BusinessWorks Inc.- A dotcom in making

If you enter the mind of a Venture Capitalist, you may find amongst other things, a formula that gives him an estimate about when he can realize some profits from a startup. It is called Payback Period . It tells you, how long will it take to recover your investments and be profitable. The formula to calculate Payback Period is simple enough. All you do is divide Investment by Annual Cash flow to get Payback Period. So suppose if Investment cost is $1,000,000 and Annual Cash Flow expected is $125,000, then Payback Period is 8 years. However in real world, you can never expect to have a constant Annual Cash Flow every year. So, expected return for each year is added until total cost of Investment is arrived. Year Return Cummulative Project Cost 1 $125,000 $125,000 2 $175,000 $300,000 3 $225,000 $525,000 4 $250,000 $775,000 5 $250,000 $1,025,000 In the table above, Investment cost will be recovered just shy of Five years. So when a Venture Capitalist has three competing projects...

We all know, task of a Venture Capitalist is not an easy one. It is not an easy job to calculate the risk in investing in a start-up, but they have to start somewhere. Net Present Value is one such method that is used to analyze the profitability of an investment. The Net Present Value method (NPV) of evaluating a major investment allows you to consider the time value of money. Essentially, it helps you find the present value in "today's dollars" of the future net cash flow of a project. Then, you can compare that amount with the amount of money needed to implement the project. If the NPV is greater than the cost, the project will be profitable for you (assuming, of course, that your estimated cash flow is reasonably close to reality). If you have more than one project on the table, you can compute the NPV of both, and choose the one with the greatest difference between NPV and cost. Let us take an example here: Project Initial Cost Year 1 Year 2 Year 3 Year 4 Year 5 Yea...

We have learnt a lot about "What and How" to pitch to Venture Capitalists, but have you ever wondered what is going on in Venture Capitalist's brain? What is the math and science behind VC's investment decisions? Would it not be great to understand the basis of VC's decisions? So I decided to go behind the scenes and get those formulae and present them here and try to explain them in layman terms. Please remember there are other criteria used by investors, my purpose here is to help entrepreneurs tailor their projections in such a way that it increases the probability of their success. Here are some of the popular methodologies: * Net Present Value (NPV) - Capital budgeting where the present value of cash inflows is subtracted by the present value of cash outflows * Payback Period - Initial Outlay Recovery Period * Internal Rate of Return (IRR) - the return that a company would earn if they expanded or invested in themselves, rather than investing that money ab...

This is actually a review of a book that I came across other day. It is a very relevant book for entrepreneurs as well as anyone else who is trying to fight a battle against debt or simply trying to get best value for their dollar. Book is divided in two parts, one is Money Mastery Principles and other is Tax Strategies. I will review this book from entrepreneur's point of view. If you read the titles of ten chapters, complete Part One can be summarized as "Money is emotional, track it, control it! There is no such thing as savings, To power down your debt, you got to know the rules of the game as the rules are always changing, So always look at the big picture, organize the wealth, understand taxation and put your money in motion". As reasonable human beings, we know money is important and it should be spent with care, but we being emotional, spend money emotionally. Men spend on Gadgets and cars and women spend on clothes. This book teaches commonsense principles abo...

I have gathered few resources for my personal use, but would love to share with my readers. I hope this will help busy entrepreneurs as I think time spent on research is time well spent. My first resource is EBSCO Information Services . This website catalogues business journals, magazines and trade journals. Many local and regional business publications are included. There are quite a few full text articles to read. Subscription is required. Other resource is ABI / INFORM . This site has a database covering business, management, economics and a wide range of related fields. It provides abstracts of material from 1971 onwards and full text (various formats) from 1987. Subscription is required. Lexis Nexis Academic is another excellent resource which has full text information of newspapers, news magazines, trade and industry publications. Subscription is required. For a reason, I have not included any free resources. For serious research, one must go to a reliable source.

Starting your own business and becoming an entrepreneur is no easy task. As I said in my previous posts, a would-be entrepreneur need to evaluate himself/herself before actually starting the business. Here is a handy list of questions to ask and answer convincingly and in great detail. 1. What is the product or service? 2. Can I describe the product in three to four sentences? 3. What is the target market for the product or service? 4. Is this product or service practical? feasible? 5. Is there a demand for the product after discounting for existing suppliers? 6. What is the price I can get for the product? 7. What are the qualities that will give me an advantage over other businesses? 8. Where will the business be located? 9. What is the advantage in locating the business in a particular location? Availability of raw material? close to target market? 10. Do I need to consider any zoning or fire regulations or restrictions before opening the business? 11. Is any permit or license neede...

A dollar saved is a dollar earned. An entrepreneur has to be spendthrift where possible. I am always on lookout for low-cost or almost free, time saving, efficiency improving tools. Today I came across Skype , which is one such tool. Skype has been around for quite sometime. I know, I am late to the game but I discovered today, how indispensable Skype is for an entrepreneur. For those of you, who are like me, late to catch on to the Skype wave, this is a tool to make free calls over the internet to anyone else who also has Skype and believe me there are lot of people around the world who do have Skype. I tried out Skype half way accross the world and voice quality was amazingly crystal clear like a conventional phone. This services is free. There are other value-added ancillary services by Skype which are of great value to an entrepreneur. First one is SkypeOut which you can use to call any ordinary phone from Skype. Then there is SkypeIn , which is a real phone number your business...

