Market your small business at low cost

Starting a new business in India costs a bit as it is, without taking into account the resources needed to market it. So what is it that you, as a small business owner, can do to get the word out about your services, without burning a hole in your pocket?

Although it may seem improbable, there are indeed a number of low cost ways to market your product or service. Here’s our top 10 list.

1. Leverage the support of your friends and relatives to create favourable word-out-mouth. A simple tactic is to mail your acquaintances announcing the new business venture. Even if they don’t need your services, they may well know someone else who does.
   
2. Enrol in trade organizations or groups which could give you the opportunity to connect with others in your line of work. Seek to participate in any publicity event, presentation and demo.
   
3. Supporting a cause or charity event that reflects your company’s values can create a very favourable image for the business.
   
4. Once your business picks up speed, ask satisfied customers for referrals. That costs nothing yet is worth everything.
   
5. Use the Internet to spread awareness about your line of work, not just your company. The way to do this is to contribute useful and high quality content to sites that fit your business’ end user profile.
   
6. Again, be part of the online community, whether it is by way of blogging or being in a discussion forum. We reiterate that the trick is not to oversell - no one wants a hard sales pitch in a friendly chat room.
   
7. Use signature files at the end of all your e-mails. Keep them short but precise.
   
8. You can even do some low cost or free advertising on the Net. Check out Internet sites that offer free classified advertising space.
   
9. If your business has a good website, look to link it with others. Placing in-bound links from popular sites will push up your website’s search engine ranking.
   
10. Use traditional media, like press or local radio to spread awareness. An advertorial which is part informative, part commercial can get you much needed recognition.
    

An Online Storefront That Sells

It’s the festive season and a busy time for most business owners in India. Retail stores are wearing a new look in a bid to attract customers. If your business has an online storefront, it’s the right time to ensure that it’s squeaky clean, shining and a place that visitors will want to buy at.

Just as a brightly lit department store entices passers-by to step in, your online storefront should look nice and inviting. If your site hasn’t changed in years, now is the time to overhaul it.

Design it like you would any physical store, paying attention to both form and function. That means easy navigation, a professional display with all relevant information and photographs and a look that is stylish and consistent with the image your company wishes to project.

Getting the shoppers in is only one part of the good news. Now you have to make sure they buy.

Remember that convenience is one of the biggest motivators of online shoppers. Therefore, ensure that the purchase process in your online store is hassle free – an obstacle ridden storefront is equivalent to an indifferent sales force.

Some of the must-dos:

• List out all the important commercial details such as total price inclusive of delivery & taxes, lead time and refund policies. For third party products, mention warranties and service networks.
• Cap the number of click-throughs to a maximum of three in order to complete a purchase. Use a reliable payment gateway like PayPal for credit card purchases.
• Slow download speed is the electronic equivalent of a long billing queue, and that is where a number of customers can drop off. Choose a reliable web hosting service, so that you are not ridden with server related problems. The same goes for your phone lines.

The sales process is consummated only when you complete delivery to the customer’s satisfaction. Therefore, remember to spruce up the back-end as well:

• Inventory management is super important. In a physical store, if a product is on the shelf, it’s there to be bought. In an online environment, the fastest way to lose a customer is to get back a week later with the news that the product is no longer available. Also, tie up with a reliable logistics partner who can keep up delivery standards.
• If you’re selling third party products, be careful about who you represent. At the end of the day, it is your store’s reputation on the line, so make sure that the products are not shoddy.

All done? Happy selling.

Making a budget for your small business

Budgeting is not just an art, it is a learning process in itself. A well made budget is critical to the survival of any business. It tracks the flow of finances and provides insight into those areas where there is excessive expenditure, thereby allowing an opportunity to make corrections.

A small business can make budgets at different levels – one for the business as a whole, or for special projects, for example, a marketing campaign. Budgeting is a complex exercise, and is always subject to revision since it has to reflect ground realities. Therefore, it must be looked at as the first step towards understanding the financial position of the business and not a be-all.

The following tips may come in handy for a small business owner about to embark on his or her first budgeting exercise:

Err on the side of caution. Keep revenue expectations low and overstate costs. Remember, there will always be that odd contingency that will suck extra funds from the system.

Favor business growth over cost control. There will be times when you need to spend more than what you initially intended on a specific activity. If that is going to contribute to the enlargement of the business, go for it. A budget must not limit the prospects of your business; however, use this as a learning to be more accurate in your future estimates.

A budget, however well made, is good as naught if not monitored closely. When expenses come close to the pre-set limits, act quickly to see whether they need to or can be contained.

Watch the cash flow, which is even more important than profit. A business that spends more frequently than it collects is heading towards a tight spot. Therefore, while making revenue projections, bear actual credit terms in mind. It is worth closing a contract at a lower price on cash and carry basis, versus a high price-long credit option.

Budget for contingencies, and keep adequate liquidity to meet those emergencies.

Finally, be realistic. Costs will go up, some customers will not pay and a few orders may not materialize. A well made budget must recognize these realities, yet must not be so “easy” that it throws no challenge to the management.

