Are you ready to start a business? Use this 4-point checklist to find out

There is a real drop in numbers, he told me when he called. After eight traumatic months of dealing with the second wave, that sounded so good. Life will become normal, he sighed in relief. And you can go back to work, I said. No, that is not happening, he said. So many have had the time to review their lives in the many months that the Covid pandemic kept us at home. People have learnt new skills. Not just online courses and credits, but life skills like repairing the plumbing and fixing the air conditioner. Many question the time, effort and money they were losing in commuting to work. The savings many have managed have surprised them immensely. Without travel, eating out and entertainment, many have realised they don’t miss these much after all. And then many have decided to not go back to work.In some countries this has become a topic of policy discussion. The doles have stopped; businesses are opening up; but people are resigning in large numbers as to cause concern. Not many are looking for new jobs. They are looking to become entrepreneurs instead. In the new found teamsmanship, husband and wife are planning business ventures. Online sales is on top of their minds. No store, no employees, no stocks, but sales from people sitting at home and browsing away. Seems like an interesting proposition. Let’s see how the personal finances will match up to this newfound romance with entrepreneurship.large87277676People start a business for at least one of the three primary reasons, I think. First, they think they are so good at it that they must do it themselves rather than do it for someone else. Second, they think it is a good idea to do something, given the demand for the product or service that idea will create. Third, they think there is a lot of money to be made. How one sets up, grows and nurtures a business will depend on what the primary driver is. And so will the personal finances of the household. Someone who is convinced that a business will make a lot of money quickly, will not be able to take slow sales, stock pile up, delayed payments, and such routine business events in their stride. They will get impatient with the working capital needs of the business and make hasty decisions about pricing and promotion. Household finances will suffer a yo yo too. Someone who believes in the power of their skills and expertise, needs enough capital to keep the business going. They have the patience and their household finances should show the same resilience. If they have the ability to hold spends down at home, and still have the calm and persistent demeanor that their business requires, they may be able to stay invested. Someone who places a bet on the demand for their product or service, needs the agility to chase markets and promote their product or service effectively to see growth. They must not only be willing to find and win customers, but also modify and rework their ideas to the dictates of the market. Their business and the household needs the spend to keep their effort going with the optimism it needs. These are simple generalisations. But the intent is to ask the new entrepreneurs to care enough about how their business ideas can impact their personal finances. Every businessman must believe that they will succeed. That optimism is needed to take the plunge. It takes time before a business venture can take off, and there are always unexpected twists and turns in that journey. Speak to any successful entrepreneur about their journey. They will tell you that after succeeding, the world only looks at the good decisions they made, celebrating their wise choices along the way. But in reality, at every turn, they had to make decisions, and some turn out to be good and some bad. It is through the bruises of the bad decisions that a business learns and gets better with finding its success. medium87277718Therefore, a business enterprise will struggle through costs, losses, spends and investments, before it can establish. In this period of struggle, the household’s finances will also suffer a period of stress. While everyone understands that the comfort of a fixed salary will not be there, the rewards of a bountiful bag of money will take its time to arrive. Hence the notes of caution from an author who will be accused of being conservative and cautious.First, don’t romanticise the new post pandemic world. Things will reverse in time, and we are all creatures of habit that will go back to what we were doing. We may be wiser with this experience, but we still don’t know how much of it will remain as time passes by. Don’t mistake the changes from this shock to be some kind of trend reversal. Let your business plan allow for this possibility too. Second, do not be tempted to divert most, or worse, all of your wealth to your business idea. Unless I stake it I wouldn’t make it, said one friend. You are in charge of your money when you deploy it, but the concentration risk of your wealth lying in one asset, even if it is your most precious one, is high. Keep enough for you to go back, if you must.medium87277743Third, provide for the income and spends of your household, for a reasonable period of time. Three years might be a good ballpark. Enough for your business to take off and make it all worth it. If you don’t have the wealth to provide this, let one earning member keep their job. They can quit and come in later when the business begins to cover costs and make money. The household will be insulated until then with that income.medium87277844Fourth, make sure you don’t make isolation your credo even if the pandemic made it a virtue. In the real world things happen because a community comes in to rally around you—your friends, colleagues, relatives, peers, well wishers. Make sure you continue to invest in your relationships and networks. They will not only look out for you, but also offer precious insights if you cling on to an idea that is not working. They may be able to offer alternatives when you need them. If entrepreneurship is your calling, dial in. But don’t get carried away.(The author is is Chairperson, Centre for Investment Education and Learning)Also Read 86937000