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Cash Flow Budget

A cash flow budget is a projection of your business’ cash inflows and outflows over a certain period of time. A typical cash flow budget predicts the anticipated cash receipts and disbursements of a business on a month-to-month basis.

At least a six-month cash flow budget has to be prepared in advance. The primary purpose of using a cash flow budget is to predict your business’ ability to take in more cash than it pays out. The cash flow budget can also predict your business’ cash flow gaps — periods when cash outflows exceed cash inflows when combined with your cash reserves. You can take cash flow management steps to ensure that the gaps are closed, or at least narrowed, when they are predicted early.

Preparing a cash flow budget involves four steps:

  • Preparing a sales forecast
    • This would require you to carry out a lot of homework. You need to find out from your current and potential customers the sales forecast.
  • Projecting your anticipated cash inflows
    • You must bear in mind that not all sales are done in cash. You might be doing well in terms of sales but you are giving credit, hence low flow of cased. This is one of the reasons a company runs into difficulties and may end up winding up.
  • Projecting your anticipated cash outflows
    • This is the cash you need to stay in business. This would include planned expenses like rental, supplier payment, wages and the big one is the unplanned expenses in the event of something breaking down and you have not thought about it.
  • Consolidating the projections together to come up with your cash flow bottom line
    • By putting all the above three together you would arrive at your budget.

You can improve your cash flow in the following ways:-

  • Improve the flow of money into your business
    • You must try and collect money owed to you quickly, which means you should be giving a lower credit term than what your vendors give you. For example, if you are giving 30 days credit to your customers you should be getting credit terms from your suppliers at  45 days at least to be able to give you a buffer of 15 days to play around.
  • Delay the flow of money out of your business
    • This is not a good practice but sometimes you need to delay to stay in business. What you might need to do is always ensure your terms are longer then the ones you give.
  • Reduce the amounts you pay for operational costs of your business
    • This is an area you need to optimise. You may have a space bigger than you need or more expensive, so you should look for alternatives. You may have more staff than required, so you need to run a leaner operation by training staff to multi task and upgrading their skills.

How to fill cash flow gaps? Cash outflows and inflows rarely, if ever, occur at the same time. More often than not, cash inflows lag behind your cash outflows, leaving your business short of money on occasions. Some cash flow gaps are created intentionally.

Cash flow gaps are often filled by external financing sources. When you use external sources there is a cost you need to pay in terms of interest which means it will further eat into your profits. Hence, you need to always be prepared to look for lower interest sources.

What to Do with a Cash Surplus? Managing and improving your cash flow should result in a cash surplus for your business. A cash surplus is the cash that exceeds the cash required for day-to-day operations. How you handle your cash surplus is just as important as the management of money into and out of your company. Two of the most common uses of extra cash are paying debts and making investment. Sadly many of us use it to do unnecessary things like buying a new car which we do not need. The problem here is many of us do not realise the company is different from individuals and hence we end up spending company money which is not ours. You must ensure you do not fall into this trap as this can lead to your business closing down. It is worth noting that profit in business does not equal to cash flow, they are both different. That is why companies which are cash rich tend to be able to last during lower sales because they are able to meet expenses. If companies are unable to meet their expenses they would go out of business and in paper the company could be a profitable company. Thus, you must ensure you have enough cash to keep your business floating.

Financial Plan

Financial Plan

Most of us entrepreneurs hate finance just like what Albert Einstein said “do not worry, we are worse off than you in financial planning”. We are going to make finance as simple as possible. When you finish this chapter you would be having a good understanding on financial plan without getting a degree in finance.

Why a Financial Plan?

It will help one manage better. To show your lenders and investors that you have done your homework. A financial plan has three components, one “Basic Financial Report”, two “Breakeven Point Analysis” and three “Ratio Analysis”. Now let us take a look at each of these components.

Financial Report

Basic Financial Report has three major reports viz. balance sheet, income statement

and cash flow.

Balance Sheet

Provides details of a company’s worth on a given date which is Assets = Liability + Owner’s equity.

Assets are current, fixed and intangible. Current assets are short term ie.less than.1 year. These include cash in bank, items which can be converted into cash within one year that is accounts receivable and inventory less bad debts. Fixed assets are long term that is more than one year. These include land and building less depreciation. Intangible assets are copyright, patent, trademark and goodwill

Liabilities are current and long term. Current is short term that is less than 1 year. These include accounts payable, notes payable, wages, taxes etc. Long term that is more than one year include mortgage and long term note payable.

