05 Aug 2017 16:16 IST

The money question

Before deciding to plunge into entrepreneurship, ask yourself some tough questions

Planning to start a business based on reading about such entrepreneurial pursuits is somewhat akin to saying, “I can become a pilot because I have read about aircraft and have flown them virtually”!

In the previous article , I had mentioned two basic factors that would enable people in their start-up dream — a viable idea and experience.

Financial capability

The third and a very important aspect is with regard to financial capability. Starting and sustaining a business venture is not an easy task. The costs incurred for even the most basic businesses is, by no means, a small sum. If the aspiration is to have an office and staff members, the costs keep piling up.

News articles about massive fundings of a few start-ups tend to create the wrong impression that getting money from investors is easy. The number of start-ups and entrepreneurs who struggle to get any kind of funding outnumbers those who do get large, significant amounts.

Being realistic

As a reference, keep in mind the placement scenario at any management institute. The institute and media often highlight the highest pay package offered by a company. However, a majority of students aren’t going to get such a large package — it wouldn’t even be close to the highest amount. Some students might not even have been placed. Expecting funding based on news reports is similar to expecting the highest compensation package in the institute, just because someone else got it.

So, if funding is not going to be easy, where will the money for you entrepreneurial venture come from?

This question needs to be addressed on two fronts. First, the funds for your personal livelihood. How do you intend on funding your day-to-day living expenses? The second question is with regard to the funding of your proposed business. While parents might offer to fund the start-up, it isn’t the right alternative unless they are investing their surplus funds.

Explore all possible funding alternatives and evaluate each of them carefully. “There is no free lunch” is a common saying and this applies to asking anyone for money. You need to be clear about what is expected in return, if anyone is ready to offer you funding.

What you can do

Considering the above aspects mentioned, the most practical route would be to work for a few years after doing a management course and then exploring the start-up route. One would gain experience, which would help give clarity to their business idea. More importantly, they can set aside a part of their earnings and use such savings to fund at least a part of the business.

Call me old-fashioned or conservative, but my view is that it is better to make mistakes and learn with someone else’s money; also known as working for someone else or employment. Then, leverage that learning to start a venture of your own if the entrepreneur bug has bitten you.

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