Tanisha Achrekar – Dutch Uncles

Ten Great Entrepreneurial Lessons from Steve Jobs

Tanisha Achrekar — Mon, 10 May 2021 06:10:03 +0000

Steve Jobs has achieved more in his lifetime than most people can comprehend. Whenever we hear about the world technology giants or most successful entrepreneurs, his name is bound to pop in our minds. Starting his humble journey to creating one of the biggest and wealthiest companies in the world, entrepreneurs can learn a lot from him.

Lessons from Steve Jobs every entrepreneur must learn

Always keep learning

Jobs explored the world and always was open to new experiences. He travelled to India and connected to his spiritual side. Travelling often changes the way we perceive the world. As an entrepreneur, Jobs was always open to new experiences and learning. Never be a know-it-all, instead be open to new findings.

Perseverance, perseverance, and perseverance!

An entrepreneur’s journey is full of roses and thorns. Without perseverance, it will be hard for any entrepreneur to last through tough times. Jobs knew well beforehand that the setbacks in innovation are a part of his journey. In his old interview, he once talked about how perseverance separates successful entrepreneurs from unsuccessful ones.

The best performance comes from the best team

When it comes to hiring, Jobs ensured that he had the best of the best talent around him. He ensured that his team was as passionate and as dedicated to their work as he was. He had faith in his exceptional team and always supported them.

Keep it as simple as possible

Whether it comes to the layouts of the Apple products or his own lifestyle, Jobs always preferred to keep things simple. The iconic designs of his products are an attribute to his simplistic and elegant thinking.

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When you get an idea and you create it, ups and downs are a part of the grind. Believing in yourself and your products will help you keep your eye on the prize while ignoring the naysayers.

Don’t be afraid to take risks

Jobs was always a risk-taker by heart and self-doubt was never his thing. Many entrepreneurs have world reforming ideas but hesitate to take the leap. However, without implementing an idea is nothing but a mere thought. Jobs never hesitated in manifesting his ideas and that too with absolute perfection.

Pay attention to detail

Jobs always had an eye for the detail even for things that may or may not be noticed by most people. As sleek and exquisite as the exterior of an iPhone was, so was the interior. He said he gets his knack for attention to detail from his father.

Keep innovating constantly

It is quite often when people are talking about innovation and Steve Jobs in the same breath. The reason being he was never satisfied until he got what he wanted. He was never afraid of innovating and experimenting with the technology.

Don’t try to fit in

One thing clearly with Apple was that Jobs did not create it to fit in with every consumer. He was focused on selling dreams instead of products. He never tried to fit in the market, but rather created his own market. As an entrepreneur, he was not afraid to stand out from the crowd and that reflected in his creations too.

It’s never too early

Yes, you heard it right. We always talk about how people turned entrepreneurs after retirement and how it is never too late to follow your passion. In the same way, Jobs taught us that you are never too young to pursue your dreams. Jobs co-founded Apple Computers in 1976 when he was only 21.

Believe in yourself and your business

As an entrepreneur, you are the face of your company. Your leadership directly impacts those who are working for you, those who are investing in your business and those who are buying your products. When you get an idea and you create it, ups and downs are a part of the grind. Believing in yourself and your products will help you keep your eye on the prize while ignoring the naysayers.

An entrepreneur has a lot to learn from Steve Jobs and the way he lived his life. His vision and passion were both of absolute brilliance. He revolutionized technology and gave entrepreneurs a new unconventional icon to look up to and learn from. To achieve his charismatic leadership and off-beat thought process, has been the goal of many, in and out of the business ecosystem.

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Sales Forecasting: Know how to predict the future sales

Tanisha Achrekar — Tue, 04 May 2021 07:35:04 +0000

Have you ever wondered why people go to astrologers? Why is everyone interested in knowing what the future holds? My theory is we all have the fear of the unknown. Similarity, in business too, it helps to at least get an idea of what the future looks like. Without indulging in any pseudoscience, there is a practical way to approach the likelihoods of the future.

Be it knowing the demand for your products or the sales you will make next year, everything can be forecasted. Now there is no magic here, forecasting is simply done by taking into account the data of the past along with several other parameters. Read on to further understand and know more about sales forecasting.

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The more realistic sales forecasts are created, the more likelihood of a company succeeding.

What exactly sales forecasting is?

Sales forecasting is a process of estimating and predicting the sales of your business in future. Here the term ‘future’ can be any period be it monthly, annually, yearly or even half-yearly. Businesses use sales forecasting to understand the sales they are likely to make in the near future and manage the inventory and cash flow accordingly. Forecasting sales becomes furthermore important if any business is aiming for expansion.

Individual sales executives, the sales team or the overall organization conducts sales forecasting to make smart business decisions. As sales of any company impact the revenue, the profits and overall every aspect of the company directly or indirectly. The more realistic sales forecasts are created, the more likelihood of a company succeeding.

Factors that influence sales forecasting

While several internal and external factors influence the sales you are likely to make in the future. As a company, external ones may not seem in your control, but the internal ones are. Hence, it is important to take those into account while forecasting.

Economic and industrial factors

The economic trends keep on changing and so does the market of every industry. When you are forecasting you need to remember that the economic and industrial factors of the future may not be the same as that of the past. They may be better or they may be worse, but in many ways, they keep changing and evolving. Economic and industrial factors are extremely impactful for any business.

Legislative factors

For any business you run in India, there are some mandatory laws and rules you are required to adhere to. The change in the law and rules have a grave impact on your business. Also, changes in the taxation and government policies may work or not work in your favors. The sales you assumed you will make maybe overestimated or under-estimated if any legislative changes occur in the future.

Product changes and competition

As forecasting is based on the products you sold in the past. If that product does not exist in the future or has been modified, the forecasting will have to be adjusted accordingly. Also, there are competitive changes that occur in every industry from time to time. Maybe in the future, your competitors will overpower you or you will be in the lead, in any case, it will directly impact your sales numbers.

Different methods of sales forecasting

Variety is the spice of life, and definitely when it comes to sales forecasting methods variety is available in abundance. There are several ways to go about forecasting the sales of your company. While there is no best in the game, the best decision would be to create multiple sales forecasts. Choose the methods that appeal to you the most and create a range of forecasts. Eventually, you can observe and understand which method has been giving you near to accurate results for your business.

