Effective financial planning to help your start-up

For some years now, Deloitte has been publishing its Millennial Surveys – global reports that cover nearly 8000 respondents (equally divided between emerging and developed economies) We’re talking about adults born after 1982, who have a college or university degree; are employed full-time; and, work predominantly in large, private-sector organizations.

In its 2017 report, a telling 45% of the Indians surveyed said that if given a choice, they would leave their current employers within two years. The number was even higher in 2016 – 52% – and the ripples around demonetisation are likely to have had their effect in lowering the number. Other recent headlines bear out the general air of dissatisfaction among employed Indians:

“With unemployment rise, number of young people looking for job is on the decline.”
– Financial Express, October 1, 2017

“Disturbing trend: Why is India's unemployed youth not looking for jobs?”
– Economic Times, Aug 11, 2017

If you’re among the 45% who long for the day when you can hand in your resignation and start a small, but challenging and satisfying business of your own, then you need to read this.

Sensible financial planning can turn your plan into reality – effectively and securely. Bad financing has undone many a good start-up idea and sent many aspiring entrepreneurs back into the corporate 9-to-5 fold. But if you’re willing to commit up to 2 years to shore up your finances, then you can start your business with a good seed capital and/or buffer fund of many lakhs set aside.

Seed Capital – If you’re not relying on a sizeable gratuity pay-off or a loan from your family, then start-up funds are hard to come by. As a new entrant, banks, venture capitalists and angel investors are going to want to see some proof of concept before they decide to fund you. So, your own source of funds is crucial at this stage.

Buffer funds – Assuming seed capital came by, and you’ve started functioning with a lean team and low overheads. Your buffer fund is a back-up to keep the business running as you build your network of clients, register your business, set up accounts and tax registrations, and await actual payments against your invoices.

Here’s how you can make your salary earn and multiply for you, as you focus on developing your business plan. Among the wide range of investment instruments out there, Mutual Funds routinely outperform bank and government instruments, and come in a range of risk options. With the right advisory help, you can find the mix of options that’s perfect for you.

Debt Funds are those that plough their investors’ money into different types of fixed-income instrument like debentures, Treasury Bills etc. i.e. They are preferred by investors who want a steady income but are unwilling to take on much risk. They come in a range of options of tenure and investment-objectives - Liquid funds, Ultra-short-term funds, Income funds, etc. – your advisor will guide you to the best options for you. They’re a great option to invest any idle seed money for limited periods. You know you’ll need quick access to the funds as need arises, but why not park the money in an instrument which will outperform a bank FD or current account balance in the meantime?

Equity Mutual Funds, as the name implies invest in the equities market. While you’re earning, and in still in the planning phase towards your business – do ensure you put away as much of your salary as you can into this avenue. Monthly investing SIPs let you stagger your ent ry (and exposure) gradually, the size of your holding averages out across bull and bear phases over the long-term (the longer you are able to stay invested, the better)

Sensible investing today can see you hand in that resignation letter and face the challenges ahead armed with your smarts, a great business plan, and the financial security to tide you over the turbulent start-up period. Don’t stay stuck in a job you’re unhappy in. If you’ve got a start-up idea, the right investment planning can make that idea come true. Bootstrap your future.

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.