'Entrepreneurship Series' by Prof Ashok Jhunjhunwala (IIT-Madras, India)

Profit & Loss and Balance Sheet While cash-flow management is a priority for startups and mature companies, an important question one needs to ask is how much money a company will generate from each unit of product or service that it sells (or plans to sell) .  A good understanding of this will help the entrepreneur arrive at the number of products / service offerings to be sold, for the company to break-even and become profitable.   We will start this blog by understanding  Product / Service Margin . This will play an important role when we take up  Profit and Loss (P&L) computation later. Though a startup may have some distance to go before actually selling products/services, these estimates should be computed even during the product development stage.  Let us term this  Product margin estimation .  When the product/service is being sold, this straightaway gets plugged into the P&L. The margins multiplied by the number...

The most important Mantra for a Startup Many entrepreneurs  in India come from a technical background, but lack experience in managing an organisation, specially its cash-flow.  Normally enthralled with their exciting ' ideas ',  e ntrepreneurs are certain that these will make their company great. They believe that their ideas are so strong that investors will always put in money as and when required. They often do not appreciate the value of money or the risk investors taken by the investors. Many founders do not know how to make the best use of the invested funds and feel no obligation in managing the invested money well. Often, they have a negative view that the investors are only interested in returns and their marvellous idea is worth the investment. Founders seldom work to maximise the probability for investors to get a decent return in the long run. Moreover, they rarely know how to manage cash-in-hand and maintain a cash-flow, so that the compan...