Sunday, February 28, 2016

Entrepreneurship Marathon - Grow from Rs. 50 Lakh Equity to Rs. 50 Crore equity

My plan for the MBA/M.Tech Degree Holder  Enterprise

Grow from Rs. 50 Lakh Equity to RS. 50 Crore equity enterprise

I suggest to the MBA/M.Tech degree holders to work for at least 5 years after graduation and accumulate experience of dealing with customers, suppliers, associates and public agencies. Also plan to save about Rs. 10 lakhs.

Three friends or similarly thinking persons can come together and pool Rs. 30 Lakhs savings. Such a partnership would mean, their parents and relatives would invest around Rs, 20 lakhs into their business equity kitty. If that is not the case, they can go for equity sources like angel investors and venture capital firms.  Thus I would say, MBA enterpreneurs should look for Rs. 50 lakh equity project.

In the initial years, only one person can move into business full time.  If your business plan has 24% return on equity, it will give 12 lakhs as profit. But do not show it as profit. Give it as salary to the managing partner. Therefore, this project can easily provide income to the one managing the business.

In management accounts you can still show the profit and ask for more finance from equity and debt in the second year. Also three of the promoters can try and invest say Rs, 9 lakhs in the equity and ask for Rs. 6 lakhs from angel investors (angel investors can be parents and relatives also). This means in another three years approximately another 50 lakhs equity can be accumulated and one more partner can join the business. The cycle is repeated and the third partner joins the business after 3 more years. Once your equity is 1.5 crores, you can go for a public issue and get another Rs. 1.5 crore as additional equity.

Now if you are running your business successfully, you are into a growth path with big ideas. There are many enterpreneurs who have taken up projects of size more than 10 times that current projects. So when you reach Rs. 5 crore equity, you can think of Rs, 50 crore project. Now you have experience and valuable expertise.

Segment 2 of the $5 to $50 million growth ultra marathon. 7 rules that will help drive success!

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