Owner’s equity is investment by the investors. 10 % increase or decrease on one side is reciprocated on the other side

Income Statement

Income statement is also known as Profit and Loss (P &L) statement.  The purpose of this statement is to compare expense against revenue over a period of time. Profit or loss is the difference between revenue and expenses.

Cash flow statement

Cash flow statement shows the change in business working capital. To do this we first need the balance sheet and income statement and then the source of funds. Please note that depreciation is considered as a source of fund.

Total expense against total source is the increase or decrease in working capital.

Breakeven point Analysis

Breakeven point indicates the minimum level of sales required to reach break even. It provides a good indication but it is too simple to use as a final method because it ignores cash flow.

Ratio Analysis

Ratio Analysis compares significant numbers from the financial statement. Each ratio indicator depends on the business you are in. This is probably the most difficult part to understand in finance. We have attempted to keep it simple and we believe we have succeeded in doing so.

There are 4 main ratios and each in turn has other ratios

  • Liquidity Ratios

–         Indicates company’s ability to pay its bills

  • Leverage Ratios

–         Finances supplied by owner against creditors

  • Operating Ratios

–         Evaluating performances of the company

  • Profitability Ratios

–         Indicates how well a company is managed

These in turn have several ratios. It is beyond this article to explore them. You will need to attend a course or pick up a book on ratios to understand them further.


Managing Cash Flow

A healthy cash flow is an essential part of any successful business. Failure to have enough cash to pay your suppliers, creditors, or your employees implies that you’re out of business! Proper management of your cash flow is  very important in making your business successful.

Understanding Cash Flow

In its simplest form, cash flow is the movement of money in and out of your business. It can be described as the process in which your business uses cash to generate goods or services for  sale to your customers, collects the cash from the sales, and then completes this cycle all over again.

Why is it important to manage cash flow? Smart cash flow management is vital to the health of your business. Hopefully, each time through the cycle, a little more money is put back into the cash flow cycle than which flows out.  Your profit is not the same as your cash flow. It’s possible to show a healthy profit at the end of the year, and yet face a significant money squeeze at various points during the year.

To properly manage your business’ cash flow, you must first analyze the components that affect the timing of your cash inflows and outflows. A good analysis of these components will point out the problem areas that lead to cash flow gaps in your business. Closing  or even narrowing cash flow gaps is the key to cash flow management.

Important components to be examined are:

  • Accounts receivable are the monies people owe you.
  • Credit terms are the time allowed before you pay or others pay you.
  • A credit policy is the one which details credit terms of your company.
  • Inventory is the stock you have.
  • Accounts payable are the monies you owe others.

In the next article we will explore “cash flow budget”.

Entrepreneurs Vehicle for Success – Part 2 – Indian

In the previous article we looked at the first part of the vehicle which was the team.Now let us look at the next part which is to start the business. What Is A Business? Business is an activity wherein one provides goods or services at a profit. Every business is carried on with this intention such as trade, commerce, craftsmanship and professions. Types of Business in India. A business may be carried on in any one of the following forms viz. Sole Proprietorships, Partnerships, Joint Stock Companies as Private Limited Companies or Public Limited Companies, Cooperatives and Hindu United Family Firms.

Sole Proprietorship is the easiest, simplest and oldest form. The business is owned and controlled by an individual and it has no separate legal entity. Hence it is unlimited liability, undivided risk, individual funding and there is no need to register in India.

Partnerships are formed by two or more people (maximum 10 people in banking and 20 people for non-banking). The formation is done by an agreement known as Partnership Deed. The activity must be lawful business and the profits shared with unlimited liability. The parties are restricted on transfer of interest and based on utmost good faith. The partnership can be dissolved by a number of ways and registration is optional.

Joint Stock Companies

There are two types of companies, one private and two public.

To form a private limited company you need minimum 2 and maximum 50 people. Company name must be “ABC Private Limited” with minimum 2 directors and cannot invite public to buy shares. Must be registered and liability limited.

To form a public limited company you need minimum 7 people and there is no restriction in the maximum number. Company name must be “ABC Limited” with minimum 3 directors and can invite public to buy shares. Must be registered and liability limited.

A cooperative is formed by a group of people who join voluntarily to improve their economic interests. Cooperatives often share their earnings by dividing the profits among the members in the form of dividends.

A Hindu Joint Family or Hindu united family (HUF) or a Joint Hindu Family is an extended family arrangement among Hindus in India, comprising of many generations living under the same roof. The male members are blood relatives and all the women are either mothers, wives, unmarried daughters, or widowed relatives. In Hindu society it is common for families to carry not only family duties together but also all other activities. The family is usually headed by the oldest male, who makes decisions on economic and social matters on behalf of the entire family. The wife generally controls the kitchen, children upbringing and religious activities. All income goes to a common pool and shared by the members. Map of South Asia (see note) This article deals with the geophysical region in Asia. … This types of firms are on the decline. We have included this just for your information and we are NOT too familiar with this type of firms.