Choosing The Right Franchisor

When you start a new business, you would be mostly advised to venture into a field that you either understand or are passionate about. If you are looking to grow an existing business, you might diversify into a related area. But sometimes, business owners plunge headlong into a totally new field by buying a franchise. If you wish to follow suit, choose the opportunity with care, since they’re not all alike.

Although a franchise can give you a launching pad to commence business, there’s still a great deal of groundwork to be done prior to signing up. Investigating the credentials of the franchisor has to be among your topmost priorities at this stage.

The following guidelines could prove useful when you’re negotiating to buy a franchise:

How eager is the franchisor? This will be apparent right at the negotiation stage itself. In a franchised business, the franchisor has to be the driving force if the brand is to be successful. A relaxed or complacent attitude could signal that the parent company is vulnerable to a strike from competitors. Similarly, if the franchisor is non-responsive, it could indicate that they won’t pay you enough attention after you sign up.

Look for other opportunities if the chemistry doesn’t seem right.

What are their growth plans? While you would like to ally with a brand that has an aggressive growth agenda, remember that it could be a double edged sword. Every franchisor will target the maximum number of sign-ups possible and that could work against the franchisee’s interests, since it limits territory and encourages infighting.

Will they stand by you? Since you’re entering unknown territory, you will rely on the franchisor’s support to see you through the initial period. Check out what the training and support calendar looks like. Is there a marketing plan laid out which can help you break into the market?

Some indicators would be the number of days per month that the franchisor’s staff will spend at your location and the number of people assigned to take care of your requirements. If the franchisor is short staffed, you may find that they will not be able to support you adequately in times of crisis.

What is their reputation like? Every franchisor will sell you success stories of other franchisees in a bid to sign you up. Don’t let it rest at that – find out how the parent company is faring as well, as their financial health is very crucial to the stability of the business. Don’t assume that there’s always a sound company behind a strong brand.

A fast growing franchisor may brag about how they’ve grown in recent years. Treat that as a warning signal – usually, a spate of new franchisee signups is accompanied by an equally large number of break-ups. Make sure you are not signing up with the hire and fire variety.

Be sure to speak with at least a couple of existing franchisees to get their perspective on the parent company. If they seem satisfied, the opportunity is probably worth considering.

Are the terms fair? The franchisor will have a standard agreement that both parties need to sign. Since this is the guiding document for all franchisees, you can expect that it will not be changed to suit your preferences.

Make sure that you understand the clauses fully, especially those that deal with territorial rights, financial outlay, terms of separation and dispute resolution. While you can expect that the terms will be loaded in favour of the franchisor, don’t sign something that is blatantly unfair to the franchisee.

Quite often, the reason for buying a franchise is so that the existing infrastructure can be put to better use. But it is equally important that you don’t sign up the wrong opportunity, just so you can keep the staff busy.

Infosys: the startup business that made India proud

NR Narayana Murty has acquired legendary status not only for spearheading a group that turned a startup business into a $4 billion colossus in 25 years, but also for the ethics that he and Infosys stand for.

He will receive the ET Lifetime Achievement Award for corporate excellence in a couple of day’s time. In an interview to the paper he talks about his unique recipe for success (see excerpt below).

But a lot of people are interested in knowing how you made Infosys such a success?

In 1981, when I sat down with my six colleagues, I said three things to them. One, this company would make profits from day one, because we will spend less than we earn. Two, we will declare dividends from year one and three we will pay taxes from that dividend and put that back as equity. We were starting with an equity of only Rs 10,000 and we wanted to go public in 10 years. So we had to grow the equity from Rs 10,000 to Rs 2-3 crore. I am so happy and so grateful that everybody agreed.

Each year we would declare dividend and immediately put that back in the company after paying taxes. It was sometimes very painful. These people didn’t have cars and telephones and when the moment of taking that cheque from them came, I used to feel bad about what I was doing to them.

But I did not see a trace of disappointment in any one of them. They took such low compensation when they went to the US because I had the stupid rule that we had to make profits from day one.

Naming your new business in India

Choosing the right name for your business is both important and tricky. A name must be such that it prompts recall of your business; it must also be “right” from the legal point of view to avoid trademark skirmishes.

If you are starting a new business by setting up a company in India, the registration procedure with the Registrar of Companies (ROC) will begin with a name search. You will have to propose a set of names in order of preference, and the ROC will approve the one deemed appropriate.

Obviously, this process ensures that you are not violating some other company’s intellectual property by using a name identical or similar to theirs, whether on purpose or by accident. Bear in mind too that the ROC asks that the company name be sufficiently descriptive of the nature of the business. Also, names that contain “India/Indian/Hindustan” are usually reserved for public sector corporations.

Even if your startup is a sole proprietorship or partnership, it is very important to choose an appropriate business name. Your business’ name must fulfill at least some of the following objectives:

Reflect business activity or company values. In this context, it is worth mentioning that a number of new Indian businesses wear their “Indian-ness” on their sleeves and adopt ethnic or Sanskrit names. While this may well set them apart, the significance of an esoteric name usually escapes most people, and if the business is looking overseas, it may create needless complications.

