Raj Shankar's Blog, page 26

Interesting Links This Week: 09-March-2014

If you as an entrepreneur is not feeling stretched at least 20% of your time then you may not be really taking on too much risk! But if you are seeing potential or challenges and still not taking right help to sort out and move on, then you may be going the wrong route with your understanding of entrepreneurship. Think once more before saying no to any external help! Here is an interesting article on ten symptoms that show that you may require some external help, but are not taking it at the right time. Read more here – Link: http://www.huffingtonpost.com/marty-zwilling/10-clues-that-an-entrepre_b_4516575.html

 

What if you happen to gain access to the personal notebooks of one of the most creative minds in the world? What do you think the daily scribbles will contain? What do you think one can learn from it? Here is a look at one such recently published book containing doodles and scribbles of Hans Ulrich Obrist and some reviews of how one can benefit from its reading. Read more here – Link: http://www.fastcodesign.com/3024521/inside-the-creative-mind-of-hans-ulrich-obrist

 

While there are still a lot of concerns over how one will protect their privacy in this social media driven web based world, smart companies are using their data analytics abilities to gain insights on trends. Open Data or data which is available in the open seems to be a reservoir of inputs for entrepreneurial minds. Smart entrepreneurs can make tremendous use of these sources and come up with products and services. Read more here – Link:  http://www.mckinsey.com/insights/high_tech_telecoms_internet/what_executives_should_know_about_open_data?

Finance for Entrepreneurs: Importance of Gross Profit

Revenue in a large way is a clear measure of what customers perceive as value. Hence revenue is a tangible way of evaluating value delivered. If we can safely assume that revenue is an indication of ‘value created’ for the customer, then we can also safely assume that gross profit is a reflection of ‘value captured’. These are not accounting terms, but they are reflective of how customers value a product or service and how business creates value for itself. This makes ‘Gross Profit’ an important metric to track in any business.

On the Profit/Loss Statement when we deduct ‘Cost of Goods Sold’ from Revenue, what remains is called ‘Gross Profit’ or ‘Gross Margin’ or ‘Contribution’. ‘Cost of Goods Sold’ refers to the costs incurred directly in the creation of the products or service, thereby the revenues.

‘Gross Profit’ is a widely tracked metric. This is primarily because ‘Gross Profit’ refers to the value that the business is able to create for itself in creating and delivering value to customers. If the ‘Gross Profit’ is high, then it means that people are willing to pay a premium to purchase the benefit. For example: people understand that the cost of manufacturing an iPhone is a lot lesser than the price that they pay for purchasing it, but customers are willing to allow Apple to make the money for creating and delivering the iPhone.

A large ‘Gross Profit’ also means that the business has enough margin to cover its remaining costs and also invest into the futuristic expenses. Growth requires money. Money typically comes either from the business operations itself or from debt or from equity investors. If the business has a large ‘Gross Profit’ then there is enough money to invest for future growth too. But if the business does not have enough ‘Gross Profit’ then the business has to raise money (debt / equity) to fund the future growth. Money from business operations (‘Gross Profit’) is free money for the enterprise, while the money from external sources comes at a cost.

Investors also show interest in knowing ‘Gross Profit’ simply because it is a reflection of the economic power of the product or service. This means that as the business scales the volume of margins will keep improving the self-financing ability of the business. This will reduce the need to raise or borrow funds from outside. This results in the existing investors’ valuation growing by leaps and bounds.

Thus for a number of reasons understanding and tracking ‘Gross Profit’ is an important aspect for every entrepreneur.

Think about it!

Resource Allocation in start-ups

Thought most start-ups have limited resources, hardly any started with nothing! So what makes the difference between the ones that survived and the ones that died along the way? It is fairly easy to guess, isn’t it? Common sense says that the primary difference is in how the limited resources are put to use. But as the cliché goes, common sense is the most uncommon; most start-ups don’t seem to think too much about the resource allocation process.

