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D i g e s t

Strategy | | |Finance Digital Legal

October 2017 INR 150/-

- (Special Story)

Risks andEntrepreneurship

- ( Strategy ) - (Finance)- ( Legal & Compliance )

Things to consideredwhile dra�ing a business plan

FinancialModelling-A prac�cal view

Star�ng a NIDHICOMPANY in India

www.venture-care.com

IndexEditorial

Special Story

Index

Risks and Entrepreneurship

3

4

Legal & Compliance

Strategies: Root of business

Momentum = Mass X Velocity

Financial Modelling- A prac�cal view

Road Map to dra� a Business plan

Tested Ways Grow Your Business

Star�ng a NIDHI COMPANY in India

Things to considered while dra�ing a business plan

8

18

20

32

24

27

29

2www.Venture-Care.com/Magazine October 2017

Strategy

Finance

Editorial


Prashant KumarPrashant KumarEditor

Happy Reading...

This October issue is focusing on finance & strategy with special story as “Risk & Entrepreneurship”.

Strategies are important and are root of any business. Strategies can not be avoided. You will find

that how strategies are important in this digest.

Nidhi Company means a company which has been incorporated as a public company with the object

of-Cul�va�ng the habit of thri�y and savings amongst its members and receiving deposits from, and

lending to, its members only, for their mutual benefit.

Objec�ve of nidhi company is to simulate savings among its member and to lend Loans and receive money

as deposits for the purpose from only its members.

It is very good idea that has been carried out by RBI. You will find all the related aspects of a nidhi

company.

Businesses get started. Promoters expect to grow the business. You will find that what are the ways togrow the business.

Business plan is so important that any promoter would like to have to have a sound business plan.

There are other special theams in this issue which I hope that you will enjoy reading.

Risks andEntrepreneurship

Risks and entrepreneurship go hand in hand. No business owner should just believe it and be passive.

Of course risks should be mi�gated or at least be reduced.

Let me clarify that risk is not always bad for business and its owner. Entrepreneurs should take

calculated risk. First of all let us discuss what the benefits are of risks in the business:

It refines vision and mission of the company

It makes the organiza�on more proac�ve in handling any kind of situa�on

It makes decision makers more aggressive

It helps in devising flexible strategies for the organiza�on

It sends posi�ve energy to the middle and junior level management

It helps organiza�ons in reaching new height of growth

It helps in forming much more loyal and dedicated team for execu�on

Special Story


However, it is injus�ce to say that there are no cons of risks:

Frequent failure of strategies may dishearten the top management

Compe�tors may acquire the failed organiza�on

Execu�on team may leave the organiza�on

Sense of fear may develop across the organiza�on

Future contracts may be cancelled

There may be socio-economic pressure from stakeholders including government

It is general no�on that a start-up always faces higher degree of risk.But, this in not completely true. A

bigger organiza�on will always face higher degree of risks because of large size, huge finance obliga�on,

bigger team, global opera�on etc. Shi�ing from one strategy to another to reduce risk is �me taking and

by the �me it takes alterna�ve course of ac�on, a�ermath of risk becomes severe and unmanageable.

In contrast, smaller organiza�ons including start-ups can shi� to alterna�ve strategic plans soon to

mi�gate or reduce risk.

Let us discuss that what kind of general risks an organiza�on may face:

Management risk- any of the key persons leaving the organiza�on

Product risk- failure of product because of being out-dated or compe�tors came up with much

advanced product or associated services

Team risk- execu�on team leaving the running projects suddenly

Suppliers' risk- vendors/suppliers cancelling the contracts at very short no�ce

Legal risk- companies falling into li�ga�ons with compe�tors

Environmental risk- sudden development of rules and regula�ons by state or central government

pu�ng pressure hard to survive

Financial risk- inability to service to debt or not mee�ng financial expecta�ons of outside equity

providers

Special Story


General approach for mi�ga�ng or reducing the impact of risks:

Try to forecast the risk- although it is difficult in changing business environment but to some extent

it is possible as well as desirable.

Do not ignore ifs and buts- always have back up plan; be it related to product/services modifica�on,

new launch, execu�on team etc.

Communicate well inside and outside the organiza�on- miscommunica�on will create risk

Maintain rela�onship- develop and maintain rela�onships with current customers/vendors and

also with past vendors.

Raise finance only to the extent of requirements and stage-wise

Focus on cu�ng down the opera�onal and other cost

Develop new way of marke�ng

KEY TAKE AWAYS, risk is a double-edged sword. Taking risk is good but mi�ga�ng the impact of

unwanted risk is desirable. Understand your business and business dynamics very well and deeply. Do

counter a�ack if possible and required.

