10 December 2019

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SMEs Need to Plan Biz Strategies Wisely

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Starting any new venture brings in multiple types of risks, opportunities and excitement. A true entrepreneur loves it. Such excitement and slightly higher self confidence can lead to some faulty approaches to start the business. One of such common wrong move is putting personal assets in business.The risk to business becomes higher when any entrepreneur puts his personal assets into the business. If something bad in business happens, the entire economic set up will go for a toss. Even though the project is undertaken after a thorough research, the entrepreneur comes under high pressure to make it profitable as soon as possible.

To help eliminate this risk, small-business owners should start building business credit separate from their own personal credit line. Getting small-business credit takes small steps when trying to achieve bigger lines of credit, which can take a few months. The wait is worth it because your small-business startup's financial status will not reflect on your own personal credit and vice versa.

In this regard, what should be the ideal step-wise approach that an entrepreneur must take while arranging his finances?

As a first and foremost step, the business owner must have to incorporate his business or form a limited liability company (LLC). This will establish the business as an entity separate from the personal finances so the business owner can avail small-business credit. There are several schemes and programmes that have been initiated by the government and banking companies which can be availed.

Secondly writing a complete and correct business plan is very important. By doing this, the business gets some level of clarity on the planning of the entrepreneur in order to pursue his venture for the long term. A well thought-out plan can also convince several important stakeholders.

This document will further help the business plan while applying for small-business loans.
Now after doing all this, and company registration, the entrepreneur must have to separate his startup funds from his personal funds. The most common and the only best practice to do this, is to open a bank account for the business venture.

The next step is to go for a small-business loan if the business actually needed additional funds. There are two ways of raising funds, one is to apply small-business loan through a bank, credit union and the other mode is to take a close look on government schemes and incentive programs which can extend some financial support for the business. In the later, the entrepreneur must have to be aware of the Govt of India, Ministry of MSME’s announcements about the schemes.

Another way of raising funds at the initial phase of business venture is to pitch for venture capital funds. For this the business plan must have to be complete, scalable and transparent.

The small businesses are extremely important entity for the entire economy. Small businesses have the potential to grow exponentially. Their growth can deliver great success story for the society and huge opportunity of creating employment.

But for such goal, it is important to have a well directed and well planned approach. As a negative aspect of this glossy picture, the fact remains that a majority of startups gets collapsed in the first phase of their business operations. The reason for this is – lack of planning, and lack of clarity on business roadmap.

In the business plan, it is utmost important to include an executive summary and information about the management team, information about your startup business and its functions, a market analysis, products and services, sales strategies and plans for marketing. Additionally, include a competitive analysis, a financial plan and projections for the next three years.

With this comprehensive planning and preparedness, the startups can soon become established entity.




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