Resource allocation is an important aspect of enterprise creation and management. Where and how an enterprise applies its resources is an important aspect of business strategy as well – but entrepreneurs rarely like discussing strategy. Most entrepreneurs don’t want to strategize, they want to implement. While I don’t disagree that implementation is key to realizing strategic intent, the former without the latter seems like shooting in the dark.

For entrepreneurs with access to limited resources, it becomes all the more critical to focus efforts on resource allocation. ‘Where’ and ‘How’ resources are to be used should be a call that the entrepreneur must himself / herself take, based on ‘What’ they are trying to create.

Think of resource allocation as a fall out of strategy formulation. It helps keep ‘focus’ which is so important for a start-up.

Think about it!

Announcement: “How to start a business?” Workshop

Too many times during my interactions with aspiring entrepreneurs and students I am asked to handle sessions on “How to start a business?” It is a rather obvious question that every serious wannabe entrepreneur ends up facing. Since there are not too many people well versed in the regulatory affairs and equally adept at teaching them, I find it difficult to refer them anywhere.

So, when Kalyan (a dear friend) called in to share details about his training company (Ace Academy) offering a one day workshop by the title “How to start a business?” I voluntarily accepted to share the information amongst my network.

If you are a serious entrepreneur or an aspiring entrepreneur or a curious student wanting to know what kind of enterprise to set and the related regulatory requirements, then this is the workshop to attend. The details are below:

The workshop will be held at ACE Academy’s training centre at Mylapore on Saturday, 22nd February, 2014, between 10 AM & 5 PM

The workshop will be interactive and will cover the following steps-

1.0    Analyse the business                                                                                                                            -

- Classify according to manufacturing, trading or services

- Know your peers and competitors

- Decide what operations to outsource and which ones to retain in-house

2.0   Decide on the location

- Closer to the customer or closer to the resources

3.0   Decide on the funds  required and means of funding

- Prepare Business Plan

- Decide fund requirements

- Decide on sources of funds

4.0   Decide on the entity

- Decide based on flexibility, speed, credibility, limited liability, cost, etc

5.0   Decide on the name

- Tips on naming

- Booking the name

- Relationship between name and entity

- Apply for trade mark / copy right

6.0   Form the entity

- Proprietorship

- Partnership

- One Person Company

- LLP

- Private Limited Company

- Public Limited Company

7.0   Obtain PAN & TAN

- PAN

- TAN

8.0   Open bank account

- Type of account

- Type of bank

- Documents required

9.0   Registration under tax laws

- Applicability Matrix

- Income Tax

- Central Excise

- VAT & CST

- Service Tax

10.0            Import Export Code and MSME registration

- Import / Export Code

- MSME Registration

The fee for the workshop is Rs. 2,490/- (Including service tax)

Those interested in benefitting from this workshop can contact +91 44 2498 1027 or 97109 28701.

Please contact the above numbers to register! Good Luck and Happy Learning!

Entrepreneurs, do you know these people?

The start-up ecosystem is filled with people who are trying to help entrepreneurs get off the ground. Both the people playing the roles (or attempting to) and the entrepreneurs receiving the support are confused over the roles and the related responsibilities.

I have been leading a set of workshops helping people who want to become enablers to the start-up ecosystem become more effective. Over the discussions we have always explored what are the possible roles. As a person playing an active role in the entrepreneurship ecosystem in India and helping entrepreneurs / CEOs start, sustain and scale their enterprises, this is one thought that I have been reflecting on for sometime now. Based on all the work till now, here is a short list of possible roles and a high level thought on what they could be doing for the entrepreneurs.

Teachers (educate)
Experts (clarify)
Consultants (solve)
Advisors (suggest)
Coaches (skill)
Mentors (guide)

I will attempt to share a more detailed description of what these people do for entrepreneurs and also how they are typically labelled in the coming days.