Special Story


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Starting a Nidhi Company

in India

Nidhi Companies is regulated by Sec�on 406 of Companies Act 2013 and Companies

(Nidhi Companies) Rules, 2014

MEANING:

Nidhi Company means a company which has been incorporated as a public company with the object

of-Cul�va�ng the habit of thri� and savings amongst its members and receiving deposits from, and

lending to, its members only, for their mutual benefit.

OBJECT TO INCORPORATE NIDHI COMPANY:

Nidhi Company is incorporated with following objec�ves:

To s�mulate savings among its member

To lend Loans and receive money as deposits for the purpose from only its members.

Since Nidhis come under NBFCs, the RBI is empowered to issue direc�ons to them in ma�ers

rela�ng to their deposit acceptance ac�vi�es. However, since Nidhis deal with their shareholder-

members only, RBI has exempted such no�fied firms from the provisions of the RBI Act and other

direc�ons applicable to NBFCs.

Legal & Compliance


APPLICABILITY:

The Central Government made 'Nidhi Rules, 2014' for the purpose of carrying out the objec�ves of

'Nidhi' companies. These rules shall be applicable to-

Every company which had been declared as a Nidhi or Mutual Benefits under Sec�on 620A(1)of

Companies Act, 1956;

E very company func�oning on the lines of a Nidhi company or Mutual benefit society but has

either not applied for or has applied for and is awai�ng no�fica�on to be a Nidhi or Mutual

Benefit Society under Sec�on 620A(1)of Companies Act, 1956;

E very company incorporated as a Nidhi pursuant to the provisions of Sec�on 406of the

Companies Act, 2013.

PRE-REGISTRATION REQUIREMENTS FOR REGISTERING A NIDHI COMPANY :

Minimum Three Directors:

Minimum three Directors are required to incorporate Nidhi Company. All this three director has to actas members of the company.

Minimum Seven Members:

Nidhi Company can be started with seven members. Out of which 3 are also to be appointed as directors.

Minimum Capital Requirement:

Nidhi Company as Public Limited Company Should have Capital of Rs.5,00,000/- Like Public Limited

Company.

No Preference Shares shall be issued.

O bject of the Company

The objec�ve of such a firm would be to imbibe in the members a habit of thri� and saving and the

services would only be restricted to its members;.

The name of the company must have word as Nidhi Limited at the end.

PROCEDURE FOR INCORPORATION OF NIDHI COMPANY :

Get Digital Signature Cer�ficate (DSC) of all seven members.

Get Director Iden�fica�on number (DIN) of three Directors by using DSC.

Suggest at least Six Company name. We will do search for name availability.

Apply to ROC for name approval with adding word Nidhi Limited.

Once name is approved by ROC File Incorpora�on document with ROC like MOA AOA Consent of

Director, Affidavit and declara�on from directors etc.

Once Incorpora�on form is approved by ROC, ROC shall issue Cer�ficate of Incorpora�on with

PAN and TAN No.

Legal & Compliance


Requirement to Apply for DSC:

All 7 members should have DSC

Pan Card Self A�ested

Residen�al Proof Self A�ested

Dully fill and sign DSC applica�on form.

Requirement to Apply for DIN:

(Minimum Three Directors are required for Incorpora�on of Nidhi Company)

Photograph of the Applicant - To be Self-a�ested.

PA N - To be Self-a�ested

Mobile No.

Email id.

Educa�onal Qualifica�on

Occupa�on

Proof of residence of applicant

Address proofs like passport, elec�on (voter iden�ty) card, ra�on card, driving licence, electricity

bill, telephone bill or bank account statement shall be a�ached and should be in the name of

applicant ( shall not be later than 2 months).

DSC of Individual.

Legal & Compliance


Requirement to Apply for Name Availability:

Six Proposed name with significance of Name

Authorized Capital- Minimum 5 Lacs

Jurisdic�on of Registrar of Companies.

Main Object to be pursued by Company

Requirement to Apply for Incorpora�on of Nidhi Company:

Registered office address of Company.

Recent Address proof with NOC from Owner.

Consent from all Directors

Affidavit and declara�on from all directors and subscribers.

TIME PERIOD:

Time Required for Incorpora�on of Nidhi Company Shall be 20-30 days, depending on government

approval.

Legal & Compliance


POST-REGISTRATION REQUIREMENTS FOR A NIDHI COMPANY :

There are certain Compliances which Nidhi Company has to do a�er incorpora�on of Nidhi Company.

Every Nidhi Company shall, within a period of one year from Incorpora�on of the company, ensure that

it has

Not Less than 200 Members:

A�er incorpora�on, a Nidhi company must add at least 200 members to comply with this requirement

of law. Further, it has to maintain this during the course of �me. If the total members falls less than 200

at any �me therea�er, it will leave the company at default.