Lead-driven forecasting

Lead-driven forecasting requires you to analyze the source of each lead and assign a value to it. The value you assign here should be based on how similar leads have performed in the past. By assigning a value to each of your leads, you will get an idea of how many revenue-generating clients a lead is likely to generate.

Data-driven forecasting is susceptible to changes as there are multiple factors involved. For example, as the trends keep evolving, the lead generation strategy of your company might also change. As the number of leads and sources of leads changes, there might be a change in the customer conversion rate as well. This fluctuation and change can be handled by taking into account the latest trends and their impact on your business while calculating sales forecasting.

Opportunity stage forecasting

Opportunity stage forecasting is a type of sales forecasting where the focus is on where the prospect is in your sales pipeline. A company here needs to break down their pipeline and calculate the probabilities of the deal closing. The prospect can be anywhere from the first initial call to the final call. An analysis of the past performance is needed in this forecasting method. It is essential to get an idea of the success rate of each stage of the pipeline.

The forecasting being completely data-driven, has no guaranteed accuracy. As opportunity stage forecasting does not take into account individual characteristics. As some leads may be longer in the sales pipeline while some may be quickly converted into customers. Just like in any data-driven forecasting the catch here is the more accurate the data, the more accurate the forecasting. However, if the data is inadequate or incorrect, the numbers derived would be way off the reality.

Length of sales cycle forecasting

This method of forecasting takes into account the data that reflects the time taken to convert a lead into a revenue-generating consumer. This technique is used by several businesses as it is very objective and is not impacted by subjective factors. As the data accurately speaks for itself. Also, several sources of leads can be divided into various buckets according to the time taken to generate them.

In this method, a company that tracks how and when prospects are entering the sales pipeline will be able to forecast sales accurately. This requires your sales and marketing team to be on the same page. However, this relentless tracking that is required by your sales team can be the drawback of this method. Also, minute inaccuracies can cause inaccurate forecast numbers.

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Sales forecasting will help in predicting your sales numbers and as a business help, you make better business decisions.

Historical forecasting

In this method of sales forecasting, as the name itself suggests, you use the data of the past to estimate the sales of the future. It is calculated by taking into account previous sales data for a certain period of time. The underlying assumption here being that your future sales will be the same or better. However, there are two components ignored in this method. It does not attribute the changing condition of the market as well as the change in competition.

Historical forecasting is one of the easiest and swift ways to conduct the sales forecasting of your company. Along with any other forecast a company wishes to conduct, this one is easy and serves as a strong base, to begin with. Also, it serves great for those businesses where usually the market is not much susceptible to changes.

Test-market analysis forecasting

Forecasting using data of the past is quite handy. However, what about new businesses or new products? The test-market analysis forecasting works perfectly for such companies and products. In this forecasting, you test the waters by releasing your product to a small portion of your targeted market and see how it works. By getting the numbers in from the testing, you would know how well your product is selling to at least a part of your audience.

Based on the results of the testing, sales forecasting of the product or company can be created. However, it is important to remember that all parts of the market may not react in the same manner. This method will also give you the time to make corrections and fix any issues before the final launch. Also, this method is a great way for small businesses and SMEs to increase their brand awareness.

Sales forecasting will help in predicting your sales numbers and as a business help, you make better business decisions. The information derived from sales forecasting will prove vital as it will spot any potential issues or problems that you are likely to encounter. The data helps in a great way to understand what is working for you as a business and what needs to be changed. It helps you understand your strengths and also the potential opportunities the future holds. Sales forecasting also helps in understanding if any resources or inventories are going overused or underused. Also, a forecast report helps a company to drive performance. It gives a goal to the business overall as to how much sales they need to make in the coming weeks, month or quarter. As times evolve, the way to generate leads evolves as well. Read our article on lead generation for a better understanding of how to convert leads into sales.

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Will Rs 6500 Cr of Maharashtra Government be wasted?

Tanisha Achrekar — Sat, 01 May 2021 09:35:04 +0000

The second wave of Covid-19 has throttled India like never before. The richest state of the country, Maharashtra is amongst the worst affected states. With cases rising each and every day, the Maharashtra government has taken swift measures. On April 28, 2021, the state government cleared its plan to provide vaccines for free.

The state requires 120 million doses to vaccinate its entire population. Also, vaccination centres and facilities are needed to be set up accordingly for the entire humongous population. Health Minister, Rajesh Tope spoke about how it would cost the government Rs 6,500 crores to inoculate its population of 57.1 million citizens from the age of 18 to 44 years within a span of six months. While the plan seems perfect in itself, what is the hold-up? The biggest challenge the Maharashtra government is facing is the vaccine shortage.

Maharashtra in jeopardy: The vaccine shortage

While the plan was to vaccinate citizens between the ages of 18 and 44 from May 1, 2021, it has been halted currently due to the unavailability of sufficient numbers of vaccine doses. The state said that this plan will be resumed after getting sufficient vaccine doses. The government will still continue to vaccinate all its citizens in next six months as planned. The age group of 18 to 44 years will be vaccinated for free in the government vaccination centres as declared. However, those who take their jabs at private facilities will have to pay for it.

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The state requires 120 million doses to vaccinate its entire population.

The Health Minister has asked the age group of 18 to 44 to be patient. Also, the Co-WIN app needs to be compulsorily installed by citizens. Only by registering on the app, one can take an appointment for the vaccine. This will ensure that the vaccination centres are not crowded and end up spreading COVID-19.

Currently, only citizens who are above 45 years are being vaccinated. The government has also declared that for citizens between 18 to 44 years, separate vaccination centers will be established. The Minister has also reassured by confirming that the state jab wastage rate is 1%, way less than the national average of over 6%.

The ray of hope

The Serum Institute of India has promised to supply up to 10 million doses of vaccination every month to the state. While there is a shortage, Bharat Biotech has assured the Maharashtra government that it will accelerate its supply soon.

In the month of June and July, the company assured that they will be sending a supply of 2 million doses per month. The Chief Minister of Maharashtra is also in talks with the manufacturers of Sputnik V, a Russian vaccine. The government is tapping on all resorts to get the vaccine available for the state.