If you are an entrepreneur or one who plays the above roles, please join the conversation and share your thoughts in this conversation. We will try to decipher and arrive at some broad boundaries on what each of these roles do and how entrepreneurs can benefit from them. It will also help build comfortable relationships between practitioners and enablers. Many successful entrepreneurs have tried to acknowledge the importance of these relationships and have attributed them to their success.

Interesting Links This Week: 16-February-2014

I have always enjoyed the writings of Roger Martin and A G Lafley individually. When they team up to provide some advice you bet I would not miss it. I have in fact written about their book (Playing to Win) earlier on my blog. They have simplified the answer to the question “What is Strategy?” via the book. It helps me while I work with entrepreneurs and small business CEOs in India. Here is a short thought piece on why strategy is actually not creating a plan! Read more here – Link: http://blogs.hbr.org/2013/02/dont-let-strategy-become-plann/

 

Another interesting take on why plans are history. Considering the fact that things are changing so fast, the best laid plans are dated by the time they are prepared. So should companies stop planning? No! They just have to change their approach. Here is one such perspective. What is the Bayesian method? How can it be used in making strategic decisions? Some examples of how it has been successfully used in the past? Read more here – Link: http://www.digitaltonto.com/2013/bayesian-strategy/

 

Everyone wants to achieve more during the year, but effectiveness and efficiency have always been a challenge. While there are numerous approaches to planning your annual goals and achieving them, I found this method of the “12 Week Year” an interesting one. You should check it out! I have used variations of this in my consulting and coaching engagements and found them to be effective. Personally I love to plan only for a quarter, while keeping the larger goal in mind. Read this and you might gain a tip or two in making yourself more effective. Read more here – Link: http://www.inc.com/minda-zetlin/how-to-increase-your-effectiveness-by-400-percent.html

What is your start-up building?

Start-ups typically end up building two things. No, I am not referring to products and services! I am talking about value and revenue. Now that may seem too ironical to you, but observe more closely and you will notice the difference.

There are start-ups that focus on building revenue right from the beginning. These are typically driven by entrepreneurs who have bootstrapped or come from a small business background. They are very revenue focused right from the beginning. The entire focus of enterprises that they build is around – what makes revenue?

Another group of entrepreneurs focus on value creation. This is typically the ones who work hard to create intellectual property or a community or a group of followers. They focus on gaining value and following and then eventually work hard to raise money to commercialize the value created. These are the kind of businesses that venture capitalists also seem to like. But this is also the group that has the greatest failure rate!

The question then is to find out what your start-up is trying to build. Based on the intent you need to focus on the right metric. Based on the intent and objective you (the entrepreneur) needs to ask one of the following:

If it is value creation, are you constantly assessing the value of your start-up?
If it is revenue generation, are you constantly tracking the growth of revenue?

Not asking the right question and creating the right measures could make your start-up lose focus too soon. This is what seems to be happening with most start-ups and their founders these days.

Be honest with yourself and be clear on what you are trying to build. Once you decide, stick to it. This focus helps not only you but also the people who work for you and the other stakeholders who are viewing your start-up (investors, bankers, angels, partners, strategic investors, etc).

Think about it!

Announcement: Launchpad Challenge 2014

If you are a student interested in Entrepreneurship then you may want to explore this competition. These days competitions truly serve as a launch pad for start-ups in numerous ways. They include validation of concept, finding co-founders, raising funds for bootstrapping, etc.,. So if you are one such entrepreneurial soul living on any campus in India, here is one more chance for you not to miss. For details and links read below:

Entrepreneurship Development Institute of India, Ahmedabad, and the National Entrepreneurship Network are delighted to invite you to take part in Launchpad Challenge 2014 – an initiative that celebrates and supports breakthrough innovations from students across all disciplines! 