However, if the company is not able to reach the limit of 200 members, then you must apply for �me

within 30 days of closure of financial year in Form NDH-2 with Regional Director.

Net Owned Fund:

Net owned funds shall be Rs.10,00,000/- or more ('Net owned funds' means the aggregate of paid up

equity share capital and free reserved as reduced by the accumulated and intangible assets appearing in

the last audited balance sheet).

Ra�o:

Ra�o of net owned funds to deposit shall be not more than 1:20. This ra�o is very easy to understand.

Suppose, if you have net owned funds of 10 lakh, then your total deposit limit would be INR 2 Crore.

Deposit:

Unencumbered term deposits of not less than 10% of the outstanding deposits as specified in Rule 14.

Members restric�on:

A Nidhi Company shall not admit a body corporate or trust as a member.

A minor shall not be admi�ed as a member of Nidhi Company. But deposits may be accepted in thename of a minor, if they are made by the natural or legal guardian who is a member of Nidhi

GENERAL RESTRICTIONS:

Rule 6 provides general restric�ons.

According to this Rule no Nidhi shall-

Carry on the business of

Chit Fund,

H ire Purchase Finance,

L easing Finance,

I nsurance or Acquisi�on of Securi�es issued by anybody corporate;

Legal & Compliance


Issue

Preference Shares,

D ebentures or

A ny Other Debt Instrument by any name or in any form whatsoever;

Open any Current Account with its members;

Acquire another company by;

Purchase of securi�es or

Control the composi�on of the Board of Directors of any other company in any manner

whatsoever or

Enter into any arrangement for the change of its management, unless it has passed a special

resolu�on in its general mee�ng and also obtained the previous approval of the Regional Director

having jurisdic�on over Nidhi;

Carry on any business other than the business of borrowing or lending in its own name;

Accept Deposits from or lend to any person, other than its members;

Pledge any of the assets lodged by its members as security;

Take Deposits from or lend money to anybody corporate;

Enter into any Partnership Arrangement in its borrowing or lending ac�vi�es;

Issue or cause to be issued any adver�sement in any form for solici�ng deposit;

Pay any brokerage or incen�ve for mobilizing deposits from members or for deployment of funds or

the gran�ng loans.

Share capital allotment:

Every Nidhi shall allot

To each deposit holder at least a minimum of 10 equity shares or shares equivalent to Rs.100/-.

To each savings account holder and a recurring deposit account holder at least 10 equity shares

of Rs.10/-.

Legal & Compliance


Acceptance of deposits:

A Nidhi shall not accept deposits exceeding 20 �mes of its Net Owned Assets as per last audited

financial statements.

The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of

60 months.

Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period

of 60 months.

In case of recurring deposits rela�ng to mortgage loans, the maximum period of recurring deposits

shall correspond to the repayment period of such loans granted by Nidhi.

The maximum balance in a savings deposit account at any given �me qualifying for interest shall

not exceed Rs.1,00,000/- and the interest shall not exceed 2% above the rate of interest payable to

savings bank account by na�onalized banks.

Interest for fixed and recurring deposits shall be at a rate not exceeding the maximum rate of

interest prescribed by RBI which the NBFC can pay on their public deposits.

Every Nidhi shall invest and con�nue to keep invested, in unencumbered term deposits with a

scheduled commercial bank or post office deposits in its own name an amount which shall not be less

than 10% of the deposits outstanding at the close of the business on the last working day of the second

preceding month.

In case of unforeseen commitments, temporary withdrawal may be permi�ed with the prior approval

of the Regional Director for the purpose of repayment to depositors, subject to such condi�ons and �me

limit which may be specified by the Regional Director to ensure restora�on of the prescribed limit of 10%

Loan:

A Nidhi shall provide loans only to its members. The loans given to a member shall be subject to the

following limits:

Rs.2,00,000/- where the total amount of deposits from members is less than Rs.2 crores;

R s.7,50,000/- where the total amount of deposits from its members more than Rs.2 crores but

less than Rs.20 crores;

R s.12,00,000/- where the total amount of deposits from its members is more than Rs.25 crores

but less than Rs.50 crores;

R s.15,00,000/- where the total amount of deposits from its members is more than Rs.50 crores.

NOTE:

A Nidhi shall give loans to its members only against the following securi�es, namely:

Loans to the members shall be given against the securi�es of gold, silver and jewellery and

immovable property.

R epayment period of such loan shall not exceed one year in case of gold, silver and jewellery.

I n case of immovable property the loan shall not exceed 50% of the value of the property offered

as security and the period of repayment of such loan shall not exceed 7 years.

L oan may be given against the fixed deposit receipts, Na�onal Savings Cer�ficates and other

Government securi�es and insurance policies.

