Sitting in my hotel in Kolkatta, an IM
(instant message) flashed on my screen. It was a friend asking for an
appointment. He was planning to set up a new venture. The meeting was
easily set up. We were networked, neither knew when we first met
this would be on the agenda. We have discussed networking and here is
an example. Lets call my friend Ashley.
When we met later in Goa, a lot of what
was discussed in these columns came back. To start with he had a
business plan. He knew what he was planning to do and how he saw it
fall into place. Ashley has to be careful and selective as to who
and how much he will share of his business plan. Ashley was trusting
his gut feel here when he spoke to me.
He was looking for funding so he would
need to have his elevator pitch ready. An example of this could go
something like “there is power issues in Goa and I am starting a
genset business” . This line will surely get the interest of a
prospective investor. Ashley did not have one yet. He was full of his
idea, but prospective investors do not have time.
Ashley had set of numbers, call them
projections for five years. It was easy to notice that Ashley was
not at home with numbers. When questioned he explained it exactly how
he should not. I am the operations guy please give me a break. All
the partners were operations guys. However there is no excuse for
Ashley to avoid understanding and the time to start was now.
He had no clue about P& L and B/S
concept. I gave him a book, “Romancing The Balance Sheet” by
Anil Lamba. This clearly rates as the best book for a startup. He did
message me after a few days and thanked me for the same. It will
surely give him a fair idea about revenue and capital accounts and
the difference. His projections did not seem to differentiate the
two. Any aspiring entrepreneur must get the hang of the numbers and
not just focus on the technicalities.
One aspect of his projections was the
flat nature of the expenses and revenues. I suggested he err on the
higher side when expenses are concerned and focus on lower numbers
when sales are concerned. This means that there is ample scope for
meeting targets in the event of some unforeseen situation.
Family support. Ashley had given up his
job and was focussed on his venture, in the meantime his wife was
keeping the fires going. They had decided that once the venture was
operational she would take care of the home front and Ashley would
step out to do battle. Discussion and openness would help his wife
understand and allow her to play the devil’s advocate. This will
ensure requisite support at crucial junctures
Ashley did not factor software costs.
The regular operating and office stuff. Neither did he consider
alternatives to paid software. Assuming he will get to 20 systems in
3 years he is building a liability by using pirated versions.
Ashley had growth on his mind which is
good, but with growth other costs increase, costs not directly
associated with production. These must be added to costs as growth is
factored in. As one grows a better office, more AC’s could be an
example.
Now when should Ashley shift gears.
When should he move from drawing board to execution. Everyday means
that much sale lost. Yet if launched pre maturely he will have a hard
time. In my opinion he has to tie up his project funding and launch
the next day. While waiting he must be ready to go on day 2 if
project funding arrives on day 1.
What I liked was there was no fudging,
over invoicing or attempt to mask expenses. Ashley is on the right
track. He has the fire in his belly and belief in his heart, we wish
him luck.
Blaisie Costabir
Suggested reading : Romancing the
balance sheet by Anil Lamba
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