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Entrepreneurs Business Plan

Why a business plan for an entrepreneur? The reason is it defines your business, identifies your goals and serves as your firm’s resume. The business plan should include a current and pro forma balance sheet, an income statement, and a cash flow analysis. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.

The Importance of a Comprehensive Business Plan is that much depends on it for outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business and achievement of your goals and objectives.

Before writing your business plan ask yourself the following:-

  • What service or product does your business provide and what needs does it fullfill?
  • Who are the potential customers for your product or service and why they will purchase it from you?
  • How will you reach your potential customers?
  • Where will you get the financial resources to start your business?

Now that you have the answers you can start with your plan. Your plan should include a description of the business, a marketing plan, financial plan and management team.

A typical business plan should include the following:-

  • Executive Summary
  • Company Direction
  • Company Operations
  • Products/Services
  • Market Analysis
  • Marketing Plan
  • Financial Plan
  • Supporting Documents 

This is not the only format but generally most business plan will follow some sort of outline similar to this. Now let us take a look at each one of these one by one.

Executive Summary

An executive summary is the summary of the entire business plan it comes at the start of the business plan. This will summarize in 1 to 2 pages what the business plan is about. So this will give the reader a chance to see if he is excited enough to read the whole plan. For this very reason you must ensure it is written well. There are two schools of thought viz you can write the executive summary at the start or at the end of preparing your business plan. Some say if you do not know what you are going to write then how can you write the plan. So they suggest you do the summary first. Others say you can summarise in the end once you have completed the business plan. I feel that both have merit and demerit. So you should select whichever you are comfortable with.

Company Direction

The first chapter in the business plan is the company direction. This should cover in detail the present situation, vision, mission, goals and objectives.

In this you are telling the reader what you have done so far and the status of your project. You should also cover your vision in what you hope to achieve in the long term, the mission  is what you are going to do to achieve your vision, goals are long term achievement more then one year must be quantities and objective are short term and again must be quantities.

Company Operations

Here you should talk about the legal business description meaning which type of structure you have decided to use based on chapter 4. As explained there is two opponents for this. One the team members and second the legal status of your company. The team members fall into the following management team, board of directors and staffing.

All three have different functions. Therefore under here you should only speak about relevance to your business. The management team is the one which will manage the business on a day to day basis. The board of directors are the ones who set the company directions. The staff are the ones who actually carry out all the actions. Strategic alliances are outsiders whom you have made some arrangement to enhance your business. These can be vendors, support service and really anything that can help you achieve your vision.

Products/Services

Here you have descriptions for all your products/services. You must also address how you are positioning your products/services in the marketplace. It is important to have a competitive evaluation of products/services. All future products/services should also be discussed here but you must be cautious that you do not over do it then it will sound like you are only concentrating on new products and not making money.

Market Analysis

Market analysis is different from a marketing plan. First you need to carry out a market analysis and then write the plan. The marketing analysis should include the following market definition where you define what the market means to your business then your customer profile as to who will be the ones you have defined you will serve. Next who will be your competition for these customers and finally the risk in doing this business. Once you have addressed these you are now ready to write the plan.    

Marketing Plan

This is the plan as to how you are going to get your customer. A detail marketing plan was discussed in marketing chapter. This will include the following marketing strategy, sales tactics, advertising, promotions/incentives, publicity and trade shows.

Financial Plan

This will be cost and pricing of your service and product. Again this was covered in detail in the finance chapter. This will include assumptions, financial statements, Capital requirements, Use of funds, Exit/payback strategy and conclusion.

Supporting Documents 

This is section which will include details of anything which will support your business plan. In the earlier chapter on finance we just included very large figures, like an overview but here there should be detailed calculations and you must include resumes of key personnel.

Now how could you use your business plan.  There are 3 areas where you can use a business plan.  The first, almost every unit in a company should have a business plan where they use it to communicate with their colleagues and others can see what they are doing.

Second, for the management to know what your team is trying to do or achieve. Third, it is a very good planning tool which actually tells you things which you would not have known otherwise. The fact that you have actually written them down you would be able to find things otherwise you would have never come across. It is actually a survival plan.

Now how can you get help to identify these plans. There are plenty of books in the book shops which you can read and write them, write the business plan yourself.  There are actually business plan software tools that you can use to develop your own business  plan. Actually there are business plan websites which do business plan for you. And finally there are many big organizations who use professional business plan services. For a start you probably don’t have enough money. You probably have to do the business plan yourself. And I personally believe it is probably better to for you to do your own business plan because nobody knows what  you hope to achieve in your business over the next 12 months, 36 months and 60 months. As you are so involved with your own business it is better for you to come up with your own business plan.

Entrepreneurs Marketing

Marketing is probably the most important activity of your venture. Unfortunately most of us are not well equipped in this area. It is worth spending your time to explore and learn marketing well before embarking in your venture.

Marketing Plan must integrate various marketing components to create customer value. In order to have a marketing plan you do not need to be a large company. A plan will help you to maintain or gain market share, show your innovation and improve the company position.

Marketing is a series of activities carried out to finding out what your customers need or want. (both existing and prospective). You should apply all your efforts in the business towards making sure your customers get what they need or want. By doing this you will be able to meet their expectations or exceeded.