Legal & Compliance


The rate of interest to be charged on any loan shall not exceed 7.5% above the highest rate of interest

offered on deposits by Nidhi and shall be calculated on reducing balance method.

Dividend:

A Nidhi shall not declare dividend exceeding 25% or

Such higher amount as may be specifically approved by the Regional Director for reasons to be

recorded in wri�ng and further subject to the following condi�ons-

An equal amount is transferred to General Reserve;

There has been no default in repayment of matured deposits and interest; and

It has completed with all the rules as applicable to Nidhis.

Director:

The director shall be a MEMBER of Nidhi.

H e shall hold office for a term up to 10 consecu�ve years on the Board.

H e shall be eligible for re-appointment only a�er the expira�on of 2 years ceasing to be a director.

W here the tenure of any director in any case had already been extended by the Central Government

it shall terminate on expiry of such extended tenure.

T he person to be appointed as a Director shall comply with the requirements of Sec�on 152(4) of the

Act and shall not have been disqualified as provided in Sec�on 164 of the Act.

Auditor:

The tenure of Auditor is five consecu�ve years.

No auditor or audit firm as auditor shall be appointed for more than two terms of five consecu�ve

years.

The auditor shall be eligible for subsequent appointment a�er the expira�on of two years from the

comple�on of his term.

The Auditor of the company shall furnish a Cer�ficate every year to the effect that the company has

complied with all the provision contained in the rules and such cer�ficates shall be annexed to the

audit report and in case of non-compliance he shall specifically state the rules which have not been

complied with.

Branches:

A Nidhi may open branches only if it has earned net profits a�er tax con�nuously during the preceding

three financial years.

T he company may open up to 3 branches only within the district.

I f it proposes to open more than 3 branches within the district or any branch outside the district, it

shall obtain prior permission of the Regional Director and in�ma�on is to be given to the Registrar

about opening of every branch within 30 days of such opening.

N o Nidhi shall open branches or collec�on centers or offices or deposit centers, or by whatever name

called outside the State where its registered office is situated.

F urther branches or collec�on centers or offices or deposit centers shall be opened unless financial

statement and annual return are filed with the Registrar.

Legal & Compliance


Closure of Branch:

A Nidhi shall not close any branch unless:

It publishes an adver�sement in a newspaper in vernacular language in the place where it carries on

business at least 30 days prior to such closure.

I nforming the public about such closure; fixes a copy of such adver�sement or a no�ce informing

such closure of the branch on the no�ce board of Nidhi for a period of at least 30 days from the date

on which adver�sement was published and

G ives in�ma�on to the Registrar within 30 days of such closure.

COMPLAINCE WITH REGISTRAR OF COMPANIES - RETURNS:

NDH -1

Within 90 days from the closure of the first financial year a�er its incorpora�on and where applicable,

the second financial year, Nidhi shall file a return of statutory compliances in Form NDH – 1 along with

such fee as prescribed with the Registrar duly cer�fied by a Company Secretary in prac�ce or a Chartered

Accountant in prac�ce or a Cost Accountant in prac�ce.

NDH -2

If the company is not complying with the above it shall within90 days from the close of the first

financial year, apply to the Regional Director in Form NDH -2 along with fee for extension of �me and the

Regional Director may consider the applica�on and pass orders within 30 days of the receipt of the

applica�on.

NDH -3

The Nidhi Company shall filed Form NDH-3 within thirty days from the conclusion of each half year

duly cer�fied by a company secretary in prac�ce or chartered accountant in prac�ce or cost accountant

in prac�ce.

If there is failure the Nidhi shall not accept any further deposits from the commencement of the second

financial year �ll it complies with the provisions besides being liable for penal consequences provided in

the Act.

PENALTY:

If a company contravenes any of the provisions of the rules the company and every officer of the

company who is in default shall be punishable with fine which may extend to Rs.5,000/- and where the

contraven�on is a con�nuing one, with a further fine which may extend to Rs.500/- for every day a�er

the first during which the contraven�on con�nues.

Legal & Compliance


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“Strategies are roots of any business, plans are stems and branches and growth is fruit”.

There are many areas where strategies can be implemented:

Product strategies

Marke�ng strategies

Growth strategies

Financial strategies

R&D strategies

Service strategies

HR strategies and many more

1. Framework For Opera�onal planning

Strategies provide the framework for plans by channelling opera�ng decisions and o�en pre-deciding

them. If strategies are developed carefully and understood properly by managers, they provide more

consistent framework for opera�onal planning. If this consistency exists and applied, there would be

deployment of organiza�onal resources in those areas where they find be�er use. Strategies define the

business area both in terms of customers and geographical areas served. Be�er the defini�on of these

areas, be�er will be the deployment of resources. For example, if an organiza�on has set that it will

introduce new products in the market, it will allocate more resources to research and development

ac�vi�es, which is reflected in budget prepara�on.

