Calculating Return on Investment (ROI)

How to calculate Return on your investment & plan your business
expenses:

Some people call it ROI (Return on Investment) & some people call it ROIC (Return on Invested Capital). Both are actually same but it is very important that we periodically calculate it to check the health of our business.
The formula for calculating ROI is :
ROI = [(Benefit in Rupees - Investment)/Investment)]*100


To summaries it in a single statement "It is a measure of the Rupees returned for Rupees invested".
So ROI calculation is not important just for the health of your overall business but it is equally important when you plan for any investment whether it will return positive ROI or not. So whenever you want to make any decision regarding a moderate to major investment you must calculate ROI for that investment & see whether it makes any sense to go for that investment or not. I suggest each & every capital expenditure should go through this & this will help you run your business profitably & this will also help you to avoid impulsive investment decisions.
While calculating the total investment make sure you also include the run cost , maintenance cost & as well as the cost of funds.
You can consider the following while calculating the benefits:
Typical benefits that are considered in an ROI assessment include:
Increased revenue, e.g. increased sales, or sales margins
Retention of sales that would otherwise have been lost
Reduction in operating expense, e.g. daily time savings, eliminated rework.


Since what you can include in the benefits or cost is always a subject of argument & can be easily manipulated. Since everyone agrees to the importance of this tool, i suggest to form a core team who can agree on the parameters used for the calculation.

How to Calculate Start Up Costs for a New Business?

The very first issue that comes up with a startup is to find out the intial investmment/funding required. Though the best way is to start this with a detailed business plan in hand. But here is the list of things I have done to come to the estimated cost of initial setup & the additional capital to keep the business running till you get the operational break even:

1. Writedown each & everything you would need & when. Try to capture the cost of each of the item. Keep 10-20% extra to keep the buffer for any missed out item or higher cost. To determine the costs of the equipment your organization needs, look for online distributors or commercial wholesalers available locally.

2. Determine business start up costs for your area. This can include a business registration charges, insurance for your business, getting PAN numbers, TAN Numbers etc.

3. Determine the office space cost and for other assets required. Make sure you include all the brokerage charges, advance rentals etc.

4. Determine the cost of hiring employees.

5. Think about advertising and marketing expenses that can get your business out there. Newspaper ads, flyers, phone book advertisements, or online advertisements are examples. Business Cards and referral cards can be helpful as well.

6. Determine all the ongoing expenses required to meet monthly expenses of running the operations.

7. Ongoing costs can include Salaries, utilities charges like Electricity & telephone bills, rent, supplies required for your operations, marketing & advertising etc. Ongoing expenses should be considered for good enough period atleast till the period you get operational breakeven & beyond.

8. Must keep atleast +20% buffer while calculating your expenses. More the buffer better prepared you are.

How to start a business with no money or investment?

Some of the successful people have said that "there is always a baggage that comes with investors’ money & also you will be responsible for other's karmas”. So sometimes it’s a good idea to start with whatever little money you have. There is a freedom & a control that comes with no money. There are tons of ways to make money, but people never pursue them because they seem "menial" or "not worth their time". In every locality or community you will find few problems which most people are living with. A smart person can actually tap these kinds of opportunities & make money as well as create good-will & the network.

One more thing which sometimes goes against people who wants to pursue their hobbies into their business. Though it helps sometimes but someone has to be practical enough to be aware of the market scenario & what makes business sense. But it is found that if instead of concentrating on your hobby only if someone concentrates on the processes used in the business it will return far better results comparatively. Processes could be building teams, collaborating with others, wrestling with creative challenges, supplying customers with value, entertaining paradigm-shifting ideas, dreaming of the potential for fast growth, and being socially responsible to all the stakeholders.

Some of the points which can help one get succeeded in their startup businesses:
Try to be Pro-people & hire good people
Try to be a specialist of the business you are in
Do on-hand as & when needed
Be passionate about your work
Be an example for your employees
Use problem solving tools to deal with the problems.
Think ahead of time
Some of the things every new entrepreneur must remember if he has to succeed & sustain in the race:
· Always plan for each & everything for your success. If you & your employees are working long hours that means there is something wrong with your planning & management
· Always deliver value not junk
· Buy good stuff sell good stuff
· Be innovative
· Involve & collaborate
· Stick to your values

What product youth of India would like to buy thru Internet?

I have been researching on the subject that what is it that youth of India wouldn't mind buying online without having an itch of evaluating & seeing the stuff physically. I would like to hear recommendations of you folks who have been working on the similar analysis & are budding entrepreneurs in making. Please join in my search & partner with me.

Some of the reasons why startups fail?

Why most startups fail?

Starting a business of your own has a lot of benefits such as being your own boss, facing new challenges, a high growth potential and reaping all the rewards of your hard work, however, success in a small business can never be taken for granted. Entrepreneurs who want to run their own small businesses cannot afford to ignore the difficulty of starting a business. The following are the primary reasons for small business failure:

• Lack of planning: Not having a proper business plan is a major pitfall that can lead to failure of a small business. A SWOT analysis is necessary to be able to overcome difficulties during its growth. A business plan gives proper direction to the business.

•Trying to make a hobby into a business: Not every hobby can be transformed into business. Before planning to start a small business, the idea must be thoroughly researched for its feasibility.

•Inexperience in managing a small business: To run a small business successfully it is necessary to be familiar with several aspects of the industry, its trends and possess the skills necessary to market one’s products and services. Inexperience in these aspects can result in failure of the business.

• Poor record keeping and financial controls: Not maintaining good accounts of profits and expenses, taxes etc is also a cause for small business failing.

• Entrepreneurial enthusiasm: Entrepreneurs must learn to differentiate between "true opportunities" and just new ideas that are not practical. It is necessary to compare the idea with the business plan objective and see if it the skill and time is really available to put the idea into practice.