Trends are always changing. So you need to keep your eyes on your customers to see what is changing. This can be done as simple as watching television. It is absolutely important that you keep doing research. You can only stop doing research if your business will growth on momentum, with no improvement, you know all about your competitors, you cannot lose customers, your products would not go obsolete, no trend changes, you are the only one with ideas, you can tell the future, you know tomorrow’s requirement yesterday, you have billions worth of contract.

Research can be done in two ways. One primary and the other secondary research. The first you collect data which no one has and the second you use data available to conduct your research. The cost of primary research is much higher. So we might need to use secondary research to reduce cost when you start out. The good news is that with the internet the secondary research virtually comes free or with minimal cost. So you have no excuse not to do research.

A good research can help you in the following ways:-

  • Show ways to increase the off-peak or off-season business.
  • Show ways to increase the customers’ spending patterns.
  • Show ways to ensure that the customers keep coming back.

Marketing Strategies

Can you list at least 10 things your potential customer needs or wants? Have you taken any personal action to market yourself and your venture? To help answer these you can apply the famous 4Ps of marketing known as marketing mix.

The 4Ps are product, price, placement and promotion. Now look at these Ps to promote yourself and venture. Sometime these 4Ps and 3 more Ps are known as 7Ps. These 3Ps are people, process and physical evidence. With technology these 4Ps can be looked at a different angle penetration, permission, personalization, and profitability. Once you have done these you are ready to write your marketing plan.

Now the you are familiar with all the Ps you need to identify and each of this what is your value proportion for each of the Ps. Once you have done that you can work on how to go about getting the marketing activities.

Marketing Plan

Every marketing plan must have four elements personality, budget, business and time. 

A typical marketing plan’s contents can be captured from from wikepedia http://www.wikipedia.org/ I feel it is very well captured and to rewritte or attempt to write is a waste of time.

Now use methods which you are comfortable in applying, look for methods which are easiest and cost effective to access specific people you want to reach and do not depend on only one method at a time. Apply activities that compliment one another and check your methods against your competitors methods and find out what is working well for them. You must track the outcome of your marketing efforts.

Please note you can  increase your business only in these three ways one by increasing number of clients, two increasing size of the sale per client and three increasing the number of times clients return and buy. With these in mind now ask yourself these questions:

  • What is the number of clients you have?
  • How much these clients spent on an average on each transaction?
  • How often do these clients buy from you?

Now let us look at an example

Let us say you have 100 clients. Each buy for Rs100 each time and buys twice a year. Your revenue is 100 * Rs100 * 2 which equals to Rs20000. Now you want to increase your revenue by 20 % that is Rs24000. So you need to have more clients, bigger sales from your existing clients for each sale or increase the frequency of buying. Once you have this worked out your sales can easily increase.

How do we increase these?  By creating a desire for the client to use our services and product. Here we can apply Maslow’s hierarchy of needs to our product and services. Maslow says that there are five levels of needs. These are physiological needs which include basic need like food, clothing, sex, shelter, etc, safety needs so you do not feel threatened, social needs to have a belonging, esteem needs to have self esteem and recognition and self-actualization needs which include self-development, creativity and psychological health.

Multi-level marketing (MLM) and Franchising

These are the two biggest marketing activities discovered in the last century. Both have tremendous potential for accelerated growth.

Multi-level marketing (MLM), also known as Network Marketing. In this model individuals or companies are allowed by a parent company to market its products directly to consumers by means of direct selling and referrals

Usually individuals act as unsalaried salespeople of multi-level marketing, referred to as distributors and represent the company and are given a commission based on the volume of products sold by them.

Each distributor develop their own organizations either by building an active customer base to whom they sell direct from the parent company or by recruiting a downline of distributors who in turn build a customer base, thereby expanding the overall organization. To top their income, distributors can also earn a profit by retailing products they purchased from the parent company at wholesale price.

Distributors earn commission for the overall organizations they build based on sales of individuals and group based on the compensation plan design by the parent company.

Franchising refers to the methods of practicing and using someone else idea to do business. The franchisor, the owner, gives the rights to an independent operator or franchisee the right to distribute its products, techniques, and use its trademarks for a percentage on gross monthly sales and / or royalty fee for an agreed period of time.

Entrepreneurs Project Management

What is a project?

A project has a specific timeframe. It is inter-dependent on events with defined outcome and unique characteristics.

A specific timeframe means a temporary undertaking. The timeframe is usually from days to years (usually maximum 1 year). It is worthy to note that all projects must end and have deliverables along the project.

What does inter-dependent events means? Projects have series of events, one event lead to another and sometimes we have multi events. If it is a single event then it is not a project. A project might be so complex, that you might need a software to manage the project. Projects have defined outcome and unique characteristics? At the end of the project there will be some thing worthwhile. The project will have an end objective but along the way there will be several other objectives to get to this one. Some people call these milestones, phases, tasks or subtasks. Even if you have done a similar project it will always be different from the last one.

What is project management?

Project management is a set of principles, methods and techniques used for planning and controlling a project.

Why project management?

We project management in order to complete on time, within budget, inline with guidelines and objectives. So the project is optimized in time, cost and quality.

History of project management

Project management has been around all ages, project management started to get recognition in the 1950s. But today it is a premier tool in business

What is good project management?

  • Be aware of what you are doing.
  • Do your homework.
  • Be prepared for stumbling blocks.
  • Go deep into the problem.
  • Be able to change.

How to manage a project?