In short there are four major types of structures which most small entrepreneurs can consider. These are Sole Proprietorship, Partnership, Companies and Cooperatives. Each type has pros and cons based on the table of comparison. You must choose carefully as to which structure is suitable for you and in the future. You need to know your rights and desired role in the company.

Once you have decided as to which is suitable to you the next step is to arrive at a name. Believe it or not, there are two schools of thoughts. One says the name makes a difference and the other says no. I leave that decision to you.

Now let us take a look at how others got their names. I cannot say for sure if this information is accurate but nevertheless it is useful for us to think about this.


Apple Computers – favourite fruit of founder Steve Jobs. He was three months late in filing a name for the business, and he threatened to call his company Apple Computers if the other colleagues didn’t suggest a better name by 5 o’clock.

CISCO – it’s not an acronym but the short form for San Francisco.

Google – the name started as a joke and boasts about the amount of information the search-engine would be able to search. It was originally named ‘Googol’, a word for the number represented by 1 followed by 100 zeros. After founders Stanford graduate students Sergey Brin and Larry Page presented their project to an angel investor, they received a cheque made out to ‘Google’ !

HP – Bill Hewlett and Dave Packard tossed a coin to decide whether the company they founded would be called Hewlett-Packard or Packard-Hewlett.

Intel – Bob Noyce and Gordon Moore wanted to name their new company ‘Moore Noyce’ but that was already trademarked by a hotel chain. So they had to settle for an acronym of INTegrated ELectronics.

Microsoft – coined by Bill Gates to represent the company that was devoted to MICROcomputer SOFTware. Originally christened Micro-Soft, the ‘-‘ was removed later on.

Yahoo! – the word was invented by Jonathan Swift and used in his book Gulliver’s Travels’. It represents a person who is repulsive in appearance and action and is barely human. Yahoo! founders Jerry Yang and David Filo selected the name because they considered themselves yahoos.

3M – Minnesota Mining and Manufacturing Company started off by mining the material “corundum” which is used to make sandpaper.

In India the Registrar of Companies has the right either to approve or disapprove a name.

Entrepreneurs Vehicle for Success – Part 1

In the previous article we determined the opportunity. You have to make good use of this wonderful opportunity. You cannot do it yourself. You need a vehicle to achieve this. There are two components which are equally important for the success of the opportunity.

The first is the formation of a team. Please let me draw your attention to the fact that team formation is totally different from team building and team work. The first step is formation of a team then building it and then team work.

There are many team theories but in this article we will explore the theory “Tuckman’s Stages” which in my humble opinion is the most successful theory. This theory was developed in 1965  by Bruce Tuckman, an American Psychologist with four stages and added a fifth stage in 1977.

Before we explore this theory let me emphasize the following points. The team will drive a venture forward more than the product or services. The team will transform a creative idea into a commercially viable one. Venture Capitals prefer a first class team with a  second class idea. The team needs a leader and a legal vehicle.

At the onset of forming a team you should ask the following questions first. What are the tasks that need to be completed by the team? What skills does the team need to complete these tasks effectively?  What, exactly, does this team need to do?  Which people have the necessary skills?  How long will it take to complete the task?  How will the team know when the task is completed?  How will the team measure the ongoing progress?  How will the team recognize and reward team members?  How will the team actively exploit individual ideas and skills?

Bruce Tuckman’s original model had four stages Forming, Storming, Norming, Performing and he later added a fifth stage Adjourning.

1st Stage Forming

This stage is highly dependent on leader for guidance and direction. There is not much agreement on team goals other than those received from leader. Individual roles and responsibilities are uncertain and need to be defined. The Leader must be prepared to handle lots of questions about the team’s purpose, objectives and external relationships. Leadership style is likely to be the “tells” type.

 2nd Stage Storming

This stage involves a lot of contesting and debating on team decisions. Team members will be seeking positions by attempting to establish themselves in relation to other team members and the leader. The leader may receive challenges from the team members. The aims become more defined but uncertainty will still exist.

Cliques and factions may be formed and there may be power struggles.

Leadership is likely to have moved to a more “sells” type.