Strategies: Root of

business

Strategy


2. Clarity in Direc�on of Ac�vi�es

Strategies focus on direc�on of ac�vi�es by specifying what ac�vi�es are to be undertaken for

achieving organiza�onal objec�ves. They make the organiza�onal objec�ves more clear and specific. For

example, a business organiza�on may define its objec�ve as profit earning or a non-business organiza�on

may define its objec�ve as social objec�ve. But these defini�ons are too broad and even vague for

pu�ng them into opera�on. They are be�er spelled by strategies, which focus on opera�onal objec�ves

and make them more prac�cal. For example, strategies will provide how profit objec�ve can be sharply

defined in terms of how much profits is to be earned and what resources Of how much profit is to be

earned and what resources will be required for that. When objec�ves are spelled out in these terms,

they provide clear direc�on to per-sons in the organiza�on responsible for implemen�ng various courses

of ac�on. Most people perform be�er if they know clearly what they are expected to do and where their

organiza�on is going.

3. Increase Organiza�onal Effec�veness

Strategies ensure organiza�onal effec�veness in several ways. The concept of effec�veness is that the

organiza�on is able to achieve its objec�ves within the given resources. Thus, for effec�veness, it is not

only necessary that resources are put to the best of their efficiency but also that they are put in a way

which ensures their maximum contribu�on to organiza�onal objec�ves. In fact, taking strategic

management, which states the objec�ve of the organiza�on in the context of given resources, can do this.

Therefore, each resource of the organiza�on has a specific use at a par�cular �me. Thus, strategies

ensure that resources are put in ac�on in a way in which these have been specified. If this is done,

organiza�on will achieve effec�veness.

Strategies contribute towards organiza�on effec�veness by providing sa�sfac�on to the personnel of

the organiza�on. In organiza�on where formal strategic management process is followed, people are

more sa�sfied by definite prescrip�on of their roles thereby reducing role conflict and role ambiguity. If

the decisions are systema�zed in the organiza�on, everyone knows how to proceed, how to contribute

towards organiza�onal objec�ves, where the informa�on may be available, who can make decisions, and

so on. Such clarity will bring effec�veness at the individual level and consequently at organiza�onal level.

Strategies provide all these things in the organiza�on through which everything is made crystal clear.

4. Personnel Sa�sfac�on

To conclude,“Without a strategy the organiza�on is like a ship without a rudder, going around in circles.

It is like a tramp; it has no place to go.” They ascribe most business failures to lack of strategy, or the

wrong strategy, or lack of implementa�on of a reasonably good strategy. They conclude from their study

that without appropriate strategy effec�vely implemented, failure is a ma�er of �me.

Strategy


9 Tested Ways

to Grow a Business

Let your business grow on new trajectory. Here are some ways thatwill flourish your business.

1. Get your business spread in the exis�ng market

Ge�ng new customers is not bad. But be�er will be to sell more to the exis�ng customers; retain the

exis�ng customers. Acquisi�on of new customers will involve higher promo�on out-go. Whereas, selling

to exis�ng customers will be cost-effec�ve. Pricing is another aspect which will help your business in

penetra�ng the exis�ng market. Remember that always charging compe��ve price may not help.

Some�mes you need to reduce the weight/quan�ty of the product (indirect pricing) or offer free gi�s.

You may even change the packaging.

2. You may seek referrals.

During or a�er every job or sale, ask your sa�sfied customers if he knows anyone else who would be

interested in your products or services. However, this is possible only if your deliverables can delight the

customers.

Strategy


3. Innovate or modify your product

Every product or service has some life. It is always sugges�ble to go for product innova�on or

modifica�on. This will help in adding new customers also. However, research & development wing should

be strong enough to perform this. Just think of transforma�on of offline business into online business.

4. Extend your market reach.

You may start locally but increase the market reach. Many businesses have gone this way and grew

tremendously. There are many ways to get it- open stores in new loca�ons, go virtual, acquire other

companies, make �e-ups, use social media, use website etc.

5. Par�cipate in trade shows and arrange seminars

Trade shows can be a great way to grow too. Because trade shows draw people who are alreadyinterested in the type of product or service you offer. They can powerfully improve your bo�om line.

6. Win the niche market

Big market customers try to follow the customers of niche market. Once your product or service has

got hold in niche market, it will be easy to extend the present big market. Think of branded apparels, use

of home appliances, mobile handsets and many more.

7. Reduce the costs.

Don't forget that reducing cost directly helps in increasing bo�om line and thus valua�on of business.

It is not necessary to cut costs in all the areas. Few areas where it can be done are- reduce wastages,

electricity cost admin costs and other indirect costs.