However, if the shortage has not been met by the institutions soon, the Rs 6500 Cr plan of the Maharashtra Government may go on the blink.

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Demand Forecasting 101: Meaning, Types and Methods

Tanisha Achrekar — Thu, 29 Apr 2021 05:35:05 +0000

In grocery stores, you might have observed that some products are available in more quantity than others. The store owner would have more of some biscuit packets and barely a few or none of the others. Even from the manufacturer’s end, some products are manufactured more than others. Why would manufacturers, suppliers, or store owners keep/produce more stock of some products and less of others? The reason behind their actions is simply an estimated demand. The grocery store owner observes his usual sales and estimates which products are going to be sold more and which less. Then according to the estimated demand, he places the order to his supplier. The grocery owner here, without even realizing, conducted the process of demand forecasting.

Defining and understanding demand forecasting

Demand forecasting is a technique of estimating the demand of consumers for a product or service in future. Historic sales along with other information are taken into consideration while forecasting the demand for a product or service. A demand forecasting process gives a business the valuable information needed in order to understand the current consumers and potential consumers. This analysis helps the business to create a pricing strategy, marketing analysis, production along with other critical business decisions.

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If your business is new, active demand forecasting seems the perfect fit for you.

Types of demand forecasting

Depending on your business, there are several ways to conduct demand forecasting. Every forecasting will give you a different result. If resources and time permit, using multiple forecasting helps a lot to understand the consumer demand better. As it will help you in understanding the difference in predictions and the reason behind it.

Active demand forecasting

If your business is new, active demand forecasting seems the perfect fit for you. Active forecasting is where demand is derived based on external factors. This is because since the business is new, there is barely some or no internal information available to analyze. Instead during active forecasting, the focus lies on marketing campaigns, expansion plans, and marketing research.

Passive demand forecasting

Passive demand forecasting is the smoothest and easiest way of forecasting for your business. This is because the sales from the past are used to predict the future sales of the product/service. Also, there are no statistical methods or economic trends that are needed to be studied for this type. It is completely data-driven. The key here is to have tangible and reliable data that you can use. The more reliable your data is the more accurate your demand estimation will be. However, during passive forecasting, the underlying assumption is that your sales will remain the same as last year approximately. Hence, it is a great model for a business that is doing good sales and plans to continue that. This forecasting is more focused on maintaining the existing stability rather than growth.

Internal demand forecasting

Internal demand forecasting helps in understanding that even though the consumers demand increases, is the business capable enough to handle it? Does it have enough resources to meet those demands? Internal forecasting helps in understanding how the operations are going and their existing capability. It helps in understanding what is working for the business and what isn’t. One of the parameters taken into consideration during internal estimation of demand is profit margins, finances of the business, working capital, and supply chain operations. The reason why finances form the basis of this forecasting is to understand does the business have enough funds and resources to meet consumer demand.

External macro forecasting

What is happening in the industry, the market or the overall economy is taken into consideration during the external macro forecasting. It focuses on the external massive factors. The forecasting helps in understanding how the macro external factors are going to impact the consumer demand of your business. A simple example is how the COVID-19 pandemic, an external factor affected the demand of several businesses. Taking external market forces into consideration is essential as even though your business may be ready to expand, sometimes the time just may not be right. Also, these external parameters usually do have a direct impact on raw materials availability and other factors in the supply chain funnel too.

Short term analysis

Short term demand forecasting is basically to understand the demand for your goods or services in the next three to twelve months. Knowing the short term demand helps in managing the supply chain on an almost real-time basis. Also, the data here is adjusted according to the existing sales data. Short term demand estimation helps especially for those products whose line-up keeps changing. For most organisations, the short term demand does not suffice and long term demand forecasting is needed to be conducted.

Long term analysis

Long term analysis will help in estimating the demand for your product or service in the long run. Usually, the period here is anywhere between one to five years. The forecasting here helps in modelling the growth of your business. Sales data and market research being the parameters, long term forecasts may not always go exactly as predicted. This is because there may be several external factors that may impact one or both the variables. However, still, long term demand forecasting is needed as it acts as a roadmap of where your business wants to be in the long haul. The demand that is forecasted in the long haul impacts the sales, supply, funding and marketing decisions. For a growing business, it is important to plan for the future and be prepared accordingly.

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Long term demand forecasting is needed as it acts as a roadmap of where your business wants to be in the long haul.

The different methods of demand forecasting

There are several ways to derive the estimated demand for your product/service. The popular five are listed below –

Market research

The data that is collected via consumer surveys form the basis of market research demand forecasting. It is quite insightful but time-consuming well as surveys are needed to be created and distributed. However, the information you receive here is directly from your consumer or potential consumer and hence, it is of great importance. Some companies conduct market research on a continual basis while others prefer to do it only during research. It gives you a clear picture of your consumer and based on their demographics, marketing strategies can also be enhanced along with understanding their demand.

Delphi technique

The Delphi technique leverages the opinions of experts on your demand forecasting. In this method, you engage with experts outside of your organisation to understand your market forecast better and get their views on it. Usually, a questionnaire is sent to a group of demand forecasting experts. The responses of the experts are shared anonymously via a panel discussion. The process continues and answers are shared by experts in one round after the other. The answers shared in the previous panels impact the answers of the next round. This continues till the entire group of experts have come to a mutual conclusion.

The method though may sound quite extensive, it helps in understanding the views of experts on your business and its demand. Also, the reason behind the anonymity during the questionnaire helps in understanding the true views of the panels of experts. As the rounds proceed the group builds on each other’s expertise and opinions till they all arrive on the same page.

Trend projection

Trend projection is a simple and hassle-free way of demand forecasting. It basically used the trends of the past to understand and estimate the trends of the future. The data of the past sales of your product or service will be used to estimate the demand for your product/service in the future. However, it is necessary to take into account that if your sales were drastically down or up in a given period, that situation is unlikely to repat. For example, if you sell sanitizers and your sales were soaring high at the beginning of the pandemic, those high numbers are unlikely to stay the same forever. It is essential to observe and adjust any unusual factors that may have impacted your sales in the past.