3rd Stage Norming

In this stage agreement and consensus tend to have been reached, with minor disagreement. Roles and responsibilities should be defined and accepted. Big decisions are made collectively by group agreement. Smaller decisions may be delegated to individuals or small teams within a group. The team discusses and develops its working “guidelines”, processes and working style.

4th Stage Performing  

In this stage the team is clear about its function. The team has a shared knowledge and understanding and requires little input from the leader. The team starts to focus on achieving goals, and the team makes the most of the decisions based on agreed criteria with the leader.  Disagreements still occur but  they are resolved positively by the team. Team members look after each other and share common “bond” and group individuality.

This theory was amended by the original theorist (Bruce Tuckman) and a fifth stage called Adjourning, which is also referred to as Deforming and Mourning was added.

5th Stage Adjourning

This stage is the break-up of the group. Hopefully the project is fulfilled at this stage. The team can move on to new things, feeling good about what’s been achieved.  Feelings of insecurity would be natural for people with high ‘steadiness’ attributes.

During the Forming Stage

You need to allow time for team members to get acquainted. Review the team’s purpose and goals, and share individual goals. Share strengths and challenges related to working on teams. Create initial guidelines for working together. Determine task-related details. Develop team communication and conflict management skills proactively. Conduct a group check-in at the end of meetings. Provide active task and process leadership.

During the Storming Stage

You need to promote open and constructive communication. Allow conflicts. Manage conflicts collaboratively. Focus on short-term goals. Encourage a positive and supportive atmosphere. Provide empowering leadership.

During the Norming Stage

You need to maintain open communication. Increase focus on performance goals. Acknowledge team members and celebrate team achievements. Encourage shared leadership.

During the Performing Stage

You need to encourage innovation. Conduct periodical team assessments. Continue to acknowledge and celebrate successes. Share team leadership roles.

During the Adjourning Stage

Adjourning is arguably more of an adjunct to the original four stage model rather than an extension. It views the group from a perspective beyond the purpose of the first four stages.  The Adjourning phase is certainly very relevant to  people in the group and their well-being, but not to the main task of managing and developing a team, which is clearly central to the original four stages.

In the next article we shall look at the second part of success vehicle.

Innovation and India

Innovation is often related to entrepreneurship. Even when Prof Peter F Drucker wrote his book on entrepreneurship he had named it “Innovation and Entrepreneurship” and the question might arise why?

We will explore the 4Ws and H of innovation to understand why these are synonymous to one another. The four Ws are what, why, when, where and the H is how. What is Innovation and what does it mean to India?

It would be worthy to examine what innovation means and how it differs from invention. Invention is something novel (new) and does not necessarily have a business value. On the other hand innovation is not necessarily something novel (new) but it has  business value. What does this mean? By innovating we are making a service or product to have commercial value. And hence its relationship to entrepreneurship as entrepreneurs focus is to make commercial value with their venture. However saying this it is not only entrepreneurs who need to innovate but all of us need to be innovative in order for our organization to suffer in this era of change and ever changing technology. Unless the company is innovative technologically its chances of survival in this fast moving times are remote.

In other words innovative products and services increase the benefit-to-cost ratio significantly. Another perspective is that innovation lowers the costs and/or increases the benefits of a product or service.

A good innovation increases the benefits-to-costs ratio to such an extent that it enables you to  enjoy a product or service you would not have  thought of enjoying. Some examples which fall in this category are home printer, camera, mobile telephone, car, flying, television, computer, email, fax and online shopping.

Cost is not just money. It can be the ease in use, the skill level required, physical pain, harm or risk, inconvenience and environmentally friendly products and services. Benefits can be the efficiency, effectiveness, safety, speed, pleasure, healthy and fun.

Why innovative? With current slow down unless companies innovate they will not survive these trying periods. It is also because in today’s world competition is great and hence the better companies will innovate to stay a head.

India needs to innovate now more then ever before with the impact of globalization, migration, technological and knowledge revolutions, and climate change issues. Innovation brings better living quality and employment. Innovation will lead to a better India for the benefit of the youth of India.

Innovation has become the talk of multi national companies to small medium businesses world over. In some countries the science ministry has changed or added the word Ministry of Science and Innovation. This goes to show that not only companies are focusing on Innovations but even governments are turning to innovation. Innovation is also a tool to help poorer countries not only to develop but also provide basic needs like water, electricity and clean living. These innovations which cost only a few rupees can give tremendous relief to the villages in India. For example a few solar panels can supply a whole house with the electricity it requires. With plenty of sun here in India this would be a reality.

When to innovate? Simply always!

Where to innovate? Yet again another simple response but a serious one every where!

