LAUNCHING your first entrepreneurial venture is no cakewalk.

It takes guts, vision, planning, and last but not the least, money. And you may have lots of doubts about the road ahead. So, we kickstart a new series, which tackles issues relevant to budding entrepreneurs. This column provides some insights on how to manage capital and the competition!

Q. What are the basic expenses involved in setting up a start up venture? Do these expenses take place in phases or are they a one-time investment?

-- Ajay S

A. The expenses involved are typical -- cost of people, rent for office space, cost of acquiring infrastructure (example: computers, software), utilities, communication costs, travel and so on.

Some of these expenses are fixed and some are variable. For example, the rent of the office is fixed independent of the number of people or number of personal computers in the office.

On the other hand, the people cost is a variable. It's a good idea to build up expenses in a staggered manner. Rather than hire 10 people and have a big office from day one, it’s a good idea to incur expenses as needed and based on possibilities of generating revenues.

For example, rather than investing in 10 PCs, it may be better to lease or hire PCs on a month to month basis. Make a purchase only when revenues or funding is in place. In some businesses, it is possible to negotiate rentals and deposits downwards by having a revenue share agreement with the landlord.

Hiring temporary staff from external agencies for customer support, front office functions, bookkeeping etc, are other options to consider. Also, have employment contracts that provide for a probation period before confirmation of employment. This probation period can have a termination of employment clause that’s as short as possible.

Illustration: Vaibhav Shirke
(Photograph used for illustrative purposes only)

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e-mail: Sanjay Anandaram

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