Strategy


8. Diversify your products or services.

Diversifica�on in products and services is interes�ng way to empower growth. Package the products.

Simply think of a burger or pizza is available with sauce and chilli flakes and cold drinks. Or, a restaurant

serves meal with pickle and 'papad' and 'chutney'.

9. Franchising.

Franchising is good way to grow your business. It may not be possible to directly reach the customers

to create brand of your product or services and go for franchising model.

To conclude, there is no op�on to let your business grow. The above ways are not exhaus�ve but thereare ways possible to achieve that depending upon the nature of product/services and business model.

Strategy


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Things to considered while

drafting a business plan

Ribbo: Mr. Tick I want some fund for my business.

Tick : How much fund you need?

Approximately INR 5 crores. I need it urgently.Ribbo :

Then why don't you dra� a business plan for your business? Do you know purpose of a businessTick :

plan?

Of course. It has sole purpose of convincing the investors to bring money in my business.Ribbo :

So I think you are very clear that how and where the fund will be u�lized.Tick :

Not exactly. But once I get fund I will start u�lizing it.Ribbo :

The above conversa�on discloses two things- purpose of business plan and Clarity required.

So entrepreneurs must understand that the sole purpose of business plan not just raising fund but it

should give complete clarity of the planning. Meaning, first let us be clear about the planning and then

approach any investor for raising fund. Dra�ing a business plan on paper is like a tool which helps

investors to understand the planning aspects. Investors are smart enough to read between the lines.

Then do not invest just on the basis of business plan but the business and entrepreneur.

Let us discuss that what are the things which should be considered while dra�ing an impressive andlogical business plan.

Strategy


Title page:

It includes the table of content and execu�ve summary. Purpose is that a�er looking at the contents,

investors will come to know whether the business plan covers all the aspects. Before going into the

details of business plan, investor goes through execu�ve summary to understand what the different

plans are. Execu�ve summary should not be very lengthy but to the point and impressive.

The organiza�on:

Business must have legal structure. If presently, it does not have any legal structure then which

structure has been planned for and why. The business plan must men�on clearly that what kind of legal

structure is suitable for the business.

Under this heading it should also be men�oned about the team required or employed to execute.

Whether the present team strength is sufficient or need to be increased.

The Industry:

It should have an overview of industry such as present status, segmenta�on, scope of growth etc. The

business plan should clearly men�on that which industry segment will be targeted and why.

SWOT:

Strengths and weaknesses in the business should be genuinely men�oned. SWOT gives an insight of the

strengths and weaknesses to the entrepreneur also. Moreover it leaves a very good impression in the

mind of investor. Further, “how weaknesses shall be converted into strengths or at least can be removed”

should also be men�oned to make the investor clear.

What the opportuni�es and threats to the business? How it will be overcome? Can the business com-

bine strengths and opportuni�es?

Product and services:

Business plan should complete details of the product which will be marketed. Is this a mass-reach

product or niche product? “How the product is unique from the similar product? Why the purpose of the

product? How it fulfils the very need of the customers? All these ques�ons should be answered.

It may happen that product is associated with some services to the customers. What kinds of services

are being given to the customers? Does the proposed service add value to the customers? Whether the

product just fulfils customers' expecta�ons or it provides customer delight. All these should be

men�oned clearly in the plan.

Strategy


Marke�ng the product:

The planning document should men�on that how the product is ge�ng marketed presently. Further, it

should also men�on that what are the short term and long term marke�ng plans. Importantly, the

business plan should also men�on that how the planned marke�ng will be effec�ve to achieve the

purpose. Moreover, the plan should also discuss the marke�ng tool to be used. It may happen that

marke�ng of the product will be needed in stepwise; those steps should also be clearly explained.

Opera�on and delivery:

Business plan should clarify that how the opera�onal ac�vi�es will be carried out. How the productshall be delivered to the customers? Does the planned delivery model add value to the customers'expecta�ons?

Finance:

Perhaps this is the most cri�cal aspect of the business plan. This column should men�on that: How

much fund is needed? At which stage a par�cular amount is needed? Where the fund shall be u�lized?

How much fund shall be u�lized for a par�cular purpose?

If possible a projected profit & Loss account and balance sheet should be men�oned to have outlook

a�er the fund is infused. The planning document should have ready plan to give suitable exit op�on to

the fund providers.

To conclude, the business plan should men�on, with clarity, all the planning aspects. Also the

entrepreneur should, by own heart, should be clear about the dra�ed plans.

Strategy


Momentum = Mass X Velocity

It is not just a formula in physics. It has great business sense! Every business wants to grow and

therefore businesses need to know where they exist; which will increase the growth momentum.

