Here, we write some practical steps on how to start a business in India in a simple way. We might have seen many people with creative ideas to start a business in India. But the majority of them does not reach their destination, to make these ideas into the real business.
There are a lot of limiting factors abstain them from starting a business.
If they know the basic steps on how to start a business in India, we hope they can make magic with their ideas.
Table of Contents
1. There Must be a Good Business Idea to Start a Business
To start a business, you must have a burning idea in your mind. Whether the project is small or big, first we need to create it in our mind.
It has much importance when you start thinking of how to start a business in India or anywhere in the world. The business idea is considered the first stage. As usual, the primary objective of any business is making money.
So the business idea also compatible with it and at the same time, you need to find an idea or concept, for which you have passion. This idea must be one which inspires you, among others.
When you select the business idea, don’t blindly follow others ideas and success. Ideas won for others may not work for us as the abilities of persons vary from one to another.
Try to find a unique idea which can connect the gap in society or solve a problem existing at present. It may be the manufacturing of something, Marketing of products or providing service etc.
There are many business opportunities if you apply modern technology to traditional business. We can see trends across the world.
We can take an example of a Freshtohome, an online fish and meat company. You can see how applied the technology in the traditional business and turned to a million-dollar company. Their story may really make you cool if you thinking on how to start a busines in India.
2. Feasibility Study
The feasibility study is the study of the viability of the business idea. After feasibility analysis, one can say that whether to move with the business idea or any alternatives available in the market to follow or to stop.
This process can identify the market, targeted customers, competitors and alternatives. Once we get the result of this study, we can see the viability of our business idea.
Usually experienced consultants are providing these services, and it is an important aspect when you plan to start a business in India
3. Business Plan
When you wish to start a business, whatever be the nature and size, the third thing you need to prepare a plan. This plan may call a Business Plan or Business Project Report. Anyway, it will transform the business idea from your mind to papers.
When we go to start a business plan, it needs to be successful in the market.
A business plan may win the market if it can solve a problem faced by the public. So one must bear in mind that mere passion will not become a good business unless it solves or makes easy the routine problems faced by the public. And also it must have an economic value.
4. Contents of Business Plan
A business plan contains the following items, but it may vary as per the requirement of the business plan.
- The Business Plan must be a written document
- It must have a Summary of the business
- Details of the company, legal framework, promoters etc
- A summary of the business idea
- What kind of products or services offered
- Target market
- Existing competition
- Marketing plan
- Required Investment, Revenue and Return on Investment.
- Break-Even analysis
- Projected Income Statement, projected Balance Sheet, projected Cash Flow statement.
To start a business in India, it is essential to have a clear business plan.
5. Types of Business Ownership
There are many types of business ownership. They are
- Sole proprietorship
- Limited liability partnership
- One person company
- Private Company
- Public Company
We need to consider the nature and scale of operation, capital requirement, risk and liability, flexibility and transferability of ownership etc. of the business when deciding the type of business entity.
When we wish to start a business in India, careful analysis is required to select the type of business. Usually, people are consulting qualified persons or firms like CAs, CMAs or CS for getting more clarity of it.
(i) Sole Proprietorship
A Sole proprietorship business is a simple form of business ownership with limited formalities. The compliance requirement as per the law is very low for this type of business.
But the liability of the sole proprietor is unlimited, and any risk of loss may extend to the personal properties of the sole proprietor. If you want to start a business with less exposure to risk, it is advisable to start a sole proprietorship.
A partnership is a relationship between persons who have agreed to share profits or losses of the business carried out by all or any of them acting for all. In India, partnership business is controlled by the Indian Partnership Act, 1932.
To constitute a partnership,
1. We need an agreement between parties
2. They need to agree to share the profit or loss of the business
3. Business must be carried out by all of the partners or any of them acting for all.
Many types of partnerships are there like General Partnership, limited partnership, partnership at will, particular partnership.
If you want to start a business to share the responsibilities with two or more persons, it is better to go with the partnership business.
(iii) Limited Liability Partnership
So in Limited Liability Partnership, partners will not be liable for the wrong actions of the other partner, and they will be liable up to their agreed contribution. But in a partnership firm, the partners can not escape from the joint liability.
We can call Limited Liability Partnership as a hybrid between a Partnership firm and company.
Limited Liability Partnership can functions, as a partnership, based on an agreement among the partners. It mainly helps professionals to start a business without undergoing thorough legal and compliance requirement by giving adequate consideration for grabbing the financial risk.
(iv) One Person Company (OPC)
In India, the concept of a Single Person Company has introduced by the Companies Act,2013. It is considered as one of the best steps by the Government of India to support those seeking self-employment or to start a business.
A One-Person Company needs one person as a member and another as a nominee.
The nominee will become a member of the company in case the original member is unable to become a member of the OPC.
As per the provisions of the law, only a natural person can start a business as a One Person Company. The person must be a resident in India during the immediately preceding one financial year. To consider a person as a resident of India for this purpose, the person must stay 182 days or more in India during the immediately preceding financial year.
It also provides a threshold limit for paid-up capital and average annual turnover.
The Act provides the limit of share capital as fifty lakhs rupees and an average annual turnover of immediately preceding three consecutive financial years as two crore rupees.
In case it exceeds the limit, then the OPC must convert itself to Private or Public company.
A person can not be a member of more than one OPC. In case of becoming a nominee, he can not become the nominee of more than one One Person Company. This type of companies not allowed to get licenced for the operation of NBFC.
This type of business model is suitable if you like to start a business with a small or medium-scale operation.