Sales force composite

This is where the sales team takes the lead. In sales force composite demand forecasting, the data received from the sales team is used to understand and estimate consumer demand. This is because the sales team is usually closely connected to the consumers and may know how the consumers are feeling about your product/service. They take feedback and get requests every day from the customers and hence, they might know what is working and what is not. The sales division conducts meetings to collect the data from their team and develop a forecast accordingly.

Econometric

The econometric method as the word suggests is when you take economic factors into consideration while forecasting demand. Along with the external macro factors, even internal sales data is taken into account for predicting the demand. This method involves a lot of numbers as a mathematical formula is used for estimating the consumer demand in future. It reflects how the internal and external factors impact each other while estimating demand.

Demand forecasting is a great tool for your business as knowing the probable demand in future will help you in taking the right business decisions in the present. It is like a road map for your business. The mere demand for your product impacts its sales which impacts your profit which in turn impacts the growth and sustainability of your business.

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How Does a New Business Get Its First Client?

Tanisha Achrekar — Wed, 28 Apr 2021 08:35:04 +0000

Establishing your business from the scratch is a thrilling and overwhelming experience. Getting your product or service ready for the market is only half the battle. Finding clients or customers who are willing to give your product or service a try can sometimes be a real struggle. Even with the best of products and services, clients do not magically appear. Below are some ways a new business will be able to get its first client.

Four techniques to get your first client

Use your network to your advantage

The first place to look for to get your client is by tapping on your existing network. Be it the business community you are a part of or your friends or even friends of friends. Talk about your product or service and learn about their views on it. Don’t play too aggressive and try to make a sale in the initial stage of your business. Focus on learning rather than selling, you don’t want to seem too desperate. If your product or service naturally catches their attention, they are bound to be your first client in no time. Also, your circle is a great place to practice your pitch. Many times small business owners find inventors in their circle through effortless pitching.

Create an online presence

The Internet connects billions of people on various platforms. Look for the place on the Internet where your business belongs. Several online communities and platforms are supporting small businesses and looking for new products or services. In these online platforms, you will find business advice, clients, inventors and overall build a stronger network.

Also, another online strategy to get people in is blogging. Blogs provide significant results in the long run. Build your blog around your product/service and if possible launch it before you launch your product/service. A blog is a great way to tell the story of your product and generate demand. As your blog will create enough traffic beforehand and as it is related to what you are selling, you may find your first customer in that traffic itself. Also, crafting content is a great way to boost your Google ranking.

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The first place to look for to get your client is by tapping on your existing network.

Use affiliate marketing

Affiliate marketing is a powerful tool for getting more users. The best part of it is that this is a low-risk way but the rewards are often great. In affiliate marketing, you do not pay for the traffic driven to your website but only for the actual conversions. Dozens of times the products marketed by the affiliate are bought by the customers. An affiliate works on a commission that it gets for bringing in consumers.

Consider providing free product/service

Just started a business, and give out free stuff? It might seem a lot to ask for but people love free products or services. When the goal of your business is to be heard as much as possible and get your product out there, giving out free stuff is worth a try. If you are confident that after using your product or service, people will come back for more, giving free products or trials is worth a shot. Create a strategy on how you will provide free products/services to your targeted audience. If it seems financially too burdening you can offer a first-time discount to your customers. Psychologically free or discounted products appeal to the human brain and you might end up getting not only your first customer but many more along the way.

Be prepared and have faith in your business. As long as you put in the work, you will get your first client. Embrace and learn from the failures that come along the way. Giving up is not an option here, experiment with the above techniques and see which one works the best for your business.

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What are the Prominent Traits of Most Successful Entrepreneurs?

Tanisha Achrekar — Tue, 27 Apr 2021 03:35:04 +0000

An entrepreneur’s life is not like a 9-5 job where you do your tasks and head home. Instead, it is like nurturing a baby where it requires 24 hours of dedication and sheer effort. While every entrepreneur gives it all, why only some succeed and others don’t? Below are few traits that were found in most successful entrepreneurs around the world.

Prominent traits of successful entrepreneurs

They are confident

As an entrepreneur, you are required to believe in yourself and your ideas. Successful entrepreneurs have a rock-solid, unshakable self-belief. An entrepreneur’s journey can be rocky, and you can only make others believe in your company when you believe in yourself. Before you get anyone else to back you, you need to back yourself.

They are not afraid to take risks

Nobody becomes a success by playing it safe and being in their comfort zone. Entrepreneurship requires you to go out of your comfort zone and endure risks. However, these risks are not about playing blind but rather a well-thought calculated one.

They are passionately proactive

Sleeping over your idea for a night is fine, but for years? There are so many people who hear about successful entrepreneurs and say I had the same idea. However, they failed to act upon it and did nothing. A successful entrepreneur does not sit back but rather is proactive. Rather than sitting back, they go for their ideas passionately.

They are consistent

Rome was not built in a day and nor was any business. To build an empire, you are required to consistently give it all day after day. Without consistency, no goal can be achieved by it personal or business. Even on tough days, a successful entrepreneur keeps going.

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Through practice, persistence and hard work, anyone can incorporate these traits into their lives.

They have realistic goals

Overachieving your goals is good, but overestimating your potential can rather hamper your success. A successful entrepreneur does not overestimate his/her potential. Instead, the goals are set in a realistic manner by understanding his/her true potential.

They are patient

Every entrepreneur in his/her initial years goes through a period where his patience is being tested. The successful ones are those who understand that failure is a part of the grind. Patience by its virtue is not everyone’s cup of tea. However, only with patience can you build something meaningful and significant.

They know how to balance

We hear the term burnouts these days a lot. While an entrepreneur surely is on his toes all day, the successful ones know when to unwind. Knowing how to balance is the only way to live a successful life. It is essential to know no matter how important your business is, it is still a part of your life and not life itself.

They are adaptive

In a world that is constantly changing, rigidity is not a quality you want to behold. An entrepreneur who has been successful in his/her industry knows how important it is to be adaptive and a quick learner. Even though adapting in a business has drawbacks and discomfort, the successful ones are ready to grind.