  • Use project management tools.
  • Be able to take and give feedback.
  • Be open for new ways and ideas.
  • Good time management.
  • Effective meetings.
  • Be able to make decisions.
  • Have a sense of humour.

How not to manage a project?

  • Not addressing a problem quickly.
  • Changing timeline too frequently.
  • Ignoring quality to reach milestones.
  • Focusing on administration work.
  • Micromanaging.
  • Using new tools readily.
  • Not monitoring regularly.

Project Planning

  • Must prepare a project plan.
  • The project plan is the governing document.
  • Project methods and resources.
  • Project tools.
  • Most people say it is a waste of time.
  • People spend only 5 % of the time on planning.
  • Should spend at least 25 % on planning and rest on execution.
  • Planning should be done through out the project.

Elements of Planning

  • Problem or opportunity statement.
    • Get a clear understanding from your supervisor what is the problem to be solved. Understand their needs and wants. Get background on current status. Understand the motivation of the supervisor for taking this project.
  • Define objectives.
    • Project objectives must be specific, measurable, agreed, realistic and timely (SMART) and the Ps.
  • Write the plan.
    • Several times you write the plan and carry out a conceptual review. Is it in line with your objectives? You must be having feasibility review. Is it realistic? Benefit-Cost Review, is it cost effective? Profitability Review, is it profitable? Alternative Review is there any other way to do it? Opportunity Review, is there any opportunity? Risk Review, is there any risk? Outcome Review is to proceed or not?
    • Breakdown down these objectives into manageable activities.
    • Estimate the time and cost of these activities.
    • Logical sequencing of activities.
      • Bar Charts – Gantt charts.
      • Network Diagrams.
      • Precedence Diagramming Method (PDM) or Activity-on-node.
      • Next we need to calculate the critical path for the project.

–         Program Evaluation and Review Technique (PERT).

  • Provides three estimates.

–         Mostly (m), Optimistic (o), Pessimistic (p).

»         Estimated time = (o + 4m + p ) / 6

–         Critical Path Method (CPM).

  • Now using the CPM on the network diagram to calculate the critical path.

–         CPM calculations include Early Start, Late Start, Early Finish, and Late Finish.

  • Preparing Schedules using Gantt Charts.
  • Crashing Schedules happens when change in resources, activities and objectives.
  • Resource Planning includes identifying skills by recruiting and assigning. Adjust project schedule.
  • Get approval for finance
  • Setup controls to monitor. Must have a formal process and don’t micro manage. Elevate problems to the lowest management in order to ensure on schedule. Must rank projects
  • How to setup monitoring and control? Determine information needed. Determine data collection method and frequency.
  • Start the project.
    • Formal start off with meeting to agree parameters, roles and other project related activities and communicate to all stakeholder
  • Controlling project objectives.
    • Network diagrams, schedules and budget are not only for planning but used as control for time, cost, scope and quality and resource.
    • Tools used to control are Inspection, Statistical Sampling, Flow charting, Control charts, Trend analysis, Pareto diagrams, Cause and effect diagrams and Earned Value Analysis.
  • Reporting Project
    • Reports are for communications to others. This can be in graphical reports, Reporting percent progressed, Sample Reporting, Status Report, Schedule, Cost and Scope
  • Take action or re-plan if not in line with original plan.
    • During the course of the project there will be minor or major changes. Not all changes are bad. Too many changes may indicate poor planning. Must have formal and regular checks for parameters change i.e. requirement, budget etc.
  • Project Evaluations.
    • Periodic evaluation must be done to ensure accomplishment of the project.
    • Project plan is like a map it tells you where you are.
    • Evaluation also motivates the team.
    • When to evaluate? On Going Reviews, Periodic Inspections, Milestone Evaluations and Final Project Audit.
    • Consider in evaluation, Quality of Work, Team Performance and Project Status.
  • Managing Risk.
    • Identify Possible Cause. This can be Technical, Administrative, Financial etc
    • You must Assessing these risk and respond by planning. The possible solution for these risk can be avoiding, transferring, mitigation or accepting the risk.
  • Close Project.
    • Good projects have a formal closure to ensure the job is done.
    • Time to recognize efforts.
    • Complete individual, vendor and customer satisfaction evaluation.

Project Management Software

Due to complexity of project you can use software for Planning, Initiating, Tracking, Monitoring, Reports, Charts and Communication. The following vendors supply project management software Vendors PlanView, Primavera, Microsoft, Dekker, Welcome, Artemus, Quick Gantt, Milestone Simplicity and Project Vision.

Please note it is beyond the scope or intention of this article to make you a project management expert you will need to do that by attending a program or buy a book which specializes in project management.

Entrepreneurs Strategic Planning

Now that you have a good understanding of the finance aspect you can move on to look at the strategic planning for your idea. As former President of India said strength respects strength this is not only true with strength but with anything, if you are strong is something people will always respect you. Under this we will examine the 4 W’s and 1 H of Strategy.

First W of Strategy

What is Strategy? A dynamic process involving more then the usual linear sequence planning that is associated with strategic planning.

Customer

Evolve

Test It

Strategy

  The common mistakes made about strategy is that first you plan, then you strategize, then you decide on the tactics to carry it out, it is the CEO’s job, it is in the red book and it comes in the shower.

Second W of Strategy

Who should strategise? Actually everybody in the organization should play a role in strateging.