• Inefficient money management: It takes about a year or two for small businesses to make profits, so not having proper resources can hamper the growth of the business. Also,personal use of business funds must be prevented.

• Dependence too much on a single element: Small business owners must be careful against offering just a single major product service or having just one big client. Though this might be the major source of profits they must think of what might happen when they no longer have the source and try to broaden their horizons.

• Competition: Competition is a major factor influencing the success or failure of small businesses. Therefore it is necessary to identify the exact nature of competition, their services and how our products/services are superior.

• Poor marketing: The success or failure of a product can depend on good marketing.Therefore it is important to research every marketing method used and stick to those that are yielding results.

• Entrepreneurial exhaustion: Having a small business requires patience, capital, time and energy. Not every individual is cut out for it. Long work hours can cause exhaustion and lead to a lack of interest in the business which can stunt its growth.

• Faulty location: Visibility is very important for the small business. If the store is not easily found by clients and suppliers, profits could suffer.

• Poor selling techniques: Business fail if owners are not able to get potential customers to buy their products.

• Postponing tasks and improper time management: Deferring important tasks can be lethal to a business. Staff can be hired if necessary for doing tasks that a business owner doesn’t like to do.

• Inferior quality customer service: A bad quality customer service such as not replying quickly to emails, phone calls etc can lead to customer dissatisfaction. Also, not giving the customer what he wants may weaken the bond with the small business owner.

Sam Walton's 10 Rules for Success in any business:

Rule #1 :
Commit to your business. Believe in it more than anything else. If you love your work, you’ll be out there every day trying to do the best youcan, and pretty soon everybody around will catch the passion from you - like a fever.


Rule #2:
Share your profits with all your associates, and treat them aspartners. In turn, they will treat you as a partner, and together you will all perform beyond your wildest expectations.


Rule #3:
Motivate your partners. Money and ownership aren’t enough. Set highgoals, encourage competition and then keep score. Make bets withoutrageous payoffs.


Rule #4:
Communicate everything you possibly can to your partners. The more they know, the more they’ll understand. The more they understand, the more they’ll care. Once they care, there’s no stopping them. Information is power, and the gain you get from empowering your associates more than offsets the risk of informing your competitors.


Rule #5:
Appreciate everything your associates do for the business. Nothing else can quite substitute for a few well-chosen, well-timed, sincere words of praise. They’re absolutely free and worth a fortune.


Rule #6:
Celebrate your success and find humour in your failures. Don’t takeyourself so seriously. Loosen up and everyone around you will loosen up. Have fun and always show enthusiasm. When all else fails put on a costume and sing a silly song.


Rule #7:
Listen to everyone in your company, and figure out ways to get themtalking. The folks on the front line - the ones who actually talk tocustomers - are the only ones who really know what’s going on out there. You’d better find out what they know.


Rule #8:
Exceed your customer’s expectations. If you do they’ll come back over and over. Give them what they want - and a little more. Let them know you appreciate them. Make good on all your mistakes, and don't make excuses - apologize. Stand behind everything you do. ‘Satisfaction guaranteed’ will make all the difference.


Rule #9:
Control your expenses better than your competition. This is where you can always find the competitive advantage. You can make a lot ofmistakes and still recover if you run an efficient operation. Or you can be brilliant and still go out of business if you’re too inefficient.


Rule #10: Swim upstream. Go the other way. Ignore the conventional wisdom. Ifeverybody is doing it one way, there’s a good chance you can find your niche by going exactly in the opposite direction.
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I came across this on another forum and decided to share here with the EDC community. I hope you enjoyed it!http://en.wikipedia.org/wiki/Sam_Walton

How to succeed in B2B trade: A checklist

1. Collect corner samples,sample books and price info with pictures from old factories, since you've been worked with those suppliers for so long when you worked as an employee. You may also develop some new factories as they may have lower price but the same quality.


2. Make advertisement on B2B like alibaba or popular searching engine like google,kilim search, ect. Recommend yourself on the net is relatively economic to lower cost when your company's not so big at the beginning. To ensure your products info in the advertisement are correct,detailed,attractive. Buyers will come to you by these advertisement. You could also look for buyers on the net actively. It'll be best if your previous clients wanna do business with you even though you've left the previous companies. Yet, I don't suggest that because it's not good if your previous company treats you well. More important, you must be clear if your clients had good relationships with you in previous work, mostly because they trust your company and the products which you may not be strong enough to compare with now when you're boss yourself. Find the proper buyers! Big buyer maynot be the most propriate one for you!


3. Fix your aim buying groups and markets and recommend different quality and price accordingly. Please be sure to make prompt and responsible reply to every clients. Making records of all the inquiries and analyse who and where your products attract more. Adjusting your aim market and buyers according to your experience and new discoveries through the inquiry records.


4. Keep creating new designs, new quality, and new process. For textile industry, I believe excellent designing staff help a lot for your company development. Good sales are also very very important.


5. Keeping eyes on your local market to see where you are among competitors. Try to ensure yourself own at least 2-3 advantages all the time. Maybe your advantage's in the price, maybe in the quality, maybe in designs, maybe in service. Anyway, the more advantages you have, the more competitive you are.


6. Be cautious when quoting price and fixing payment terms.


7. Last but not the least, keep promise to both customers and suppliers. Good credit helps you to get more good clients and suppliers.

Entrepreneurship ideas: A beginning for beginners

Hello everyone,

This is my first time on any blog. I want to start a discussion thread on the Entrepreneurship ideas especially thru the online medium & in India scenario. I welcome all ideas which can include collaborative partnerships to help each other in various aspects of a startup.


I am looking forward for an overwhelming response.