Want to be an entrepreneur?

Dreaming about entrepreneurship? Get set financially
By Srikala Bhashyam

Entrepreneurs often are born rather than made. With Indian economy looking more global than ever before, this desire of entrepreneurship has caught on with many. If you are wondering why we are discussing entrepreneurship in these columns, it is again got to do with money.
Surely, you need more money as an entrepreneur than as an employee. More importantly, you need to be financially prepared besides zeroing on the right business plan. Here are some tips for all those budding entrepreneurs who are dreaming about creating their own enterprise at a later date.
Get disciplined: The basic requirement for an entrepreneur is to be more disciplined with his finances. As you are aware, when you jump into entrepreneurship, you may not have the luxury of regular cash flow in the early days and hence, one needs to get a fix on expenditure before jumping into creating a start-up.
That would mean, an individual who dreams about getting started on his own should have a clear idea of his financial needs.
While it is important to define the short term cash needs, it is much easier to define long term financial needs which range from property to children’s education. The challenge is to set aside savings for short term needs.
In reality, most entrepreneurs end up setting aside more than necessary for their short term needs. For instance, Ramesh, a consultant, makes it a point to keep two years of his business expenditure in his current account!
That surely is not the best investment option as current account does not earn any interest. It helps a great deal when entrepreneurs clearly know their monthly cash needs and ideally, one should set aside two months of such expenses in highly liquid form. This could be in the form of savings balance or even in a liquid fund.
Planning for long term finance is a lot easier simply because time is available. Those who jump into entrepreneurship after a stint as employee can use their long term savings such as provident fund and gratuity for long term expenses.
For instance, the money drawn from these accounts should be aside in long term products such as post office monthly income plans or fixed deposits. I wouldn’t recommend too much of equity allocation for such funds because it is better to allocate them in low risk products till you attain financial comfort.
Besides FDs, even monthly income plans or balanced funds can be another option. When the corpus is huge, it is not a bad idea to allocate a portion of this corpus towards an insurance product. This will also ensure economic comfort to the family in the event of any eventuality.
The PF and gratuity corpus can also be used to supplement your monthly cash flow. Two products – monthly income plans or systematic withdrawals can meet this requirement.
While monthly income plans provide annual returns of 10-14%, systematic withdrawals allow you to withdraw a fixed sum on a monthly basis.
For the later, the corpus needs to be slightly large. For instance, an investment of Rs 25 lakhs invested in a balanced fund can allow an investor to withdraw Rs 10,000-20,000 on a monthly basis besides providing capital appreciation.
In the initial years of entrepreneurship, this can come in handy when the business fails to generate the required cash flow for your personal needs.
Srikala Bhashyam is a financial journalist with 13 years of experience across financial publications. The author can be contacted at srikala.bhashyam@gmail.com

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