Financial literacy is integral to building an empowered and secure society. The Reserve Bank of India’s 2019 report on financial literacy reveals that only 20 per cent people of eastern India are above threshold level in terms of financial awareness, whereas in western India it is 37 per cent. Considerable wealth is locked up in small savings as people struggle to find investment avenues for the right balance of risk and return.
Extreme risk averseness and deep mistrust about all things business could be the reason. The number of job seekers is far more than job creators. Most people want to leave the state and possibly the country. Hardly anyone is asking how to start a business and succeed.
When I see lakhs of people taking classes to prepare for competitive exams, I cannot help but think what a waste it is. All great nations and societies are built by private enterprise. India’s youth need to take charge of private enterprise, particularly those in states that suffer from brain drain.
Start early
In our society, one only considers getting into business when all other career options are lost. By then, you are past your prime and have lost the animal spirit of youth. Bright students must get into business immediately after completing education — while the fire in the belly is still burning. Starting early allows you the luxury of falling once or twice and still managing to get up again.
Find your calling
When you look for a job, your best chances are following the herd. This is why engineering courses are in great demand. But when you are looking for a business opportunity, herd mentality can be problematic as you may end up with products and services that are in over supply. Instead, look around you and find a problem that no one has solved yet. Or take an existing solution and improve it. If your solution has the potential of being accepted by customers willing to pay, then make it your calling.
Arrange capital
Before you put your own money or someone else’s, you must write down a business plan. A good business plan is like a movie script. A business plan must articulate the market size, demand-supply, competitive landscape, strategy on product pricing, sales and marketing, etc. It must be presented with high quality supporting data. And finally, it must give a clear sense of three to five-year growth projections and the requirements of resources such as people and capital.
Your first port of call can be what is known in investment parlance as “Friends and Family”. Some close-knit communities that enjoy high levels of mutual trust amongst themselves do this well. The members are happy to support a kid while earning better returns than post office deposits. To achieve this you need credibility within your close circles.
At this stage, you are unlikely to get bank loans since you still don’t file income tax returns or have audited balance sheets. For more capital, you will need to go to angel investors, venture capital funds. Bangalore, Mumbai, Delhi, Pune, Chennai and Hyderabad are very hot for start-up funding. One needs to network well and also track the industry platforms. There are funds supported by the government of India too, like the SIDBI Venture Capital.
Find people
Success in life depends on people around you among other things, and business is no different. You will need them as partners, employees or suppliers. Choose them carefully, using your head and not emotions. Your best friend from school or your wife may not be your best choice in these roles. Instead, evaluate people for the skills they have and you need and what compliments yours.
Stay legal
You have to go all the way with legalities at the very beginning. Contact a chartered accountant or a company secretary who can help you decide whether you should set up an LLP (limited liability partnership) or a private limited company. Carefully write your articles of association and memorandum. If you have intellectual property such as logo, product design, then understand how you can protect them with patents, registration, etc. Follow all statutory norms such as audit, tax returns, PF/ESIC, if applicable. This will ensure that you are not required to divert attention away from business to douse fires.
Stay focused
Fund-raising and legalities can be a handful, but your focus is going to be your customers and your cost. If getting customers and keeping them happy is one side of the story, cost discipline is the other side. Managing bad debt, inventory and operating efficiency shall be critical. An ideal situation for success could be two partners, one focusing on bringing business and the other helping in keeping operations efficient.
If you fail, you will still learn things that no management college teaches you. If you fail, you can still find a job, as such people are in high demand. But if you succeed, you will provide employment to people and may even be rich.
The writer is the CEO of the credit research agency, Acuité Ratings and Research Limited, based in Mumbai