 

Integrators

Leaders

Front line strategists

 

A company will usually have three groups of people. Starting with the front line strategists these are the customers, the people who interact with customers and group functional teams. The next level is the integrators. These people connect the front liners and the leaders. They act as the link and tune the strategy and take it to the leaders. In turn the leaders will align these by focusing with company vision and balancing for the final strategy. As you can see everyone is involved. So when we finalise the strategy no one can say that they were not part of it.

Third W of Strategy

Why strategise? In order to focus on your customers and market needs and the need to staying flexible and responsive to market needs. This is the only way to hold on to valuable and knowledgeable work force. With the fast paced world this will avoid management burn out. Strategising is not an option. It is needed to be successful. With technology things change rapidly so you need to plan to be ahead of others. Please note that planning for a large company is different to that for a smaller one. By strategising it helps you ask “how you will compete”.

Fourth W of Strategy

When strategise?  A simple and the only answer is all the time.

H of Strategy

How do you strategies? This can come about in two ways one “listen to customers” and the other “empower your people”.

In brief, strategising involves everyone so more time is spent. But if everyone is involved you might ask who makes the decision? That is why we have a leader for each company. How can an organization concentrate if we are chasing our customers for new opportunities? Remember if customers do not want what we are doing then we lose big time so we need to chase the customer your BOSS!

The 10 Step Planning Process

  1. Define a clear vision and translate to a meaningful mission.
    1. Define a vision statement
    2. Define the mission statement based on the vision
    3. Mission statement should address the business you are in
    4. This is the starting point for you and your business
  2. Define its market position and driving force
    1. No company can be good at everything. So you need to know what you are good at and work on it
    2. You need to target a market
    3. You must be knowledgeable of the market
    4. Uniqueness of your product
  3. Determine its strength and weakness
    1. Once you have identified the market and your driving force you can now assess your strength and weakness.
    2. Strength are positive internal factors and weakness are negative internal factors
  4. Look at the market for opportunities and threats
    1. Now identify the opportunities and threats from the market
    2. Opportunities are positive external factors and threats are negative external factors.
  5. Determine the key success factors
    1. Every business has controllable variables which determine its success
    2. These factors can be cost, manufacturing, distribution etc
  6. Study the competition
    1. Why study competition?

                                                   i.      To avoid surprises and to be prepared

                                                 ii.      To identify their threats

                                                iii.      To improve your planning

                                                iv.      To understand the market behaviours

  1. Determine company goals and objectives
    1. Before embarking in a set of strategies a company must identify its goals and objectives
    2. Goals are broad long range objectives
    3. Objectives are short term and more performance specific
    4. Objectives must be Specific, Measurable, Attainable, Realistic, Timely (SMART) and 3Ps, personal, positive and put  in writing
  2. Formulate Strategy plan
    1. Formulate and select the strategies
    2. This is a road map for the company’s action to achieving its mission, goals and objectives
    3. Must be action oriented
  3. Define an action plan
    1. Now translate your strategic plan into an action plan
    2. No strategic plan is complete until it is put into action
  4. Monitoring the action plan
    1. Now translate your strategic plan into an action plan
    2. No strategic plan is complete until it is put into action

Now that we have had a look at strategic planning let us move on to look at project management in the next article.

A crowded train

As you are aware so far everything in my blog was heavy stuff and nothing light. So it struck me “why not write short stories on what and how I see things around” hence this is my first attempt of this nature. Hope you enjoy reading it.

I was just out of an inter city train in Kuala Lumpur and needed to board another train to get to my destination. I had to run to the commuter train platform to board my next train.

I had checked the time of the commuter train leaving and hence I had 2 minutes to make it. The platforms were in different floors and I had to squeeze pass hundreds of other commuters running for their trains.

I managed to hit the platform and to my delight the train had been delayed and hence I had to wait. The wait was a nightmare as this was a 15 minutes internal commuter. The delay had caused overcrowding and hence there were more people than space in the station.

Just before the train arrived the security officers said “behind the red line” and everyone started rushing to these lines to board the train.

The train arrived and no one was in a mood to allow people out and everyone started rushing into the train. Somehow most of us packed ourselves like ‘sardines’ in the train. There was an announcement saying “be careful of pick pockets” and I got a little worried. So I removed my wallet from my back pocket and placed it in my front pocket to avoid losing all my bank cards.

It was very interesting to see a couple also get in at the same time as myself into the train. I am going to call them Sarah and Peter. Sarah was full of life and Peter was a typical boring guy who just kept quiet. Sarah was commenting on the others in the train. There was another couple most likely unmarried right in front of us. Sarah did not realize that others would also be listening to her comments and said to Peter, “look at the small boy she does not want to lose him”. It was quite amazing as the girl was a young and presentable unlike the guy who appeared scruffy but the amount of love, care or lust from the girl was incredible. She refused to allow the guy’s hands go. She held to it like life and kept saying things to the guy. Again Sarah’s and my assumption was that the young girl was saying nice things to the boy as he was smiling but did not open his mouth during the whole journey. So Sarah continued her commentary the whole way how dumb the girl was and to be fair to Sarah she kept me entertained as it was a long journey and I bet she not only kept me assumed but she must have done that for the whole compartment whoever understood Tamil.

There was another girl standing right in front of me and I will call her Shelia. It was the fasting month (Ramadan) for the Muslims. She had just bought her food for breaking the fast and the aroma coming out of that would have made anyone hungry. This made me hungry and so curious to know what was inside the bag but you guessed that I never got to know. So sometimes it is better not to find out so that the good feeling is preserved and not lost.