We in India need to innovate always and every where as otherwise we will not be able to keep up with the growth India has been experiencing over the past two decades and this is where the Americans are slowing down because the rest of us have woken up and started to be innovative and are on the  backs of the Americans with our innovations

How to innovate? There are many ways to innovate. The following are some areas in which we in India should innovate viz. in operations, human capital, process and product. Many Indian businesses are still operated in the good old ways i.e. using lots of paper where we can computerise and by doing so we will save time and hence efficiency will increase. Human capital cross training our people this will increase skill levels which will in turn lead to innovation. In India we have many processes which are really not required. When applying for service we are made to fill the forms in several duplicates and mostly  no one sees these filled forms and  most of them  end up in shops as wrappers. A simple  online form would remove many of these unnecessary forms and this would help the environment by reducing the wastage of paper. An area where India can surely innovate is product innovation. With so many customers and innovators with this lethal combination India should be a world leader in innovation.

To innovate we Indians must have  revolutionary minds and will.

How to determine the opportunity for the idea?

In the earlier article we explored how to generate ideas. Now we need to determine the opportunity for the idea. Ideas are not opportunities but they are merely a tool for opportunity. An idea becomes an opportunity only if there is a need or want. The idea must be based on a solution and market driven. We need to identify the stakeholders and create value for them.

Unless there is an opportunity who will be able to make good their ideas. Therefore ensure that you spend enough time to determine if the idea has real opportunity. The time spent in doing this will help you increase the chances of success.

There are two approaches to determine opportunity. One “Systematic Approach” (by the late Professor Peter Drucker) and the other “ market Approach”.

Determining by Systematic Approach. In this approach there are seven ways leading to opportunities. The first is known as the unexpected opportunity. This is probably the largest source. This happens unexpectedly and it can come from unexpected success, unexpected failure or unexpected outside events. The second is known as the incongruities opportunity. This is a discrepancy between what it is and what it ought to be. This is basically a fault leading to opportunity. The third is known as the process need opportunity. This is a necessity and an opportunity results from this. The fourth is known as the Industry and Market Structures opportunity. This happens when there is a need for change in an industry or market structure. The fifth is known as the demographics opportunity. This happens due to change in population in terms of size, age, composition, education, income etc. The sixth is known as change in Perception opportunity. This happens when we look at things differently and gives rise to an opportunity. The seventh is known as new Knowledge opportunity. This is the big one and gets a lot of limelight and creates history.

We have not gone into the details  as you can read Professor Peter Drucker’s book “Innovation and Entrepreneurship” to get the full details.

Determining by Market approach. This process has five steps to determine opportunity. The first step is to ask how these products create value for a potential customer. Value is created when it is an improvement or lower cost of product or service. What are the barriers to adopt the products? Is it user friendly? Doe it need training? Is the market slow to adopt new products? Does adoption make other products obsolete? How to overcome these barriers? Once we are able to answer these questions we can conclude the potential demand and the revenue. The second step is to determine the risks. Risks fall into three categories, technical risks, financial risks and competitive risks. In technical risk we need to explore the barrier to entry, adoption, and obsoleteness of our product. In financial risk we need to explore the cost of research, development and marketing of our product. You must be able to recover or take the money lost in the event of product failure. Competitive risk is very important. The only time this does not happen is when there is no opportunity or no one has seen the opportunity. Both are bad for you. So you must be prepared to mitigate this risk. In the third step you must analyse the service, production and manufacturing process depending on your business. Here, can sufficient numbers of products be produced at the right cost and if it is a service can you offer enough. In the fourth step you need to explore the initial cost to setup your operation. In the final step you must expand the risks determined in the second step to see the opportunity.

Both approaches can be applied to determine opportunity. The first “the Systematic Approach” (by the late Professor Peter Drucker) was suggested many years ago  but till today it is a great approach. The other “the market Approach” is determined by applying logical steps to determine an opportunity from an idea.

The unfortunate thing about us entrepreneurs is that we tend to fall in love with our ideas and ignore the  million rupee question “does it have an Opportunity”. This leads us to say that people do not fail but ONLY ideas because they did not have an Opportunity in the first place. Now that this has been brought to light and the approach has been clearly explained to you we hope you will focus on this aspect of Entrepreneurship  extremely seriously to ensure success of your ideas.

Entrepreneurs Tools to Determine Ideas

In the last article we explored opportunities areas. Now we are going to explore some tools to arrive at our ideas. Most sources of ideas come from technical or market requirement by universities, companies and individuals. Contrary to belief we often hear from our participants and students that they want to be entrepreneurs but to our surprise their response is “we do not have an idea and do not know how to get one”. You can get an idea by using the many tools available to you. There are more than 200 techniques available to you. We will explore 10 of these in this article.