The above traits and qualities are observed in the most successful entrepreneurs around the world. The cheery on the cake being none of them were born with these qualities. Through practice, persistence and hard work anyone can incorporate these traits into their lives.

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Break-even Analysis: Understanding Where Your Business Stands

Tanisha Achrekar — Fri, 16 Apr 2021 04:35:04 +0000

I remember as a kid, there were so many fun and fair exhibitions and stalls to enjoy. As an adult, I see my friend hosting one. Stalls usually have a simple business model, where other than the product, the costs involved are of the stall and staff if any needed. My friend wrote down all the expenses from the rent of the stall to travel expenses on paper. She stated that she needs to make enough sales to recover the amount she put in the stall. Once she recovers the money invested by her, the rest of it is profit. Without realising, here she did a break-even analysis of her small business.

Read on further to understand break-even analysis in detail and use it for your business.

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To make smart business decisions, break-even analysis is an essential metric

Understanding break-even analysis

Any business, be it small or big, needs some amount of funds. In the initial years, any earnings would be first the recovery of funds. Once all the money you put in while starting the business is recovered, the rest is profit. The point of any business, where the costs incurred has been recovered but no profits have been made is known as the break-even point. As the business here is evenly broken, it is neither making profit or loss. Here the business is not making any money or losing any money. Any sales made after the break-even point is the profit of that business.

Even two companies who are selling the same products can have a different break-even point. If one company has Rs 50,000 as the total cost incurred and the second one has Rs 75,000 has the total cost incurred, the first company’s break-even point will be lower than the second one. This is because the cost incurred by the first company is less than the cost incurred by the second one. You can conduct a break-even analysis to understand the time taken to make your business profitable or the sales target needed to reach the no profit- no loss point.

When is break-even analysis used?

Break-even analysis can be conducted in your business at any point in time. Some of the common scenarios when businesses conduct a break-even analysis are

Establishing a new business

Break-even analysis is an excellent and efficient tool especially before starting a new business. It helps you to understand how viable is your idea and how realistic the costs are. It will help you to understand the financial forecast of your business idea. Also, it will help you as well as the investors to understand the sales needed to start making a profit. According to the break-even analysis, sales targets can be set according to how long the business can function with ease in the beginning without making any money. Break-even analysis of a new business will impact the cost-effectiveness, pricing strategy and also sales strategy.

Changing or transforming in the current business model

The key to surviving and sustaining any business is being open to changes. To have a competitive edge, you need to evolve as your industry does. During such times, when your business is going through an evolution, conduct a break-even analysis. As any amendments impact costs incurred and hence, the profits too. For example, a grocery store starts offering at-home delivery to get an edge over its competitors. Here the product price will remain the same, but the expenses have increased. A break-even analysis will help here in understanding the impact of this change on the business.

Launching a new product line

When you are planning to launch a new product, you need to consider the impact it will have on your business. Conducting a break-even analysis will reflect how the expenses incurred in the new product launch will affect your business. Sometimes, the fixed costs may remain the same and only changes may be observed in the variable costs. In that case, the analysis will help in understanding the impact of change in variable costs. Conducting an analysis aids in setting the price of the new product as its financial impact is already known before you start selling.

An additional sales technique

We live in the age of technology where sales techniques keep evolving and changing with technology now and then. Any additional sales technique or channel will impact the finances of any business. It may change the costs incurred by the sales department and also the sales. For example, an offline business that contemplates selling on Amazon needs to consider the fees charged by Amazon for their services. The significance of this new sales channel on your business can be known by conducting a break-even analysis.

Why should you perform a break-even analysis?

There are several situations where conducting a break-even analysis of your business would prove useful. Some perks of conducting break-even analysis of your business are

A break-even analysis in the simplest terms helps in determining the ability of your business to generate profit.

Break-even analysis of your business will help to tap the unleashed potential a product/service can generate. It will help you to utilise the unused capacity of your business and maximise its potential and profits.

It helps in determining the impact made on your profits due to the changes made in fixed costs or variable costs.

It helps in estimating the sales that are needed to be made to recover the costs.

It reflects how a change in price or sales impacts the finances of your business.

How to calculate the break-even analysis?

Break-even analysis is a great tool for your business and calculating it is relatively simple. The break-even point of your business equals your fixed costs divided by your average price derived after subtracting the variable costs.

In mathematical terms,

Break-Even Point = Fixed Costs/ (Average Price – Variable Costs)

Say a company is commencing its footwear line. The fixed cost incurred by the company is Rs 5,00,000. The average variable cost per unit is Rs 500. With a variety of footwear, the average price per unit is Rs 1000. Here the break-even point will be –

Break-even point = 5,00,000/ (1000-500) = 1000 units

This means that to recover the cost incurred, 1000 units are needed to be sold at a selling price of Rs 1,000 per unit. The 1000 units here is the break-even point.

Also, the break-even analysis included determining the contribution margin of a product. When you subtract the total variable cost from the selling price, the number derived is known as the contribution margin. Fixed costs are not considered while calculating the contribution margin of any product. For example, if the price of a product is Rs 500 and the variable cost is Rs 300 per unit, the contribution margin is Rs 200 (Rs 500 – Rs 300). The contribution margin of Rs 200 here is used to cover the fixed cost incurred.

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Break-even analysis of your business will help to tap the unleashed potential a product or service can generate

Limitations of break-even analysis

The break-even analysis does impact the decision making of any business. However, it has its limitations.

It fails to give the demand insights of the market as it does not reflect how likely your business is going to break even. As demand is not a stable and steady variant.

The break-even analysis would be difficult to conduct in huge corporations with multiple products at multiple prices.

While conducting the break-even analysis, you need to ensure that the data is accurate on your part.
The striking limitation of the break-even analysis is ignoring competitors. As competitors affect the market, prices, sales and demand of any product.

How can I lower my break-even point?

If after conducting the break-even analysis, you find that the units required to sell are too high, measures may be needed to lower the break-even point. In some scenarios, it might be unrealistic to lower the break-even point. While, in other cases with the application of the strategies below, the break-even point can be lowered –

Reducing the fixed costs

If you want to lower the break-even point of your business, a thorough analysis of your business is needed. See if you can reduce the fixed costs in any areas. For example, if there is ample space in your office that is not being used to its full capacity, consider subletting it or opting for a small office space. This will lower your fixed costs without impacting the production.