Next was a man screaming down on his phone saying “yes I am coming who are you” and this went on repeating itself the whole way. He did not seem to be bothered that others were in the train.

As I was getting closer to my destination the train was emptying out quickly so we had a lot of space. Sarah and Peter were still on the train, Now, two stop before my stop ticket inspectors boarded the train. This was quite hilarious to me. As all train stations had auto gates and inspectors and yet not only people had short changed the railways but had NO ticket. The question to me was “how on the earth did these people get in without a ticket”. The ticket inspectors were tough but extremely pleasant even to those law breaking citizens. The inspectors found a couple of offenders and asked them a couple of questions. One was holding a ticket for the opposite direction and he had the cheek to explain where he was going which was further on the route. The inspectors said “pay a fine”. He had no money .So at the next stop not only did I get off but all the offenders were reeled out and taken away. What a wonderful experience. What I saw in an hour’s journey was amazing.

Intellectual Property Rights – India – Part 3

Trade Marks

India is governed by the Trade Marks Act, 1999. A trademark is any distinctive word/s, symbol, emblem, name, logo, slogan, letters, drawings, pictures, colours or combination of colours or trade dress that a company uses to identify the origin of a product or to distinguish it from other goods in the market. It may also be a combination of all the aforesaid elements. It is what the company wants itself to be identified with…….THE COMPANY’S IDENTITY. Scents and Smells can also be registered as trademark. Sounds can be used as trademarks as well as shapes and configurations of products. E.g. Coca Cola bottle.

Although in some countries and in some situations a mark may be protected without registration, it is generally necessary that for effective protection a mark be registered in a government office. If a trade mark is registered, no person or enterprise other than its owner or authorized users can use it, infringement actions can be taken against them otherwise.

Trade marks rights can last indefinitely, if the trade mark continues to be used. In India, the only criteria is that it has to be renewed every 10 years.

However, the exception is – Trademark rights can be diminished, eroded or lost if the owner does not continuously use the mark, or if the owner does not actively enforce his rights against known infringers, or if the trademark loses its significance in the market by becoming generic. Generic is a part of everyday language and hence becomes common. An owner may lose his trademark right if the mark becomes a generic name e.g. – Aspirin, escalator, yo-yo, cellphone etc. These were once enforceable trademarks but not any more now as they are common words in the English language. Why resort to trademark? To prevent others from using the same or confusingly similar trademark for the same or similar product. To prevent others from using confusingly similar marks, stripping off the identifying source and replacing it with different marks. Mere registration of a domain name does not confer trademark rights. You have to use your domain name to identify your goods or services to acquire trademark rights.

Trade Marks that cannot be registered

The use of a mark which is likely to deceive or cause confusion, contrary to any law for the time being in force, comprising or containing scandalous or obscene matter, comprising or containing any matter likely to hurt the religious susceptibilities of any class or section of the citizens of India, which would be disentitled to protection in a court of law which is identical with or deceptively similar to a trademark already registered in respect of the same goods or goods of the same description, a word which in the accepted name if any single chemical name of chemical compound in respect of chemical substances and marks prohibited under the Emblems and Names Act cannot be registered. Trade marks that have been register already or trade marks that are pending before the Registry which are similar to the mark it seeks to register may be searched at the Registry situated in Kolkatta, Delhi, Mumbai, Chennai and Ahmedabad.

Ingredients of Trademark

The name should suggest the use and nature of the product or service and should be easy for the customers to remember. Present a trademark in such away that it stands out. Use bold letters, colours, capital letters, quotation mark and use the trademark consistently. Do a trademark search to determine whether the name is available for registration. It is common ground for people to put in a lot of time and money into developing a name only to find out later that somebody else has a right to it. It is very frustrating, hence conduct a thorough search first.

Trademarks should be used. If it sits idle for more than 4 yrs then it is redundant. Not only should it be used but it must be used properly. Use the appropriate notice symbols – TM, SM, ® – this shows that the marks belong to you.

Madrid Protocol

The Madrid Protocol covers trademark matters, and facilitates registration of trademarks in member countries by allowing proof of registration in the home country to be deposited in a Central Registration Bureau. At the time of writing this book India was not a member of this protocol.

Industrial Design

Governed by the New Designs Act, 2000 in India. Features of shape, pattern or configuration or ornament applied to an article. This must appeal to the “eye”, new and be industrially applicable.

Registration is required and the duration of Protection is not less than 10 years. The International treaty which governs New Design is the Paris Convention which India is a member.

Integrated Circuits

This is similar to industrial design and used for integrated circuits.

Trade Secrets or Confidential Information

Trade secrets are also known as CONFIDENTIAL INFORMATION. It is information, generally not known, which is valuable to the owner and kept in strict confidence or in secrecy. In recent times, trade secrets are deployed in keeping “Technology” secrets in this technology era.

Examples are Customer lists, Designs, Instructional Methods, Manufacturing processes, Formulas for producing products, recopies, Invention and processes that are not patentable and Technical know-how.

Trade secret protection attaches automatically when the information is kept secret by the owner. The owner has the right to prohibit others from misappropriating and using the trade secret. Duration of protection is as long as the information is valuable to the owner and is kept in secrecy. Protection will be lost if the owner fails to take reasonable steps to keep the information secret.