The first technique is known as Interviewing. Here you have one facilitator. It can be the entrepreneur who then carefully selects six to twelve people for this technique. In this technique it is a discussion and not just asking questions about products to fulfil market needs. The session should last half a day and a token should be given to the participants for their time. This method can be used not only to generate ideas but also to screen ideas and concepts.

The second technique is known as classical brainstorming. In this technique we start with a problem statement. The problem should not be too broad or too narrow. We should select one facilitator and carefully select six to twelve people. In this technique a free flow of discussion takes  place to generate more ideas. All ideas generated must be recorded (Most of the ideas will not materialize). Then the group should combine all ideas and come up with one or two ideas. During this session, criticism and negative remarks are not allowed. The session should have a time limit.

The third technique is known as negative brainstorming. It is similar to Classical brainstorming. However during this session criticism and negative remarks are allowed but must ensure no personal attacks or demoralization of the group members take place. The purpose of this session is to knock an idea down. This is a good technique to be used before using the other techniques as the group will be aware of what problems they have to overcome.

The fourth technique is known as Rawlinson brainstorming. It is similar to Classical brainstorming. However during this session all feedback is directed to the facilitator and not to the group. This is a good technique if there are enough people to capture and note down all the ideas. This is a good technique for new groups.

The fifth technique is known as Value Brainstorming. It is similar to Classical brainstorming. Here we list the primary concern. Then we list hidden values that lie behind the primary concern. Then we rank the hidden values and define what each means. Then we put into action the ranked results.

The sixth technique is known as Collective notebook (CNB). Here notebook means a book to write and not a computer. The facilitator provides a notebook to all team members with a problem statement. The notebook will contain some suggestions to help generate ideas. For a month everyone writes one idea everyday in the notebook. Facilitator will provide regular related information during the month. At the end of the month each member presents summary of their idea in brief. At the end of the month the facilitator collects the notebooks and consolidates the ideas. Then all the members will view the notebooks and the facilitator’s comments to come up with the final idea.

The seventh technique is known as Five W’s and H. The W’s are Who? Why? What? Where? When? and the H is How?. This is popular in the world of journalism.

The eighth technique is known as Why? Repeatedly asking “why” questions enables to arrive at a solution

The ninth technique is known as keeping a dream diary. Before you sleep you tell yourself several times that you will not forget your dreams when you get up. When you wake up you lie quietly with your eyes closed and try and remember your dream. You need a notebook next to you to record these dreams and do not miss any day

The tenth technique is known as Relaxation. These are not only good for anxiety alleviation but also useful in idea generation. Recite a script to relax yourself.

Now that we have examined 10 methods it is worth noting that these techniques are from different areas i.e. Journalism, Engineering, Management and others. It shows that all of us rely on idea generation to execute our work. Your attention must been drawn to the fact that you may need to use several methods together to generate your idea. You select a technique which is suitable to you and your team and apply that technique.

Areas Entrepreneurs Can Explore for Opportunities

As described in the earlier article, fortunately the attractions to become an entrepreneur are becoming much easier especially since there is a shift from a predominantly manufacturing to a service based economy, and due to this, cost and barriers to entry for entrepreneurs have lowered considerably.

Besides service based opportunities other areas entrepreneurs can explore are farming, food technology, food processing, agriculture, aquaculture, mining and exploration for minerals, new materials, chemicals, drugs, medical drugs, medical equipment, health care, data mining, internet based services, designs and manufacturing. As explained in an earlier article it is important to note that subject knowledge is a must in these areas. In many of these areas knowledge can be acquired by under going study, work experience and self learning.

We must caution you that it may not be possible for a young entrepreneur to attempt some of these areas as barrier to entry and cost would be relatively high but again NOTHING is impossible for a budding entrepreneur.

You may ask “Which area should I look at as there are so many many areas?” the answer is very simple. You need to have passion and interest in the area to be successful. So select an area you are passionate and feel comfortable with. You need to have the burning desire to succeed in the area you choose.

As the barrier to entry is lower in service industry let us explore some specific areas in this sector. Besides farming, agriculture, aquaculture and mining fall under service sector. This has shown tremendous growth in last two decades in India especially the rise of information technology. This has given birth to mega giants in India which are at par with the world’s best. You could be the next one. The new areas which have arisen in this area are managed services, branding, marketing and consulting. These areas play a major role on the non-service sector as these inputs will generate huge outputs. These areas require little or no investment and provide a vast scope for exploitation of these areas.