Appeal to the customer. If your business caters directly to end users, and your company name is the same as the brand, consider the specifics of your client base (for example, sophisticated versus youthful).

Have no negative connotations. History is rife with examples of name-disasters, especially when the company ventured into another culture or country. Also steer clear of any names that could be perceived as being controversial or offensive.

Be easy to remember. The name is a huge part of your business’ identity, so ensure it is easy to recall. Short, simple, universal generally works.

If a website is central to your new business, the same logic applies when it comes to choosing a name. In addition, use a “.in” extension to improve the search engine rankings when someone is searching for your type of business in India.

Being a serial entrepreneur in India

Given the wave that the economy has ridden in recent years, a number of people who start a business in India don’t stop at just one. Whether it is a matter of balancing the business portfolio by having multiple ventures, trying to make a quick profit in a rising sector or merely succumbing to the urge, serial entrepreneurship is here to stay. However, serial entrepreneurs must remember that it is equally important to move on when things don’t go their way.

By definition, an entrepreneur has vision, the passion to start something new and the ability to take a certain amount of risk. But for a number of them, the thrill ends with the chase. Once the business gains traction, an element of boredom sets in along with the itch to start something new.

And so, a serial entrepreneur is born.

But before plunging headlong into another new business, it is important to consider the following:

Is the existing business stable enough to stand without your constant support? Is there a capable management team in place?

Does the business generate enough revenue to be able to fund at least some part of the new startup?

Can available resources be leveraged across both businesses? Ideally, administrative functions, IT infrastructure, real estate should be shared across group businesses.

That apart, you can learn the following lessons from the experience of other serial entrepreneurs:

It gets easier the second time round. If you see an attractive opportunity, but are apprehensive about the effort it takes to get it going, remember than your learning curve is going to be shorter this time.

Be prepared to move on. If the new business doesn’t go according to plan, it may jeopardise the others too. Work with a pain threshold in mind – it is better to cut one’s losses and go on to other things, rather than hold on to a fast fading dream.

Working in a family business

From big companies to start-ups, a number of businesses in India are still family owned. Having family members work with you can be a huge advantage; on the flip side, you have to handle the dual nature of the relationship with greater care. The key to success in running a family business smoothly is to maintain objectivity, professionalism and adhere to the system as far as possible.

If you are about to become part of a family business – whether existing or new, pay careful attention to the following:

It is likely that division of responsibility is not always according to experience or capability in a business that is strongly family-owned. Patriarchs and senior family members will hold key portfolios or wield power informally, especially in the area of finance.

Given the Indian way of life, in which deference to age plays an integral part, you might find it difficult to express disagreement with those older than you. Confrontation will certainly not work, try consensus and consultation instead.

Expecting higher performance levels from family members can be tricky too. You might not be able to influence the older generation, but at least with the youngsters, implement a formal performance measurement system, the same as for other employees.

Choose partners carefully. If you are the one starting a new business, select your partners carefully. Are they professionally qualified, in tune with the company’s philosophy and as committed as you need them to be? Also, be sure to assign responsibility purely on the basis of ability.

Be objective in your decision making. In a bid to maintain relations, you might be tempted to go with the flow, maintain status quo or defer to elders’ wishes. It may be okay to do this for routine matters, but when it comes to taking a decision of importance, be objective, pragmatic and unafraid.

Don’t show any favours. The business will have other important employees, many of whom will have been around for years. It is important not to openly favour a family member, even if he or she is the brightest spark around, at the cost of hurting the sensibilities of other employees.

Separate the turf – that’s easier said than done. Be prepared for the relationship to come under strain at times. The trick is to ensure that it impacts the personal relationship as less as possible – assigning your spouse a set of responsibilities that don’t overlap with yours, is one way. If things look like they are going out of control, it is best for one person to opt out sooner rather than later.

Requirements for Starting a Business in India

What is the first thing to be done to start a business in India? What are the key issues that must be addressed before others? Here’s our top 10 compilation.

1. Make a business plan. It will change many times, but you need to start somewhere.
   
2. Follow that up with a detailed marketing plan for your product or service.
   
3. Employ the services of a chartered accountant(s). They will help you get through the startup formalities.
   
4. Decide the business structure you want your new business to have – a private or public limited company, a sole proprietorship or a partnership. Company formation is more complex and expensive, and you need to approach the Registrar of Companies in the chosen location for this purpose. On the other hand, a sole proprietorship is the simplest form of business (check our older blog post).
   
5. Evaluate the funding options. The promoters have to bring in some money to start with (a lakh of rupees for a private limited company). Also look at loan options. Almost all banks in India have specific loan products for Small and Medium Enterprises.
   
6. Open a bank account for the new business.
   
7. Check out mandatory requirements stipulated by government agencies at different levels (central/ state/ municipal). Does your business need a license?
   
8. Apply for the PAN & TAN numbers, Service Tax/Profession Tax/ VAT registration numbers.
   
9. Identify business premises and fit it out with necessary furniture and equipment.
   
10. Recruit key employees.