Startups are becoming the latest rage among millennials as more and more individuals are floating their own business ventures. In fact, if numbers are to be believed, as per a study conducted by NASSCOM1,2 (National Association of Software and Services Companies) in 2015, India ranked in the third position globally when it came to the number of startups with about 4200 startups in 2015. There was a 125% increase in the funding for startups in 2015 compared to 2014. In 20183, the growth in funding was 108% as 1200+ startups were launched in India taking the total number to 7200.
NASSCOM’s2 study also revealed that about 72% of the founders of startups were below 35 years of age showing the popularity of entrepreneurship among the Indian youth. What about you? Do you also want to be a part of the startup movement?
If you have a start-up idea which you would like to give shape to, here are some tips how you can go about it while you are employed –
Test the practicality of your startup idea
Having a great idea for a startup is the first step in launching your business venture. However, before you give up the security of your monthly salary income, test how practical your startup idea is. Conduct market surveys to find out whether your product would have customers, look at the competition, understand the market dynamic, test the feasibility of your product and take any other steps necessary to make sure that your business idea is practical and sound.
Set aside the seed capital
Bootstrapping your business is a very important and delicate step in establishing your business. You need to have sufficient funds at your end to fund the seed capital. So, when you are working, build an earmarked corpus for your venture’s seed capital from your salary income. It should be done regularly 2-3 years before floating your startup. Cut down on unnecessary expenses and increase your investments to create a seed capital. You may choose mutual fund schemes for investing your money. Investment in mutual funds not only gives reasonable returns, they can be easily accessible too.
Sharpen your skills
Starting and managing your own business effectively needs special entrepreneurial skills so that you can succeed at your venture. So, try and take up a part time or correspondence entrepreneurial development course to hone your skills. Besides the course, enrol in computer education classes too to learn the technical skills required for maintaining the accounts of your business till you hire the correct person to do your job.
Pay off your personal debts
Managing your money is essential before you start your venture. To do so you should be financially free to take on your business’s financial challenge. Any type of personal loan or credit card debts that you have in your name should be paid off at the earliest. When you are debt free, you would be able to source funds for your business from banks and other financial institutions. You should also create a working capital fund to meet the expenses of the business when the business is in the nascent stage and unable to generate revenue.
Understand the tax implications
Startups are required to calculate their tax liability in a different manner. Moreover, there are also tax incentives provided by the Government of India on new startups to boost economy. Understand the tax rules which your startup is supposed to follow and the tax benefits which are applicable. When you know the tax rules you can reduce your business’s tax liability which, in turn, would increase the business revenue.
Keep your business funds and personal funds separate
New entrepreneurs often mix their business and personal finances in an effort to maximise the production and consequently the revenue of the business. This is a mistake. While you are creating investments and seed capital for your business, use your salary for your personal financial requirements too. Divide your salary. Allocate one part of it towards saving for your startup and the other part towards fulfilling your personal financial obligations. Don’t mix up the two.
While starting your own business is a good idea, make sure to use your working years effectively to help fund your start-up. While you have the comfort of a regular income in the form of your salary, build up the groundwork for your startup. Test your business idea, understand the market, build up a seed capital, pay off your personal loans, enhance your skills and then try and establish your business. Be careful before you say ‘I quit’. Quit your job only when the foundation of your startup has been laid.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully