Here's what I did when I started my business

Having a business of your own is very tempting. But before you embark on this journey, there are numerous things you need to put in place.

Here's what I did when I started my business

I always had a passion for cooking, and was quite good at it too. My relatives and friends always complimented the food I made, so much so that a friend even urged me to open a small café. The idea was enticing; after all, who wouldn’t want to turn their passion into a lucrative business?

So, I started researching the internet for ways to start my own café. I talked to relatives and others who had any idea of running a business. The process was challenging, but my dream helped me persevere. Here’s what I did to get my small business running.

Step 1: Registering the name of my café
A business needs to be registered for it to function legally. So, I first selected a name for my café, and registered it with the correct authorities. That’s when I found out that more paperwork would be involved. Since I would be running an eatery, I would require a food license, health trade license, fire security certificate, etc. I had to approach various authorities such as the Food Safety and Standards Authority of India (FSSAI), Municipal Corporation etc. for these licences. 
Based on your businesses, you will require different licences. So, do your research and follow the necessary protocol to ensure it all goes smoothly.

Pro Tip: While registering your company’s name, be original and ensure the name you’ve chosen is not already a trademark that belongs to someone else. If you are operating in a less competitive market, you could choose to postpone the trademark registration.

Cost for registration ranges based on factors like stamp duty, professional fees, etc. You also require a company secretary or chartered accountant for the registration process.

Related: The origin-story of India's richest families

Step 2 – I also registered for GST
According to the latest rules, I would have to pay GST to the Government on all transactions my café made. So, I obtained a GST registration. I also applied for a TAN (Tax Deduction and Collection Account Number) for my café. Although my start-up is exempted from tax for the first three years, I completed the necessary tax-related formalities for my café to prevent future hassles. 

Pro Tip: Documents needed for GST registration include photograph of owner and managing partner (if any), partnership deed if it is a partnership firm. Other important documents include- 

  • Bank documents (passbook, bank statement or cancelled cheque with name, bank account number, IFSC, MICR and branch details)
  • Electricity bill, tax receipt or register documents if you own the property
  • Copy of rent/ lease agreement in your name (if the property is rented)
  • NOC (No Objection Certificate) and electricity bill (if you neither own or rent the property)

Step 3: I estimated my capital requirements
Starting any business involves some costs. So, I began estimating the capital I would need. First, I considered my savings that I had put away over the years. Other things I had to consider included:

  • A suitable location and the leasing cost for it 
  • Necessary equipment and the costs involved 
  • Fixed costs such as rent, utility bills, etc.
  • Working capital needs for buying raw materials and hiring staff

Related: 6 Actionable money tips from those who became millionaires

I assessed how much of these costs my savings would cover, and then estimated the amount I would need to borrow. After all, the revenue generated would not necessarily be enough to fund all the expenses in the beginning. Here are some options I considered for funding-

  • Own savings
  • Business loan
  • Loan from family/ friends 
  • Venture capital

I realised that my savings would cover about 20% of my expenses. I ruled out taking a loan from friends or family; instead opted for a business loan. Take into consideration cash flow challenges when starting a business. There are various ways to generate funds for your business if you plan for it well in advance. 

Pro Tip: A working capital loan can cover daily operational expenses, and can help small businesses generate capital overtime. The tenure of a working capital loan in India ranges from 6 to 12 months, with interest rates between 11% and 16%.

Working capital loans have its own advantages. For instance, if your credit history is good, you might get a loan without any collateral security.

Step 4: I prepared a business proposal and applied for a loan
I knew lenders could ask for a business proposal when applying for a business loan, especially if it is a reputed lender. So, I designed a proposal for my café, which included the location, expected costs, existing assets, and revenue forecast. The next step was to apply for the business loan, for which I arranged the necessary collateral security. I then checked with different lenders for a loan. Once I found a suitable option, I submitted the required documents and completed the application formalities. 

Pro Tip: Many banks willingly offer loans to start-ups. However, note that the sanction of these loans depends on certain factors, such as proposed business model, experience of a promoter and collateral security.

There are also schemes like CGTMSE scheme or Credit Guarantee Fund Trust for Micro and Small Enterprises that provide bank loan facilities without the hassles of collateral security. In such cases, the proposed business model and promoter experience must be strong and convincing.

Step 5: I bought the premises, hired people, and opened my café
After getting the necessary funding, I leased the premises, bought the equipment I needed and hired a few people. Since the loan I got was slightly higher than my estimation, I used the extra amount to fund the day-to-day activities of my café. With that my café was up and running. 

Related: 4 Money management lessons you can learn from Donald Trump

Pro Tip: How well you manage the cashflow in a small business can determine the success of the entity. Therefore, you must pay careful attention to revenue that comes in and goes out of your company. For instance, payroll costs, should be about 25%-35% of your total gross sales. 

Starting any business comes with some hard work initially. It may also require some budget cuts on your part, which you realise is worth it when you see your dream finally materialising. Adequate research, disciplined spending and following the necessary rules can help you create a legal and well- established business. 


Related Article

Premium Articles