Based on your skill set and interest you could provide services like financial advice, public relation communication services, trading, distribution, training both soft and hard skills, consulting both in management and technical, outsourcing research, testing, certification, third party inspection, equipment repair, preventive maintenance, calibration, public service outsourcing, leisure and health tourism, sports coaching, old folks home and preventive medicine to mention a few.

Now looking at some of these areas for potential scope, for instance in  public relation communication services are adverting, carrying out research for new markets and products, writing in newspaper and other magazines on selected topics.

Next, trading and distribution have been around for many of years. These can be in the form of shops both physical and virtual but with big players these have been huge retail chains but still small shops can do well because of the personal services. Here we can look at package of existing products and repackage them as many small companies are not able to package their products in an attractive manner. This would be a great example of innovation at work. Innovation is about making a business case out of a product or service. Another area you can focus on is supply chain management as this is one huge area and it can make or break a company. In order for one to do well we need the assistance of technology which will enable a smooth working of this area giving rise to opportunity in building software and systems capable of making this happen.

An area which is gaining momentum is training both hard and soft skills. You can design and run programs for different segments of the society which can start from 5 years old to adult, empowering certain segments of the population like women and many other valuable programs.

In the area of consulting both in management and technical, with increasing need for special skills in specific areas companies are seeking help from experts. Here consultants may work for short or long term as part of the core team to achieve the companies’ goals. In this area you have the flexibility of having to work on a wide range of jobs.

Certification has huge scope because of organisations trying to meet quality and other world standards. So it is a much needed area where experts can certify and carry other inspections to verify if a company, product or service falls under this certification. Organizations having this certification in place will be able to build their business based on this certification as it gives confidence to the potential customer.

An up and coming area is public service outsourcing. Many agencies are outsourcing their process to third parties for cost and efficient running of these services.

What we have covered in this article is not exhaustive. There are a lot more areas to explore but this would give a budding entrepreneur hope that there is so much to explore.

What Does It Take to Be an Entrepreneur?

The field of entrepreneurship was described in 1983 as “an intellectual onion” by a senior faculty member at Harvard Business “You peel it back layer by layer and when you get to the center, there is nothing there, but you are crying.”  To avoid this scenario you need to examine yourself if you are prepared to go through what you need to be an entrepreneur.

We can use a study by the late Professor Jeffry A. Timmons and his colleagues who identified some important entrepreneurial characteristics of successful enterprise owners which still feature in many entrepreneurship studies. I have tried to apply some of these to my personal experience which I am going to share with you.

Entrepreneurs have very high levels of drive and abundance of energy. Entrepreneurs are always on the go looking for opportunities. Entrepreneurs have tremendous self-belief. If you do not believe in yourself, who else will believe in you. Entrepreneurs are looking for long term involvement and use money as a measure only. Entrepreneurs do not stop because of problems. Entrepreneurs love solving problems and if there is no problem there is no opportunity. Entrepreneurs are not risk takers. Contrary to belief they take calculated risks. Who does not take risk? We all do but we think through like crossing the road. Entrepreneurs set goals and because of this they are able to deal with failure and love feedback to improve. They are highly initiative and responsible. They do not need to be told as to what they should do. They are always doing things. They are able to manage and use resources well plus they compete against themselves. Entrepreneurs have good internal control and can tolerate ambiguity unlike most people.

I will share with you the MBS aka MUST, BE and SHOULD of an entrepreneur now. I believe it is a must to have a vision and Review it regularly. You are going to be successful only if you have fun and relax. There must be urgency and excitement in your venture. It is important to have time for family, prayers and time for Exercise

Entrepreneurs have to be open, be willing to learn and be oneself. Do not worry about others as no one will be worried about you. Entrepreneurs need to be able to Change, be Patient, be helpful and respect others. Entrepreneurs have to be serious and result oriented and thankful. Most people are not. For instance they think that their parents are duty bound to do things for them so they do not have to say thank you. Try saying thank you to your parents and you will be amazed by the response.

Entrepreneurs should know where one is heading  and know how to handle success. Everything should be earned and don’t’ feel sorry for yourself. Entrepreneurs should keep writing Positive Statements and plan for the next day at the end of each day

Again based on a study by the late Professor Jeffry A. Timmons and his colleagues they identified some important demands. I am again applying this to my personal experience. We need to give all to the venture and have complete commitment along with creativity and innovation. As pointed out earlier knowledge of the subject is crucial. We must be able to build teams who can deliver. Success leads to economic values but it must be accompanied by ethics, integrity and reliability.