This covers all the avenues available to you as an Entrepreneur to protect your idea. Generally

The legal regimes establishing ownership and control of intellectual property are applied on a territorial basis that is, they are created by, and apply only to the country of origin. Accordingly, in order to protect your intellectual property in countries outside your own country, you must establish such protection in each country

You might think that this would require an examination of each country’s laws to determine the existence and scope of protection in that country. Fortunately, many countries adhere to established international conventions and treaties mentioned above.

Many of these conventions and treaties are administered through the offices of the World Intellectual Property Organization in Geneva, Switzerland (www.wipo.org).

Important bodies

WIPO – World Intellectual Property Organization

TRIPS (Trade-Related Aspects of Intellectual Property Rights) by GATT (General Agreement on Tariff and Trade) – TRIPS Agreement requires all GATT members to provide at least a baseline level of protection and enforcement for patents, trademarks and copyrights.

Intellectual Property Rights – India – Part 2

Patents

India is governed by The Patents (Amendment) Act 2005 and the Patents (Amendment) Rules 2005

A patent is a monopoly or exclusive rights granted by the government to a person who has invented a new and useful article or an improvement of an existing article or a new process of making an article for a limited period. The Patent gives exclusive rights to make, use, sell the invention and to assign or transmit the patent via licensing contracts for a period of 20 years from the date of application.  After the expiry of the duration of patent anybody can make use of the invention. The objective of patent is to encourage and develop new technology and industry, to promote innovation and to stimulate creativity.

Ingredients of Patents

Patent must have novelty (new) and true inventor. You cannot discover another person’s invention and apply for patent. Patent must have lack of obviousness to a person of ordinary skill and knowledge in the related field. Patent must have sufficiency of description/ Be Applicable in the Industry and which can be industrially manufactured or used and must be useful.

An idea cannot be patented. Only the article or the process of making some article by applying that idea can be patented. A device cannot be patented if it has been published anywhere in the world or if it has been used or offered for sale in this country prior to the date of the patent application. The patent does not give its owner the right to practice the invention, only the right to exclude others from doing so. Copying, reproducing or selling a patented invention without obtaining a license or permission from its inventor is strictly PROHIBITED. Unawareness of existing patent is not a defence

Applying for Patent

Before applying for a Patent it is prudent that one does an extensive search to find out if the invention or process already exists.

Do not wait until your inventions are fully developed. Apply for a patent as soon as your idea of the nature of the invention has taken a definite shape.

The subject matter of patent protection has evolved as technology has developed and progressed. In recent years there has been much discussion and debate, and some confusion, regarding the patentability of living matter (non-naturally occurring forms which are the product of human ingenuity), software and business methods, but it is now well established that all these can be patented.

Software and business methods cannot be patented in India. Software can only be protected by copyright.

The first person who files a patent application gets the patent, even if he or she is not the first person to invent the claimed subject matter. Only the U.S and the Philippines have a first to invent system so if you can show you will the first you will be granted the patent.

Patent Cooperation Treaty (PCT)

Allows applicants to file an “International Application” at one’s home country patent office under the auspices of the World Intellectual Property Organization. India is a member of this treaty.

Patent Offices are located at Mumbai, Delhi, Chennai and Kolkata. The Indian Patent office has brought out a Manual of Patent Practice and Procedure, 2005 and General Information Booklet for filing Patent application in India

In the next article we will complete IPR.

Intellectual Property Rights – India – Part 1

Now that you have found your vehicle you need to stir it without the fruits of your labors being robbed. As all good entrepreneurs we must give credit when is due therefore I must place on record this article is written based on Chittu Nagarajan’s original material.

A good idea in itself is just an idea. It has no value at all until something is done with that idea. That idea has to be produced in a form/product in order to become valuable and in turn the product or service has to be commercialised.

It is a fact that when you are involved with entrepreneurship there is a high probability that you may develop something new. It may be an invention, software, design, literary work etc.

The name or brand that you may have developed will also be new. You must remember that all these have a VALUE attached to them. This VALUE is known as INTELLECTUAL PROPERTY or IP.

Intellectual Property

The following are the options available to you

  • Copyright
  • Patents
  • Trade Marks
  • Industrial Design
  • Integrated Circuits
  • Trade Secrets or Confidential Information

We will take a look at each one of these later in this chapter.

Why Intellectual Property?

Intellectual Property Rights exist to encourage, promote and protect Entrepreneurs.

You do not have to be worried that someone else may reap the benefits of what you have sowed or the hard work you have put in. 

It is vital to acquire your rightful ‘Rights’ to an invention, work or name and then to enforce those ‘Rights’ in the market.

Commercial Value

IP has commercial value or potential commercial value. If you protect it no one else can infringe upon it and use it for their own gain.

If you go through the process of inventing a product, process, or device, if you come up with a great new name or slogan, or if you write a company document, spending the time to protect it can save for your company’s products or name a great deal of legal trouble.

Do some research yourself. This can save you lot of money. The Internet is a boon and so make use of it. Only if there is an infringement of rights can IP rights be enforced.

