term counsel, it’s important to find
someone close to you so that you can
develop a trusted, face-to-face relationship.
 5. Experience

• In addition to someone with a specialization

in the area of law you require, choose an
attorney with experience cases similar to your
own. You can find out information about their
practicing history by simply asking them, or
checking out their firm’s website (if they have
one). An attorney with more experience may
be more valuable, but only if their experience
matches your situation, as well as your
budget.
 6. Size of firm

• The size of the law firm can affect your

decision in a few ways. Larger firms are
usually more established and have greater
resources, but can also be more costly.
• Smaller firms may be more personal and
perhaps less expensive, but they may be
limited in their services if they don’t
specialize in the area of law that you
desire.
 7. Cost and billing

• Ultimately, cost will be a factor when

you’re choosing an attorney. How much
you are willing to spend is up to you. You
can gather more information beforehand
by asking the lawyer for a quote, as well as
how they bill their clients. It could be an
hourly fee, a flat rate, a contingency fee, a
negotiable fee, or possibly even a retainer
for future fees.
 8. Compatibility

• While there are many professional things

to consider when choosing a lawyer, their
character should also factor into your
decision. Find someone that is
trustworthy and makes you feel
comfortable.
 9. Availability

• Does the lawyer you want to hire have

enough time to dedicate to your case?
How is their caseload? Can they take on
your case immediately? These are
important questions to ask if you plan on
being in contact with the attorney often. If
they appear to be overworked, consider
looking for someone else who has the
time to attend to your needs.
 10. Communication

• Mention your preferred form of

communication and discuss your
Communication goes hand in hand with
compatibility and availability. Often,
between paperwork and meetings, there
can be a tendency to fall out of touch. Try
to establish proactive communication at
the beginning. hours, so you are both on
the same page.
• Most importantly, finding a lawyer that fits
your needs, your budget, and your welfare
is going to give you peace of mind
because you will trust that they are looking
out for your best interests.
 FOUNDER AGREEMENT
• A founders' agreement is contract that is
executed between all the co-founders of a
company. The Agreement sets forth the
ownership, rights, responsibilities, dispute
resolution and other terms to be executed
between the founders and the company.
Key Terms of the Agreement. Equity
ownership.
 Tips to help you avoid disputes

• Confirm the details in writing. ...

• Read contracts before signing them. ...
• Develop good communication and
relationships. ...
• Be organised. ...
• Train your staff. ...
• Know your legal obligations. ...
• Seek help early.
 
 SOLE PROPRIETORSHIP
• A sole proprietorship is a business that
can be owned and controlled by an
individual, a company or a limited liability
partnership. There are no partners in the
business.
 PARTNERSHIP
• A partnership is a formal arrangement by
two or more parties to manage and
operate a business and share its profits.
There are several types of partnership
arrangements. In particular, in a
partnership business, all partners share
liabilities and profits equally.
 CORPORATION
• A corporation is a business entity that is
owned by its shareholder(s), who elect a
board of directors to oversee the
organization's activities. The corporation
is liable for the actions and finances of the
business – the shareholders are not.
• Almost every well-known business is a
corporation. Examples include Microsoft
corporation, Coca-cola Company, apple,
google, Microsoft, J.P Morgan Chase, and
Toyota. Some do business under their
names and also business names as Inc.
 
 LLC
• A limited liability company (LLC) is a
hybrid unincorporated business structure
that combines the pass-through tax model
of partnerships and sole proprietorships
with the protection of individual assets
provided by the C corporation. The owners
of an LLC are known as members.
 How to Write a Business Plan
• Write an executive summary.
• Describe your company.
• State your business goals.
• Describe your products and services.
• Do your market research.
• Outline your marketing and sales plan.
• Perform a business financial analysis.
• Make financial projections.
• What are the outline of a business plan?
• A traditional business plan typically
includes—an executive summary, an overview
of your products and services, thorough
market and industry research, a marketing
and sales strategy, operational details,
financial projections, and an appendix.
 INVESTORS
• An investor is any person or other entity
(such as a firm or mutual fund) who
commits capital with the expectation of
receiving financial returns.
 FINANCING
• Finance is the functional process of
business which helps to meet its goals
and objectives with responsibilities for
acquiring funds for the companies,
managing the funds within the companies
and planning for the expenditure of funds
on various business aspects.
 FUNDING
• It can be money, equipment, land, building,
etc. Raising fund helps to make the
process of purchase of assets simpler.
Raising funds is important as it also helps
in speeding up the work by provisioning
for working capital required in the day to
day functioning of the business.
 DEBT FINANCING
• When a company borrows money to be
paid back at a future date with interest it is
known as debt financing. It could be in the
form of a secured as well as an unsecured
loan. A firm takes up a loan to either
finance a working capital or an acquisition.
 LEASE
• A lease is a contract outlining the terms
under which one party agrees to rent an
asset—in this case, property—owned by
another party. It guarantees the lessee,
also known as the tenant.
 GRANT
• A grant is a fund given by an end entity
grant – often a public body, charitable
foundation, or a specialised grant-making
institution – to an individual or another
entity for a specific purpose linked to
public benefit. Unlike loans, grants are not
to be paid back.
 STRATEGIC PARTNER
• A strategic partnership is a relationship
between two commercial enterprises,
usually formalized by one or more
business contracts.
• Strategic partners are usually non-
competing businesses and often share
both the risks and rewards of the
decisions of both companies