Increase the price per unit

If the selling price of your product is high, you may need to sell fewer units to break even. As the marginal contribution received by selling each unit increases. The catch here is to understand your target audience and their willingness to pay the price you are planning to quote. This strategy works the best if your product is not yet launched in the market. For an existing product, an upselling strategy may be needed as consumers may expect a better, upgraded version for the higher price.

Lowering your variable cost

Reducing the variable cost per unit is one of the most challenging strategies. One way to reduce the variable cost is increasing the scale of production if your business is ready for it. Also, negotiating with your supplier or considering other suppliers without compromising on the quality will help in reducing the variable cost. Even the process can be altered to make it cost-efficient like switching to cheaper alternatives for packaging.

To make smart business decisions, break-even analysis is an essential metric. The financial health of your business can be determined using it along with other metrics. Also, it is essential to monitor the break-even point of your business when any changes are made in the variable.

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Top 10 Sport Start-Ups in India

Tanisha Achrekar — Tue, 13 Apr 2021 00:35:04 +0000

Be it Amir Khan’s Lagaan, Shahrukh Khan’s Chak De India or Priyanka Chopra’s Mary Kom, these movies reflect the deep-rooted relationship between India and sports. Start-ups are leveraging on this relationship and coming up with their unique discoveries. Combining technology and sport, start-ups have created some of the best sports apps and services in the country.

The top 10 sport start-ups in India and what makes them the best.

Dream 11

This unicorn start-up is now a well-established name in and out of the sports world. Sponsoring the IPL to bring fantasy platform in India, the start-up continues raising bars higher and higher. Users on their platform can play fantasy cricket, basketball, hockey, volleyball, football, kabaddi, handball, rugby or even baseball. With more than 10 crore users, they are determined to set new records every day.

SportsApp

SportsApp is a platform integrated simply for connecting one sport lover to another. The app has a wide range of players who have played at different levels and have different experiences. SportsApp was launched to get all players together on their platform. Founded in 2018, the start-up has received funding of $50,000 in its angel round in August 2019.

Adda52

When it comes to playing the right cards, the founders of Adda52 know it all. The Delhi-based start-up allows players to play several card games online with real money. The growing popularity of this start-up led to their merger with Delta Corp in 2017. Indians have always been fond of card games and to no surprise, their app holds more than 20 lakh downloads. Their authentic and easy payment process has bought in popularity amongst users.

Mobile Premier League

Mobile Premier League popularly known as MPL is a tech start-up based in Bangalore. Directly competing with Dream 11, MPL is also a widespread name in the fantasy cricket industry. The company has received fundings from Sequoia Capital India, BeeNext and Times Internet. Their total funding reportedly amounts to $40.5 million. The platform has one of the most popular faces in India, Virat Kholi as their brand ambassador.

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Start-ups are leveraging on the deep-rooted relationship between India and sports.

Run Adam

Newly part of the sport start-up league, Run Adam is already making headlines as it is backed by MS Dhoni. Sources have it that Dhoni has bought a 25% stake in this company. Run Adams is concentrated on uniting sportspersons, professionals and business on their integrated online portal. The company offers athletes to connect with all the needful resources they require in just a click. The start-up also raised $1.5 million in the seed-funding round.

KOOH Sports

KOOH Sports is an international sport start-up with its headquarters in Mumbai. They provide sports education, training and technology intending to promote a healthy lifestyle. Establishing sports programs in schools, they are developing interest amongst children in sports on a foundation level. KOOH is reportedly funded by Elevate Sports, Faering Capital, Tata Consultancy Services (TCS) and HDFC Ltd.

Collectabillia

The Bangalore-based start-up is a celebrity commerce company. On their online portal, fans can win memorabilia autographed by their icons through an auction. Along with that, there are several merchandise available too. They aim to inculcate the mindset of personalised merchandise along the same lines as buying an art. The star-crazy market of India is a huge boon to Collectabillia.

Time Of Sports

The Time Of Sports is majorly focused on providing a sports platform for everyone in India with their vision of creating a fit nation. The start-up provides consultancy services to the sports and business sectors along with hosting several sporting events. They have observed an untapped potential in the country when it comes to sports and fitness. Time Of Sports has its presence across UAE, CIS, Singapore and Africa apart from India.

Playo

Playo had an unconventional idea that was much needed in the country. The sport start-up is focused on being the one-stop destination to bring sports back in everyone’s lives. They are focused on empowering the local sports communities by allowing them to make new play pals, discover new venues, organize matches and share experiences. Their app is focused on bringing together recreational activities be it sports, fitness or fun. They want to bring back the childhood memories of playing sports back in everyone’s lives.

BalleBaazi

BalleBaazi is an online fantasy platform that is focused on providing an interactive user experience to its audience. The platform allows users to participate in fantasy sports leagues and is one of the prominent fantasy cricket platforms in India. Along with cricket, BalleBaazi has further expanded its reach to fantasy leagues of other sports too. In 2019, the start-up raised $4 million in Series A funding from Singapore and Delhi.

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What Is Working Capital? How Is It Calculated?

Tanisha Achrekar — Mon, 12 Apr 2021 04:35:05 +0000

When you start earning, you want to make a living, do some savings and also give yourself a better lifestyle. Handling finances can be tough, be it business or personal. Whatever you earn, you prefer to block some of your money in financial instruments like fixed deposits. Why is not all the money blocked? Because some liquid cash is always needed for everyday expenses and unforeseen emergencies. Similarly, in businesses, there are different types of capitals serving different purposes. Read on to know more about working capital.

Defining working capital

As an entrepreneur, working capital for you in the simplest terms is the money you have available for your business. It is the cash you have disposable to carry out your business operations. This capital can be derived from anything, be it your own savings, a loan you took, or the profit you earned.

Working capital can be easily used for conducting everyday business operations like paying rent, giving salaries to your staff, paying creditors, monthly recurring bills. It is also known as operating liquidity.