Copyright

Copyright in India is governed by the Indian Copyright Act, 1957 as amended by Copyright (Amendment) Act, 1999. Copyright means the exclusive right to do or authorise others to do certain acts in relation to literary, dramatic, musical, artistic works, cinematograph film and sound recordings. Literary work includes computer programmes, tables and compilations including computer databases. E.g. books, music, art, software, films etc. In other words copyright is the right to copy or reproduce the work in which copyright subsists. You can use copyright to protect company brochures, annual reports, or other documents. The law does not permit one to appropriate to himself what has been produced by the labour, skill and capital of another. The objective is to encourage authors, composers, artists and designers to create original works by rewarding them with exclusive rights for a limited period to exploit the work for a monetary gain, to protect the author of copyright work from unlawful reproduction or exploitation of his work by others. How do you benefit commercially? By licensing your exclusive rights for a monetary consideration.

Ingredients for Copyright

Ideas by themselves do not have copyright. Ideas must be expressed in material form for copyright to subsist. In order to secure copyright, the author must have bestowed upon the work in terms of labour, capital and skill. It is immaterial whether the work is wise or foolish, accurate or inaccurate, whether it has any literary or artistic merit. What will be consider sufficient to merit for copyright depends upon each case.

The work should be original. Originality of “expression of thought” is required. The thought itself need not be original. Expression of that thought has to be original and should originate from the author. E.g. Dan Brown’s “The Da Vinci Code” – Ideas themselves are unprotectable under copyright. The work has to be written down, recorded or reduced to material form.

Ownership of Copyright

An author is the copyright owner. Where the making of a work is commissioned or where a work is carried out by an employee in the course of his employment, unless there is an agreement to the contrary, the copyright in the work shall be deemed to vest in the person who commissioned the work or the employer.

Registration of Copyright

No registration is required to acquire copyright. Copyright automatically subsists as soon as the original work comes into existence. Copyright protection is not granted where the work is grossly immoral, illegal, defamatory, seditious, contrary to public policy or calculated to deceive the public

Term of Copyright

Generally, copyright subsists during the lifetime of the author plus 60 years after his death. In case of joint Ownership until all owners life time plus 60 years of the last one. Unpublished during lifetime will also have 60 years from publishing.

Necessary Elements for Copyright notice

There are four elements for copyright notice. These are

  • The symbol ©
  • Year of 1st publication
  • Authors Name
  • All rights reserved

For example Copyright © 2009 Muthu Singaram All Rights Reserved

Berne Convention

Berne Convention for the Protection of Literary and Artistic Works or Berne Convention is an international agreement governing copyright, which was first accepted in Berne, Switzerland in 1886

Works created or protected in a member country must be given the same protection in all other member countries as that country grants its own nationals. India is a member of this convention.

Other treaties in this area are UCC Geneva Universal Copyright Convention, Geneva Act, UCC Paris Universal Copyright Convention, Paris Act, TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights, membership in TRIPS coincides with membership in the World Trade Organization and WCT WIPO Copyright Treaty, Geneva. India is member of all these treaties besides WCT at the time of writing this book.

Infringement of copy rights

In the U.S. Supreme Court case of MGM v. Grokster it was ruled that one who distributes a device with the object of promoting its use to infringe copyright is liable for the resulting acts of infringement by third parties. Peer to peer services can be sued if they encourage users to share copyrighted material without permission

Recently, A Hong Kong citizen has been jailed for three months for sharing three Hollywood movies online over the BitTorrent network. he happened to be he first person to be convicted using the peer to peer services.

In the next article we will look at other forms of IPRs.

Role of Venture Capitalist

To provide funds for high risk but high return ventures. To arrange additional financing from other sources if required. Constantly assist study and revise the proposed business model and work on reformulating the overall strategy. Be on the look out identifying and employing key people and firing. Provide help in identifying supportive service companies and other business contacts. To buying-out existing partners (owners) where they think this is necessary. Provide operational and technical guidance to enhance overall business efficiency. To prepare the company for a potential exit (e.g. acquisition or initial public offering).

Types of venture capital

Seed funding is usually given for marketing research, concept testing, alpha and beta testing.  Startup funding is given to get started. Second-stage funding is given to expand to the next level.

Mezzanine financing is given to bail out troubled companies but with huge potential and usually given as debt funding but can be converted to equity.

What is the benefit to the VC?

Limited partners usually fund these funds. The people who manage are general partners. They are paid a management fee (1.5 to 3%) of the fund and a profit sharing (20 to 30 %). The fund life is 8 to 10 years and because of this the exit is around 3 to 7 years. As VCs add value to your company, that is why you must do research on VCs first.

Large VC funds do not mean VCs will invest in new ventures. Many older VCs sometimes avoid new startups and concentrate on shorter exit. Exit is by IPO, selling to others, management buyout and merger. Out of 10 ventures one will give huge return, two will give good returns, 3 will return investment and 4 will give no returns. VCs are looking at 2 to 20 times gain.

Steps to Approach VCs

  • Step 1 Investment Criteria

–          Usually you can get these from their websites. Some of these usual criteria are

  • Strong Management Team.
  • Differentiated Product or Services.
  • Large Market Opportunity.
  • Barriers to Entry
  • Visibility of Exit Mechanism.
  • Size of Investment.
  • Location.

–         Depending on the size of fund and success of their portfolio they will start off investing in early stage

–         Early startups require more work

–         Sometimes it is worth talking to experienced fund raisers

  • Step 2 Going on the Road-show

–         When you raise fund you are selling a portion of your company

–         No need to tell about “How fantastic your service or product is” just “What it will help to solve and not how it works”

–         It might be worth paying an expert to raise the fund

  • Step 3 Good Team

–         VCs invest in good teams and not the technology

–         They do not expect all members to be in place

–         A good VC helps to hire these at the right time

–         Team must be fully committed

  • Step 4 Pitching for funds

–         Do not send mass emails

–         It is a selling exercise

–         Target your pitching

–         Why do VCs fund?