Meaning of “Mass”, here, is “how much big the business is”. “Velocity” defines the aggressiveness with

which business implements the growth plan/strategy. At least one of these two should be significant

enough to reach commendable growth momentum. Of course, combina�on of both will be most desired.

ITC in last AGM announced few facts:

Gross revenue crossed INR 55,000 crore and PBT surpassed INR 15,000 crore.

Non-cigare�e segments, compared to 1996, grew 18 �mes sharing 58% of net segment revenue.

Since 1996, Market Capitaliza�on has grown 72 �mes and touched INR 4,00,000 Crore.

ITC is big enough to create wealth for shareholders. Velocity is less. In the past it has undertaken some

sustainable strategies such as launch of e-choupalfor connec�ng farmers to markets and helping in real

price discovery.

Another example of less mass but high velocity is “Patanjali”. The velocity with which it started

manufacturing and adver�sing the different products under same brand name. Today patanjali brand is

known everywhere and preferred too.

There are many other examples which created wealth in a very short span of �me; Amazon.com,

Flipkart, Snapdeal, Paytm, Ola, Uber to name a few. These were very small ini�ally but suddenly acquired

velocity to achieve huge growth momentum.

Strategy


How does huge momentum help?

It works two ways. It removes bo�lenecks internal to the organiza�on- The present execu�on team will

become more aggressive, if earlier was not. Also, middle level managers will gain confidence in execu�ng

further plans/strategies. Secondly, momentum will help externally also in the sense that it will help in

acquiring more market share.

Ways to gain momentum

Operate locally for reasonably longer �me period and make hold on local market.

Create and make aware brand for the product to the target customers.

Innovate the product & brand recall frequently.

If required, make alliances.

Acquire local companies or brands which seem to be compe�tors.

Adopt aggressive marke�ng strategies.

Adopt aggressive pricing.

Add innova�ve and value added services to the product.

Step into global market

What for whom

Gaining momentum by acquiring high velocity seems to be good for start-ups and SMBs (Small &

Medium Businesses). Start-ups should gain it in the form of stairs. These companies should develop a

plan very fast and execute. Moreover, they need to be much more innova�ve and aggressive. Benefit of

this will be that it will help in acquiring market share very fast. Risk a�ached is that if plan fails the

promoters may be demoralized.

Bigger companies should acquire momentum by implemen�ng plans slowly and con�nuously in long

term. Even new plan fails, it will not affect the present product-service por�olio much.

To conclude,acquiring momentum is needed. Which business should acquire momentum in what way

is to be decided prudently.

Strategy


Road Map to dra� a Business plan

Execu�ve summary

It is a very important sec�on while dra�ing a clear business plan. Execu�ve summary reveals that how

the company is planning for its future growth and whether this is different from others'. Apart from

discussing about organiza�onal plan, product/service plan, marke�ng plan, survival and growth plan and

financial plan it should also answer some cri�cal ques�ons such as:-

Why this business will be successful?

What is the risk appe�te level of the business owner?

What is the level of fund required to successfully launch the business and how much will be

promoters' fund?

What is the short-term and long term goal of the business?

Business Descrip�on

This includes the core related areas surrounding the business and product/services. Some of the key

ques�ons could be:

What is the core area of business chosen?

What is the product or service which will be sold?

What is the growth poten�al?

What is the business life?

Strategy


Organiza�onal descrip�on

This is all about the organiza�onal structure and unique factors which compe�tors do not have.

Whether there is plan to have pvt ltd or LLP or any other structure for the business. Has the business

idea been conceived by a single person or more people are involved. Whether there is single decision

authority etc. in nut shell, the following ques�ons may be important to be considered:

What is the legal status of the company and future plan?

How many are key decision makers?

How many managers are required (opera�onal segment-wise)

How many technical personnel are required?

How many sales personnel are required?

What is the plan to increase the number of personnel in next 12 months?

Product and services

What is marketed are actually products and services. This sec�on should comprehensively include

even the small aspects related to products/services. “What is the USP of the product and how it serves

the exact need of the customers” should be very clearly men�oned. If services are a�ached with the

product then focus should be highligh�ng the add-on benefits which customers will derive.

Every product has life. The sec�on must men�on the approximate product life. Also, how the company

will plan with the new or modified product with extended or with at least earlier similar benefits. Few

ques�ons which draw a�en�ons are:

Is it standard product or customized one?

If it is standard product and any customer wishes to add some more features then is it possible?

Whether IP has been taken on the product?

How product maturity shall be tackled?

What will be the R&D cost and maintenance to the business?

Industry

Industry dynamics always change. Business plan must include the probable changes and the way to

overcome those changes. Key success factors should be iden�fied and should be men�oned that how the

company will go forward.

The complete industry should be categorized into segments and sub-segments and accordingly the

customers should be iden�fied. This sec�on must include also:

Who are the targeted customers?