Evaluating the working capital of a business

Working capital is the difference between your company’s current assets and liabilities. Current assets are cash and other assets from which you can convert immediately to get capital. Inventory, short term investments and amount receivable from debtors are also examples of current assets. Current liabilities are payments and debts that are needed to be settled in a year. Accounts payables, sales tax, payroll expenses, sales tax and everyday wages are examples of current liabilities. If the current assets of your business are more than the current liabilities, your working capital is sufficient and there is no sign of worry there. However, if the current assets are less than the current liabilities, there is a working capital deficit. This is an indication of financial trouble in business and may need your attention.

Working Capital helps you to know the everyday expenses of your business and for how long the business can keep running smoothly based on the liquidly available. The financial experts of any business usually monitor that along with several other business parameters to understand the financial standing of your business. There are several profitable businesses that struggle in generating working capital. Their funds are blocked and even though the business is making money, there is an inability in generating liquid capital.

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If you do the math, working capital is simply current assets divided by current liabilities.

Understanding working capital ratio

If you do the math, working capital is simply current assets divided by current liabilities. The answer you receive, the ratio you get how do you know it is healthy or not? If your ratio is anything less than one, it is considered as negative working capital. On the contrary, anything above two isn’t any good either as this means that you have too much liquid cash lying ideal and can be used or invested in better purposes.

So, the perfect ratio is anything between 1.2 to 2. This is usually sufficient as it means that the company has more current assets than current liabilities. Also, the current assets are not way too much that their potential is being wasted.

Companies should also track an overall progression of working capital. If the ratio is getting better and better, the business is functioning more and more efficiently. If the ratio seemed to have denied overtime, there is an underlying problem there and it needs to be addressed immediately.

When is working capital needed?

There are several scenarios where you would need working capital for your business. They can be broadly divided into two categories –

Keep the business functioning

Even if your business is making money or not, there are some expenses that will be incurred and need to be paid be it salaries, rent or electricity bills. Even if your business has slowed down due to unforeseen circumstances like the coronavirus pandemic, some expenses will still need to be taken care of. During such situations where enough funds are not coming in, working capital can be put into great use.

For expansion and growth

Suppose you run a restaurant, if you are planning to expand it, there will be capital needed even post initial stages. As the business expands, the people involved in the business increases too. There will be new short term expenses incurred. The business being in an expansion state the new unit may not produce enough revenue, but the everyday expenses would still continue.

How to generate working capital?

Depending upon the type of business and its scale there can be several ways to generate working capital. Some of the ways to generate working capital and have a growing working capital ratio for most businesses would be –

Requesting an upfront deposit

Sometimes in business when there is a lack of liquidity, a project needs to be halted. One way to cope with this is to ask for an upfront deposit from debtors. Deposits help in minimising the cash crunch that is created due to delayed payments or even no payments at times. When you are asking for an upfront deposit from your clients or debtors, look into whom you are asking to give deposits. For long-term clients with whom you have a trustworthy relationship, deposits may not be required. It is for those clients with whom you have just started dealing and as time goes, the deposit can be waived off.

Consider taking a loan

If your business is currently in a state where the working capital will be needed for the long haul, taking a loan from the bank is a good option to consider. There are several banks that offer loans for small businesses and SMEs. Ensure that your credit score is good so you can negotiate the interest rate on your loans. Taking a loan of a sufficient amount is a great way to build a safety-net for meeting everyday business expenses with ease.

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Having a steady and stable working capital takes stress off the back and smoothens the everyday functioning of your business.

Speeding up the collection process

One of the common reasons why the deficit in working capital is caused is due to delay in the payments received by clients and debtors. The conversion time increases and also the current asset is received later on. The tied-up money could have been used for conducting business operations.

Suppose you sell beauty products to parlours, the cycle for paying the wholesalers is 30 days but you collect money from your clients in 90 days. This means you have to wait 60 more days to get your money back. You need to focus on reducing this cycle as it will help in generating working capital more quickly. Start by tracking the time your clients take to make your payments. You can consider negotiating with them about it and also digitalise the process if it isn’t already, to speed up the procedure. Also, provide benefits to clients who make payment early by giving them a small discount. Consider charging late fees for payments that have been delayed for way more than the stipulated time.

Peer-to-peer lending

You can opt for a peer-to-peer loan if the bank loan interest rate seems too high. Several institutions online and offline offer peer-to-peer loans with no middlemen involved. Since these platforms connect you directly with the lender, the rates are affordable. These loans are quite easy to get but you need to ensure that your profile is low-risk or no-risk. Also, if your money is blocked and you need funds urgently, invoice financing is also an option worth considering. Here you sell unpaid invoices to a third party for generating cash immediately. You have to pay interest for the money you get but usually, it is quite low.

Mistakes to watch out for while generating working capital

Working capital is vital for the smooth functioning of your everyday business activities. There are several mistakes one can make while being focused on generating working capital. One of the biggest mistakes to avoid is taking too many loans or overextending the line of credits. Only get the line of credit or loan that you need and avoid going overboard even if you are eligible for it. Whether it is any loans or lenders you are taking money from, you need to look for hidden fees. Some institutions may have low interest but have hidden charges which you may find about later and regret. Also, avoid using the revenue you receive from old customers to finance the new ones. Doing this often is bound to block the cash flow.

Working capital for any small business or SME is easy to generate if well-calculated and well-planned. Calculate the ratio and see how current assets can be increased or current liabilities can be reduced. Choose the right options for funding your business. Having a steady and stable working capital takes stress off the back and smoothens the everyday functioning of your business. A business is like a rollercoaster ride full of ups and downs, invest wisely during the ups to survive the downs with ease.

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Consumer Price Index (CPI): The Inflation Indicator

Tanisha Achrekar — Mon, 05 Apr 2021 04:35:04 +0000

Often in everyday conversations, people talk about how expensive things have become compared to previous years. In reality, how expensive things are? Inflation is simply a rise in price levels, thereby decreasing the purchasing power of consumers. Just like so many consumer products are priced double or triple now compared to say 10-20 years ago. So how do we know how much inflation has increased? This is where Consumer Price Index (CPI) comes into play. CPI acts as a metric and is used to measure inflation. Data is collected on the prices of goods and services that are consumed by the retail population to measure the CPI. It is purely focused on measuring retail inflation.

What is the Consumer Price Index (CPI)?

