Startup finance

The first thing when I came back to Bangalore, I was amazed to find the sheer number of startups and the buzzing nature of entrepreneurship in the city. We are indeed spoilt (vis-a-vis) other cities in India to have such a good ecosystem.

I thought I would share some of my thoughts in relation to the first few things you need to think about when your starting up your own company

1. Save enough money for 18 months for your own personal expenses (That's typically by when either your business model is working/failing/ or you have managed to raise funding)
2. Making a cash flow statement. This can be as simple as listing what all expenses you expect and what you expect to sell and minus the two. The important but simple task most people dont do, is after making one is
to maintain another column of actual. You then update your subsequent months (because let's face it your estimate is only that - an ESTIMATE!)

3. Break even - this basically means the below:-

Let's say a typical ecommerce business. You have spent about 35k in developing the website. Maybe other 15k in advertising and perhaps maybe another 5 - 6 lakhs in buying up inventory

So that means that you need to earn 6.5 lakhs in total to break even - to make back all the money you have put into the business. This becomes crucial into your pricing because lets say for example the above business was selling shampoos online. (Courtesy of my wife who keeps complaining that I don't wash my hair enough!)

Let's say you price them at Rs100/- per bottle. Then to reach your break even point you need to sell - Rs 6.5 lakh / Rs 100 = 6500 bottles. I know all of this sounds really simple and you must be like I am sure all startups know this. Unfortunately most startups dont know how to price their product. Often a kickass product will still fail even with brilliant marketing if it's not priced right (of course this is the blank faced accountant in me saying this :) )

4. Profit 
In very simple terms all this mean is You sell shampoos worth 6.5 Lakhs and minus all the costs to produce and market it etc (maybe all this shampoo talk is coming from 2 states - hmm). The net sum of money which you make after this is called profit. Oops I forgot we have to pay some money to the government for services they dont provide called as tax. So you pay tax on this profit and then you get something called profit after tax.


Well I think that's it for now. Maybe next week, I ll review some interesting startups that caught my eye.

Over and out.

AD 

Back to writing

Hi All,

Post a very busy year for me - Starting a business, getting married. In the process of trying to setup one more and also stablise existing ones. The time to write has been few and far between.

However, I think I will make it a point to write every Saturday or Sunday now. The journey of entrepreneur is both mentally and physically challenging. Especially in a country like India, where the sheer task of getting anything done means calling someone about thirty to forty times multiply that by about 20x or 30x your easily looking at 600 calls / day for routine operations execution. Of course this could be more indicative of how the construction field works.

I think we in India definitely need a culture change in terms of how we do work. Whether be it a business owner or an employee. The task of executing something as per instruction and correct the first time should not be this hard. If you don't know how to do something, the easiest thing is to ask. However, in an Indian context admitting you don't know something often is taken for a sign of incompetence. Whereas the lack of task execution to expected standard should be the measure.

I think that's it for today. More musings next time.

AD

re-starting the blogging

Hi All,

After a first post, which started among much fan fare(not!) and optimism. Regrettably I have not been able to be an active blogger what so ever.

Ah the travails of running a business means that I could be looking for Architects one minute to looking the result of a latest faceboook share to finding out that something catastrophic might have happened on the construction site.

Also, I could be as I am now trying to read two books simultaneously one on construction and one on operations (and I trying to remember why I didn't do a MBA) and skimming through Nitesh estates annual report to see if i can steal some ideas!

I do wonder how other founders innovate, collaborate and ultimately not just keep fighting the daily battles but  keep that enthusiasm alive.

I just read through one of my old blogs - god I was such angst driven teenager! (Not saying I am not angst driven but maybe slightly more calmer angst version ;) )

Over and out - will try to make this a every Thursday affair - if possible.


AD 

Welcome to the new blog!

Hi All,

Many of you might know me from my many avatars - maybe as accountant, fellow traveller, best friend, enemy (hoping not too many of those) etc etc.

The reason I started this blog is very simple. The story starts something like this.

I must have been 8 or 9 years old. Having a very patriotic father - he would make me go to every flag hoisting on Independence Day no matter what country or what city we were in. ( I grew up in the Middle East). So we were in the car going to the Embassy and I was like Dad, why do we need to stand in the sun and listen to the anthem and some speech where I know I am going to doze off in 40 deg heat anyway.

My dad who by then had got used to my irreverent and thoughtless questions said, being an Indian is who we are and that's why. It didn't make much sense when I was 8 years old and nearby passed out in the middle of the Prime Minister's Speech.

But it does make sense now.

I have had many numerous conversations with close friends about where our country and this blog will be my  tiny contribution to the debate where we are headed as a country. And other random thoughts of course!

- Intensely Patriotic Indian.