(v) Private Company
Suppose the scale of operation of the business is large, better to form a Company.
You have seen some companies with the name ended with (Private Limited) Pvt Ltd.
To start a business as a private company, we need a minimum of 2 or more persons, but the maximum number of members is limited to 200.
A private limited company has a restriction on the transfer of its shares. This type of companies can not invite the public to subscribe to its securities.
The main advantage of a Private Limited company is that, in case of any liability, its shareholders do not need to settle it from their personal property. Existence of the company will not be affected by the death or insolvency of members. So this feature is called Perpetual Succession. As compared to Public Limited companies, Private limited companies do not need to keep an index of members.
Private limited can start the business with three directors, and the Companies Act does not provide any minimum capital requirements.
(vi) Public Company
To form a Public Limited company, we need to have a minimum of 7 or more persons. The maximum number of shareholders is limitless. The liability of shareholders is limited to the extent of their contribution to the share capital.
Board of directors is heading the public limited companies.
Stock exchanges are there to trade the shares of public companies, and the people wish to buy or sell the shares can trade in the stock market.
Existence of the Public limited company does not affect by the death of the shareholders.
Many regulations are governing public limited companies. It has to comply with various rules and procedures in the country if you wish to start a business as a public company. It requires to publish its financial position annually.
A financially strong company with consistent performance can enjoy the ability to raise the maximum required capital.
6. Decide the Capital and Source of Fund
Finance is the lifeblood of business. Once we start a business, we need to have a clear idea of how to find the capital required for the business. It needs Working capital and fixed assets to run a business depends on the nature of business.
The wise decision is to start small scale and go big. But we can not set a rule for it. The requirement may change as per the business idea.
So we need to answer how to fund the business idea.
(i) Invest from Your Personal Savings
We can use our savings for funding the business. As investment in business means, there is a risk associated with it. We need to analyse the risk and aware of our risk appetite.
When we use our savings for the business, we must bear in mind that the money should not be our emergency fund. It may take time to get it back from the business.
(ii) Invite Friends or Family Member to Invest
Friends and family members can help us to turn our idea into reality. Getting a loan or investment from a family member or a friend may be easy. It may affect their relationship with them in case of delay in repayment. .
(iii) Approach A Bank for the loan to start a business
Banks can grant a loan for funding your business. If you have a viable project report for a stunning idea, most of the banks may ready to fund you.
Banks have Small and Medium enterprises loans, Agriculture Business loans, Working capital loans, Project loans etc.
If you depend on the loan to start a business, you need to think rice as a small deviation in your plan may lead to uncertainty in your finance management.
The terms and conditions may vary from one bank to another. We need to approach Bank for more details.
Crowdfunding is a process of raising funds through the internet. It can collect a small amount of money from like-minded people on a large basis. It may become a huge fund to support your business idea.
Fundable is working for crowdfunding. Most of the crowdfunding sites have packages to support you with regards to the funding campaigns.
(v) Angel Investors
Finding an Angel investor is another option to fund your business idea. Usually, they invest in exchange for business ownership.
They are experienced investors in the market and will analyse your business ideas. If you can convince about your business idea, they will be the best choice for you. Angel Investors concentrate on invest in startups
(vi) Venture Capital
They are the investors with ample risk-taking capacity. If you have an innovative idea to turn into a business, they may invest in your business.
Generally, Venture capitalists invest in projects which required a huge amount of money. Its funding is meant for businesses in different stages like Seed funding, Early Stage funding and Growth stage funding.
(vii) Government Schemes
In India, the Government of India provides many loan facilities to turn your ideas into reality and also to support your existing business to fuel.
Pradhan Mantri Mudra Yojana (PMMY) is the best example of the initiative. You can get funding for business which provides employment. This loan is granted without any collateral security up to 10 lakh.
Stand Up India Scheme. This scheme is for supporting Sc/ST and Women entrepreneurs. By this scheme, we can get a loan between 10 lakh and 10 Crore.
MSME Loan– This scheme proved the loan from 10 lakhs to 1 crore to MSME. The approval process may take only 59 minutes through the web portal, and collateral security is not mandatory for this loan.
7. Register Your Business
Once you decided the source of fund, you can go for registering the business with government agencies. Depends on the form of business selected, the procedures may differ.
You need to register with local government bodies and obtain required licences from Fire and Safety Department, GST Registration, Income Tax, Udyog Adhar Registration etc.
8. Open a Bank Account
Once you have the Registration Documents, PAN Card, Address proof, You can approach banks to open a Current Account in Your company name. Contact the bank for detailed procedures as it may vary from bank to bank.
9. Go Online
Once you start the business, at the same time, you need to be present online also. There you can find potential customers. Many techniques are there to attract potential customers.
Apart from starting a web page for your business, create contents in social media also. Try to acquire and sell your product or service online. You can use an existing e-commerce business also to do the same.
Conclusion – Don t Give up
Success is the result of many hurdles and distractions we face today. We can not ask yourself to have a clear plan for success as the plan will not be perfect in all the senses.
We need to face many situations in our business journey, especially when we start a business from scratch, that all we can not preplan. It may consist of experiences of good and bad. If you go with your passion and a clear idea to become an entrepreneur, definitely it will come true.
There are many examples from the real-life of leading entrepreneurs. Some times, it may take time to reach success. Don’t expect a result immediately. We need to focus, learn from the mistakes, think positively, plan your risks and don’t give up.
Please share it in your social media and invite your comments and views. Anybody have queries regarding the topic or stuck somewhere in your business journey,please share it with us.