CPI focuses on the demand side of the economy. It measures the changes in the price level of products consumed by the retail consumer. CPI of any country is calculated for fixed baskets of goods and services. As new products and services keep coming into the market over the years and calculating CPI with new products would not be possible. The ones that are kept in the basket may or may not be altered by the government from time to time depending on the country’s policy.

CPI is a macroeconomic indicator of inflation. It also reflected the overall purchasing power of the country’s currency. For example, Amul paneer used to cost around Rs 170 to Rs 180 for a kg. Now the same paneer in 2022 costs Rs 340. More currency is needed for purchasing the same quantity of goods, thereby reducing the value of the currency. Just like we hear our older generation saying back in their days Rs 10 were a lot. In India, CPI is a vital tool used by the Reserve Bank of India, central government and state governments.

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Data is collected on the prices of goods and services that are consumed by the retail population to measure the CPI.

What does CPI reflect?

CPI is a vital economic tool; it highlights several key parameters which are useful for the government to draft policies and take measures accordingly.

The cost of living

CPI measures the change in the prices of consumer goods. As the price of consumer goods and services change, the cost of living would change too. Say if the prices of groceries and everyday essentials has increased, the cost of living has increased too. It reflects the cost of living of consumers in society.

The increased prices of goods and services

CPI helps the government to understand which goods and services have increased their prices, the percentage of rising in prices and the overall pricing graph of the product/service. While higher prices over the years are no surprise for the government, an astonishing steep rise in any product/service is concerning.

Indian rupee’s worth

With CPI, the inflation rate can be calculated and so can the money’s worth be. The government will be able to access the value of the Indian rupee. If the value is declining over time, required measures can be taken.

The purchasing power of consumers

The cost of living and the purchasing power of the consumers can be calculated using CPI. As the cost-of-living increases, the purchasing power is bound to change across various strata of society.

How is CPI calculated in India?

Measuring the price of baskets of goods and services consumed by an average Indian is a strenuous task. As the baskets of goods and services include food, clothing, electricity, transportation, education, medical care and many more. It almost includes anything and everything that requires money.

CPI is calculated by comparing the current price levels in the market to the price levels of a market in the past. The price levels of the previous year are referred to as the base year. The base year here acts as a benchmark for comparing with the current prices. Currently, the base year is considered as 2016. The base year is monitored by the Central Statistics Office (CSO), Programme Implementation (Mospi) and Ministry of Statistics. Changes are made from time to time by these committees.=

In mathematical terms, the formula of CPI is:
Consumer Price Index = (Cost of the market basket in a given year/Cost of the market basket in the base year) x 100

CPI is calculated in percentage. The statistics of CPI are released by the National Statistical Office (NSO). The several items of goods and services in the CPI basket can be broadly divided into several categories. Some of the common categories in the basket are food and beverages, clothing, housing, fuel and light, footwear and recreation. In India, there are five consumer price indexes (CPIs). CPI for Industrial Worker (IW), CPI for Agricultural Labourer (AL), CPI for Rural Labourer (RL), CPI-Urban and CPI-Rural.

The link between CPI and Repo Rates

CPI being a useful economic tool, it helps the RBI as well while drafting the monetary policies for the country. The RBI aims at keeping the inflation rate of the country around 4%. However, it usually fluctuates anywhere between 2% and 6%. RBI aims to establish inflation control and the way it does keeps changing from time to time depending on the decision of the monetary policy committee.

Depending on the inflation, the repo rates are decided. If inflation is rising, it means the prices are rising in general. To bring the rising inflation to halt and potentially reduce it, the central bank would aim to reduce the supply of money in the economy. To reduce the supply of money, the repo rates by RBI are increased. This in turn will increase the interest rate on borrowings from the bank. An increase in the interest rate will help in arresting the liquidity in the economy. Inflation is an important factor in determining the monetary policy of the RBI.

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CPI is calculated by comparing the current price levels in the market to the price levels of a market in the past.

The limitations of CPI

CPI is an important economic indicator and provides data that impacts several national decisions. However, as a macroeconomic indicator, it has its limitations.

Difficulty in price measurement

While recording price changes on a huge range of products, difficulties are bound to arise. There are likely to be local variations of different products or price differences in different states. One way this challenge is usually overcome is by taking the average price of the product after serving it from different parts of the country. However, small reductions in the quantity, weight or size of any product in the basket often goes unnoticed.

The lack of innovation

The basket of products and services from which the CPI percentage of a county is derived lacks the consideration of new products and services. As technology and the economy are rapidly changing, many products and services fail to stand the test of time and many new products are introduced in the market. To have a precise CPI percentage, frequent revision of items and weights is needed. Some products need to be added, while others would be eliminated from the basket.

Structural challenges

When the CPI is being calculated, one of the biggest hurdles is to decide the range of households to which the CPI is applicable. As different types of households have different products and services, there cannot be one basket that fits all. Income levels of different households determine their spending habits. The CPI index calculated based on the expenditure of an average Indian household will not help in determining the cost of living of the above and below average households in the country.

Outdated base year

One of the biggest drawbacks of CPI is that the base year data may sometimes feel irrelevant and outdated compared to the current year. Also, it is important to select a base year where the prices were relatively stable. Years where due to unforeseen circumstances of severe inflation or deflation should be avoided. For example, the impact of COVID-19 on the economy was devastating around the world. The year 2020 would be an unstable year for taking as the base year for calculating CPI.

Changes and differences in pattern

CPI may have a limitation in its significance. The basket that is used for measuring CPI is only applicable to the base year in reality. For example, if the base year is 2016 and the CPI is being calculated for 2021. The basket will not be the same after five years clearly. As over a period of time, the income of people changes and the pattern of expenditure too. So many things evolve and alter in society in the current year in comparison to the base year.

Apart from inflation and spending power, CPI also impacts the savings and investment of individuals. As a business, if the CPI is indicating a period of inflation or deflation, changes are needed to be made accordingly. For example, in a period of inflation, a strategic move would be to increase your cash reserves. As inflation means a rise in prices and cost of living, the cost of business expenses is likely to sour. Having cash reserves and working capital would help in sustaining the business during the economic crisis.

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