If you are a graduate or post-graduate student in India with an exciting idea/product/prototype to share, enter the Challenge to win national recognition and fast-track commercialization support, including:

An opportunity to attend an intensive business plan workshop tailored for you
An opportunity to pitch your idea/product to leading investors
Recognition at the Launchpad Challenge Grand Finale at EDII, Ahmedabad (to be held on 7th March, 2014)

To enter the Challenge, please submit your completed nomination form (available at link below), on or before 15th February, 2014. 

Eligibility: The EDII-NEN Launchpad Challenge 2014 is open to all graduate and post-graduate students in India, affiliated to recognized universities or colleges. 

Process: Interested and eligible students are requested to submit their completed nomination forms on or before 15th February, 2014. A national jury will review the nomination forms and select the most innovative ideas/products – which have the highest potential for impact. Selected candidates will be informed by NEN representatives and invited to attend the Grand Finale at EDII, Ahmedabad on 7th March, 2014, where they will take part in an intensive workshop on building effective business plans, and have an opportunity to fast-pitch their ideas or products to investors.

http://eweek.nenonline.org/page/edii-launchpad-challenge-2014

Why did you start-up?

The answer to this question makes a whale of a difference on what your actions are as an entrepreneur! Have you heard a story like the below:

The entrepreneur was building a website to generate traffic and then sell to the visitors some related products. The entrepreneur was certain that if he builds the traffic and the following, selling his wares to the following will be certain. This will result in recurring revenues and also tremendous value for the company. More importantly his concept is unique which is already becoming the talk of the town!

If you are immersed in the start-up ecosystem you know that this is not a unique business model. A lot of web start-ups do the same. The entrepreneur was building something that he felt was unique. Why was he building something that fundamentally had a value proposition and not a direct revenue model? It could have been his intention to do something unique! How often have you come across an entrepreneur who is focused on creating value without a sharp eye on revenues / profits? In recent times it is not strange to meet entrepreneurs of this type. But when they are studied as the ideal role models to entrepreneurship, it confuses many others who get into entrepreneurship / start-ups for other reasons.

When one of the invited entrepreneurs to my class shared an example like the above, one of the participants (an entrepreneur himself) in class asked me over lunch how the speaker could focus on the idea / concept over revenue generation? I asked him back this question: ‘Why did you become an entrepreneur?’

He looked perplexed at me and asked why it mattered? I told him to consider a situation where he did not generate revenue for 12-15 months and asked to rate his comfort factor? He said he could not last even 3 months without revenue (at least mentally). I told him that the person who spoke could last probably 10 years without revenue. Does that make a difference? He said ‘Yes’. I told him to think along these lines:

Why did you start?
Is that the focus of your plan and measurements?

And all of these will be based on the question I asked the entrepreneur – “Why did you start-up?” Let’s be honest with ourselves. It helps us be happy entrepreneurs and stay the course for a longer time.

What do you think?

Interesting Links This Week: 09-February-2014

Marketing and Finance almost seem to be sitting opposite to each other on the table. While one does not want to be measured the other seeks measurement over everything. How can marketing and finance start collaborating with each other for better business decisions? Here are 5 things one can do to make this change happen. Read more here – Link: http://www.mckinsey.com/Insights/Corporate_Finance/Why_cant_we_be_friends_Five_steps_to_better_relations_between_CFOs_and_CMOs

 

How does the world look when divided by population? Here is a visual depicting region with a Billion people each – there seem to be 7 such regions at least as per this map! As population grows it will interesting to know where what will be the need over time. Read more here – Link: https://twitter.com/Amazing_Maps/status/414685672948379648/photo/1

 

John Jantsch is an interesting person to listen to when it comes to small business. I have been a fan of his books since Duct Tape Marketing came out and have been following his blog thoughts too. Since every small business client of mine seems to ask about how they can use big data, I thought of sharing this short blog post that John has written on the topic. You need not spend too much money to use big data. Read more here – Link: http://www.ducttapemarketing.com/blog/2013/09/06/small-business-big-data/