  • Do your homework by looking at their portfolio
    • Background
    • Preferences
    • Likes and Dislikes
    • Try and get a reference i.e. accountants, lawyers etc
    • Get used to “NO”

VCs do and monitor

Structure the board and shareholding outside. Give equity based compensation for team members. Provide value added service and shapes the company by protecting their investment by playing an active role and limited outside involvement. They help in bring your product or service to market shorter. Fire founder CEO’s and hire new ones if necessary and this they do it extremely professionally. They hire via professional channels then informal channels. Play a supportive role and link up small companies with bigger ones.

What do VCs do after funding?

VCs do one of these things. Go IPO and sell all the shares, go IPO and sell part of the shares, fund further to next stage or sell the firm.

Now that we have explored how to get funding now you must be to apply the financial management we looked at in the previous articles.

Funding Options for your Venture

Now that we have explored financial plan. In order to do so we need funding. In this chapter we will explore how to go about to funding your idea. I love the quote by Josephine Tessier “Anything that comes easy, comes wrong.” and I absolutely agree with her and I am sure you will also agree.

There are many ways to get funding. Before we go into that let us review the “MONEY RULE”.

Money Rule

Those with it make the rules. Money is there but you need to know where to seek for it. To be successful you must be able to successfully raise funds. Money for your ideas are “risk money” to the stakeholder.

Why Do You Need Funding?

The reason why you usually need funding is for fixed capital (this will include equipment, fixed assets), working capital (this will include rental, salaries and other day to day expenses) and growth capital (this will be for expansion).

Sources of Funding

There are several sources of fund available to you. The most common are

  • Personal savings
  • Friends and family
  • Venture capital
  • Angels and private investors
  • Corporations
  • Grants and Incentives i.e. State, Federal and Agencies
  • Debt financing
  • Initial public offering (IPO)

Beside personal savings the others are sometime refered to as opm (pronounced as opium) other peoples money. Contrary to believe actually it is harder to manage OPM a your own money. Now let us take a look at each one of these sources.

Personal savings

Most entrepreneurs usually start off their business with their personal savings as this would be the easiest source of funding. However if you are a young person most likely you will not have a large amount of savings. Even other funders prefer to fund entrepreneurs who have invested some of their own money, the reason being that this will give confidence to the investor that the entrepreneur is a serious entrepreneur. However it is difficult to keep funding with your funds. So at one time you will need to look for other funds.

Friends and family

Next line of funding usually can be raised from friends and family. This you will need to return and in the event you are NOT able to return this can create unnecessary tension and lead to other issues. This is particularly very true in Asian culture.

Venture capital

These are companies which invest for equity in your company. So in the event you do not make it you do not need to return the funds but these people will usually take an active role in your company. We are going to spend sometime on this and understand how this works.

Venture capital is a term to describe financing for startup and early stage businesses as well as businesses in “turn around” situations. Venture capital investments are usually high risk investments, but with above average returns. A venture capitalist (VC) is a person who makes the investments.

Venture capital funds are made up of financial capital of third party investors that are used to fund business which are considered too risky for typical equity investors or bank loans. These third parties source of funds are known as alternative investment and come from savings accounts, insurance Policy, company stocks and shares, unit trust and pension funds. This is how some of these funds are available to give good returns as some of these investments give high returns.

The VC takes in the form of either equity participation, or a combination of equity participation and debt obligation which are convertible debt instruments that become equity if a certain level of risk is exceeded.

Venture capitalist becomes part owner of the new venture. Most investments are structured as preferred shares and the common stock often reserved by covenant for a future buyout, as VC investment criteria usually include a planned exit event (an IPO or acquisition), normally within three to seven years.

Angels and private investors

Angels and private investors are high net worth individuals who invest on young startups. They will fund using their own funds. Besides funding they also provide mentoring. In return depending on your negotiation skill they will take any percentage of the venture but usually anything between 10 to 50 %.

Corporations

Sometimes you would be able to convince a larger company to fund you. This is when corporate entrepreneurship is flourishing as companies do not want to lose good employee to entrepreneurship. By supporting and investing on these young entrepreneurs the larger company will benefit by having a new venture within the organization. Often entrepreneurs thinking and telling their present boss that they have an idea is not a good idea. These entrepreneurs feel the bosses will not be happy to know that you are going to be an entrepreneur but with the world changing at high speed companies are quite willing to explore these new and bright ideas of young entrepreneurs.

Grants and Incentives i.e. State, Federal and Agencies

There are several grants available at state and national level for which you can apply. Usually these grants are not repayable. However these are reimbursment meaning you need to actually spend before getting the fund from the fund.

Debt financing

These are funding you need to repay bank and the people who provide these funding are commercial banks, assets based lenders, trade credit, equipment suppliers, commercial finance companies, savings and loan companies, stockbrokerage firms, insurance companies and credit union.

Initial public offering (IPO)

This is when you offer the share in your company to the public and raise funds. You raise money only the first time you sell the shares after which the money is only transacted between the buyer and seller.

In the next article we will look at venture capitalist in a bit more detail.