What is the size of the targeted customers?

Who are the compe�tors? (in numbers)

What is the expected market share for this product/service?

Marke�ng

Many business plans usually say that what marke�ng channel shall be used to market products/

services. But a sound and explanatory business plan should clearly express that HOW MARKETING WILL

BE DONE, WHICH CHANNEL SHOULD BE ADOPTED AND THE EXPECTED TANGIBLE BENEFITS WHICH THE

COMPANY WILL DERIVE FROM IN TERMS OF GROWTH OF CUSTOMERS.

Strategy


This sec�on should answer the following also:

Why the customers will need it?

How the poten�al customers can be reached?

Can the customers manage their business opera�ons without this new product/service?

Does the price (cost to the customers) of the product/service jus�fy the benefits?

Threats

No business can avoid threats. It should be men�oned that how the possible threats should be

handled. Answering the following ques�ons may be beneficial:

What could be the poten�al threats?

How frequently it can come?

What will be the level of impact of threat on the business?

How the company will overcome it?

Financials Financial plan is one of the crucial aspects because ul�mate objec�ve is to raise finance and use it for

various purposes. How much finance is needed at which place should be men�oned. The following

should be included:

What will be the promoters' contribu�on?

For what purpose the promoters' money shall be used?

What will be the exit op�on to the investors?

To conclude, every business plan is unique in its case. So it should be dra�ed with utmost care.

Moreover it should include all the planning aspects and should be self-explanatory. Loopholes, if any,

should be highlighted and also the way to remove those loopholes. This will make the business plan

more genuine and presentable.

Strategy


Financial Modelling- A prac�cal view

Few analysts understand that financial modelling nothing but workings on excel spread sheet. Par�ally

true!

Financial modelling is of building a model which represents real world Financial situa�on. This is a

mathema�cal model. It is designed to represent the expected performance of a business or project or

business por�olio.

Myth and truth a�ached with financial modeling

It is only for accoun�ng purposes:- There are many accoun�ng so�ware available globally. These

so�ware are just used to see the result. But financial modelling is developed for many purposes such as

corporate finance, asset valua�on, project management etc.

It is a standard product:- Many analysts believe that financial modelling is a standard product and can be

used the same model everywhere. But this is not true. Even in the same organiza�on different financial

modelling shall be used for different purposes such as valua�on, corporate finance, es�ma�ng risk return

a�ached with por�olio etc.

It is very easy to develop:- Since the model is a representa�on of real world situa�on, anything

expected to happen in the real world has to be incorporated in the model to know the impact on the

profitability and wealth. Therefore assessment and forecas�ng of data input is very cri�cal. Moreover, all

the variable inputs should be considered and level of impact needs to be assessed with proximity.

Small business does not need financial modeling:- financial modeling can be used even for small

businesses including start-ups. For start-ups it is helpful to build out a model to understand all the

variables needed for success. The act of building out the model will bring different expenses, revenue

ideas, and cash flow requirements to the surface.

Same model can be used every �me :- NO. as the �me passes, business becomes bigger i.e. the internal

variables are going to change. Also, external market dynamics will also shi�. Therefore, there is need to

update the mathema�cal model.

Finance


How to develop financial model for your business?

Step 1:- understand the business

Clarity on business's aspects is very important. It is impera�ve to know the product's worth, industry

aspects, change in dynamics of the industry, funds as and when required and impact of any kind of

change on business.

Step 2:- iden�fy the variables:-

It is not possible to iden�fy all the variables at a �me. But list out the variables as many as possible is

required. Also it is the best idea to find out the most cri�cal variable. For start-ups it is bit difficult but

business understanding can help in that.

Step 3:- Assessment of impact of those variables:-

A�er iden�fying the variables, impact of those variables should be assessed. Impact may be upside or

downside.

Step 4:- Give quan�ta�ve figure to those impact:-

This is one of the most difficult task to convert qualita�ve aspects to convert into quan�ta�ve figure.

But it is required because financial modeling is a mathema�cal model. For already running businesses, it

is bit easier because previous impact is known but for start-ups it is difficult. The way out is to keep

tenta�ve figures and as soon as any change in variable is no�ced quan�ta�ve figures should be

incorporated.

Uses of financial modeling

The most popular use of this mathema�cal model is for internal analysis for decision making. Be it

market environment or internal situa�on, these are not sta�c.

Financial model can be presented to the investors/fund providers to provide them to have fair view so

that they can have good confidence to invest in the business.

To conclude, business owners should appreciate the value derived from financial model. It will help in

growth of the business and will keep minimum risk with maximum return. Let us not considered

developing a model waste of �me and use it properly. Start-up should even be more proac�ve in

developing it to grow faster.

Finance


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