Key Factors that can influence Entrepreneurship There are four factors which play a major role. They are policies, education, economics and culture aka PEEC will serve as the catalyst.

Favouring policies by policy makers like Government, Schools and others can help entrepreneurial development. As I have already said earlier, education will help influence entrepreneurial development.

In the USA many entrepreneurial make 100 times the amount of money they invest on their project if the environment allows this. More people will get into the Entrepreneurs world as it has economic values.

Last but not least some cultures encourage entrepreneurs. Others look at it like taboo and make fun of those who fail and many of our parents want us to join the government or Multi National Companies so that we are secure.

PEEC can create an environment for the breeding ground for entrepreneurs.

Published in  The Hindu as The never-say-die spirit on 29/6/2009

Published in  The Delhi Compass as The never-say-die spirit on 6/7/2009

Published in  The Delhi Compass as The never-say-die spirit on 6/7/2009

Entrepreneurship as a Career

Entrepreneurship is becoming an increasingly popular alternative career choice in the current economic slow down. If you are planning to become an entrepreneur you will not be alone and  will have plenty of company.

Many have gone the entrepreneur route due to external factors including layoffs, frustration in their current workplace culture, or need for greater flexibility in their lives. However it is most important to go with your own internal factor which include passion, wanting to be independent, wanting  to accomplish, building an enterprise, enjoying freedom, a burning desire to make a profession out of a hobby or enjoy the challenges.

Entrepreneurship is not for all. You may most likely be aware that many new ventures fail and probably 1 in 3 will not be in business after five years. The dot com were successes of the late 90s and early 2000s, but it is most unlikely that you will become successful overnight. It requires hard work, determination, vision, need to dedicate long hours and endless energy which is more realistic in today’s entrepreneurship.

There is no fixed pattern for entrepreneurship so long as you are focused and hard working, your dream can become a reality and you can reap the benefits of entrepreneurship.

In today’s world which is becoming flatter due to opening of countries, technology, increasing competitiveness, and mature products there is an urgent need for creativity and entrepreneurship. Fortunately the attractions to become an entrepreneur is becoming much easier especially since there is a shift from a predominantly manufacturing  to a service based economy, and due to this, cost and barriers to entry for entrepreneurs have lowered considerably. It is worthy to note that new ventures are job creators like the Silicon Valley, Silicon Alley, Route 128 and industrial parks are the envy of the world.


Entrepreneurship serves as an anchor to many businesses and economy. It can also play a major role in alleviating problems of poverty, unemployment and underemployment in many developing countries in today’s world.


Entrepreneurship will thrive only in a culture and environment which encourage entrepreneurs to take a chance and fail. At present the government and even the former President of India, Dr Kalam, have been encouraging young people to take a plunge into entrepreneurship.


Entrepreneurship can be spurred by three factors, first Opportunity, second people and third available resources. Entrepreneurs are people with high managerial and creativity skills. Sales people are low in both, managers are high in managerial skills and inventors are high in creativity. This does not mean that you must be high in both. You can form a team to strengthen your skills, as entrepreneurship is all about building a team and not a single person entity.


Why look at entrepreneurship? Entrepreneurship creates new jobs, new industries e.g. cellular phone, internet shopping. Entrepreneurship provides economic and social mobility. Entrepreneurship creates equity, produces great leaders and contributes to society. With competition increasing and technology becoming more efficient, jobs are decreasing. Hence entrepreneurship is on the rise. Jobs are also decreasing as many women are forced to look for work as one salary is not sufficient to run a family. Jobs are not for life. Nowadays people are looking for results and hence the change is common. Rearranging in companies to reduce cost is being done and therefore contract and temporary work are increasing. As an entrepreneur your hours of work can be flexible.


The positives of an entrepreneurship is that you control your own future, have the satisfaction of making your own money and not for someone else, put your talent to use and most importantly you will be doing something that you enjoy.


The flip side of entrepreneurship is you may have irregular income which leads to you not knowing what your next pay cheque is. You have to do all the work by yourself  which may result in a hard life.


You must dream to make entrepreneurship work for you just like Bill Gates a Harvard drop out. His dream was to have every desktop in the world running on his software and that dream has made him one of the richest people on the planet.

That is the power of dreams, these will help you to face challenges, handle failure, help you build confidence to face ambiguity and make the impossible possible.

As children we all have big dreams but as we grow up these dreams are reduced by people who want the best for us like our parents, teachers, friends, society and other forces.

The impact is that we lose our big dream and become ‘regular’ beings looking for things we do not want, like looking for a job.

Published in The Hindu 1/6/2009