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Investing in small businesses – Financial and Investment

11, October 2017 | Vikash Singh

India has seen a surge in start-ups in the past decade owing to factors such as strong demographic dividend, favourable government, easier entry, simpler legal aspects, and strong financing support from VCs and Angel Funds. However, like all of us need to perform financial planning as a crucial part of our lives, start-ups must also conduct financial planning to survive in a highly competitive market.

Following are 5 financial and investment planning tips to help your startup survive:

Business scalability

Business is not performed the same way it used to be performed a couple of decades ago.Earlier, business was all about managing activities from end-to-end.Today, business involves an increased focus on one or two key aspects, which a start-up could use its competitive advantage.As a start-up, you must remember that more often, it is a competitive advantage that you've gained that makes your business model highly scalable, helping you take it global. Mark Zuckerberg simply focused on making his start-up, Facebook, a content management company that has zero content made by its internal resources. Today, Facebook is the world's largest content management company with no content owned by the company. It is crucial for you to remember that make your business model scalable is the first step for you to survive as a start-up.

Take control of your cash flows

As a start-up, cash is a vital element of your business. Thus, you will have to be very frugal in the way you manage your cashflows. The best way to do it is by mapping your cash flows closely with your profitability. This will help you avoid expending money on activities that are not profitable for your start-up, which means the money can be invested in improving business aspects. Try appointing consultants for performing your activities rather than having full-time staff for every activity, since their salary will be a fixed monthly cost for you, which will further dent your cash flows.

Look at Alternative Investment Funds (AIFs)

Most start-ups approach AIFs today for their funding requirements owing to them being more flexible than bank financing. Many start-ups today receive money from Venture Capital (VC) and Angel Funds. The best part about approaching AIFs for funding is that they tend you provide you with financial help just when your start-up would need it. Moreover, they tend to provide start-ups with appropriate guidance and mentoring coupled with support in terms if client networking. 

Think about IPO

Initial public offering (IPO)provides a start-up with an opportunity to procure funds from the public through inviting them to invest in the company's shares against an ownership stake to the extent of shares they subscribe through the IPO.Thus, start-ups can look at listing their business on prominent Indian stock exchanges such as BSE Sensex and NSE through the IPO route.

See if you can gain SME or MSME status for your start-up

All you need to do is gain SME or MSME status is to see how you can satisfy the eligibility criteria. In case you qualify as SME or MSME, you can many benefits such as funding help from the government and SME listing.

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