BusinessWorks is a would-be entrepreneur's blog. Today I would like to share with my readers other great blogs which are on FORBES-Best of Web list under Small Business Blog Category . These blogs have contributed towards business in general, marketing and entrepreneurship with their excellent posts and informational material. I am honored to find my blog in the elite company of these blogs. Visit them and find out for yourself: Duct Tape Marketing by John Jantsch (rated Forbes Favorite) All Business Blog Center Church of the Customer by Ben Mcconnel and Jackie Huba Fresh Inc. by Inc.com Small Business Trends by Anita Campbell Entrepreneurial Mind by Jeff Cornwall Small Business Brief by Linda Riley Thank-you Forbes!

My last post must have left you thinking, whether you are made for business and entrepreneurship? Today's post will make sure if you are ready for the most exciting, sometimes hardest, time of your life. So let us begin that journey towards that realization. Gaining Real World Knowledge There is a modern saying by yours truly, if you want to be in the business of RFID, you have to work in the field of RFID and gain some valuable experience or going by an older saying, you must learn to walk before you run. On serious note, if you already have the expertise in the area of technology on which your business will be based on, gain some sales and marketing experience. This experience will help you gain valuable insight to develop products with marketability value. Finding Seed Capital If there is a need for $1 million for your business, your options are to approach venture capitalist, maybe an angel investor or to the bank. Irrespective of which path you choose to raise capital, each ...

In my past posts, I have stated, Phase I grants can range from $70,000 to $100,000. If you think this amount is enough to get started and and sustain your business for a period of six months (time provided by federal agencies for completion of Phase I), then you have severely underestimated your budget. What I am getting at is, once you sit down to write a financial plan, you will realize Phase I Amount won't even last you for three months. When I sat down to write a proposal for a RFID based project, I was shocked to see calculated capital requirements. Please read my post about Cost of business and subsequent post about Capital and Expense Projection , there is a minimum outlay of $2 million! There is a big gap to be filled and the question is, how do you bridge this gap? Let us go back to basics of business to find the answer. Basic Business Requirements You must have : - a feasible and marketable idea, product or service. - knowledge (or some one knowledgeable) of the produc...

My 15 minutes of fame! BusinessWorks is featured on Forbes.com, Best of Web under the Small Business Blogs category. Read the complete review here . Lea Goldman of Forbes has pointed out a couple of things, that I definitely need to work on. First is " big gaps between posts ". I am guilty as charged. I agree, I was busy developing my other weblog about Business Blog Process Outsourcing . Lea also says " while Keshwani is exceedingly detailed about the nuances of starting a business, where's the heart? You don't get a sense of the blood, sweat and tears involved in the start-up process. ". While it is true online, real life is different. Nothing is achieved without blood, sweat and tears.

Your proposal is the first and one of the most important step towards SBIR/STTR Funding. So it better be effective. Today I will write about components of a SBIR/STTR funding proposal. 1. Title - This is self-explanatory, but extremely important. 1.1 Project Summary - Write one page of summary to provide overview of your idea and the project. 1.2 Project Description 1.2.1 Identification and Importance of the Innovation - Identify and explain the significance of your innovation and how it improves existing environment or the current process. No more than 1.5 pages. 1.2.2 Background and Technical Objectives - Describe the background and define technical objectives of your innovation. Upto 3 pages 1.2.3 Research Plan - Details of hardware/software you plan to use for the research. Can be upto 2-3 pages. 1.2.4 Company Information - Describe in a page about your company, its past achievements etc. 1.2.5 Commercial Potential and Feasibility - Provide commercial potential and most imp...

A proposal is a response to SBIR/STTR grant or solicitation, which may either result in funding of your project or a rejection. This underscores the importance of the proposal for an enterprenuer. In a way, a proposal is no different from creating a Business Plan , except that it is more focussed on the solicitation. Here are few tips in creating a winner proposal (These tips apply to all three phases) 1. Search for the solicitation that best suits your skills on SBIRWorld . Download the solicitation from the Agency's website. Thoroughly read the solicitation. If you do not meet the requirements, do not submit the proposal until you fully meet the requirements of the solicitation. You may lose out on one solicitation, but there are many more opportunities from various agencies with many of them releasing solicitations every three months. 2. Never go for creating a proposal alone. There are financial and technical components involved. Involve your qualified personnel to help you cr...

My last post, was about SBIR funding. Today, I will write about funding opportunities available in the area of RFID and Wireless Sensor Networks (WSN), but first let me mention few resources available for SBIR. One of the most comprehensive resource is SBIRWorld . It is a warehouse of SBIR/STTR related conferences, open and past solicitations and federal agencies. Search feature helps in searching open and past solicitations for projects of special interests. For example, I searched for "RFID" and found 14 past solicitations in near past. Second resource is a regular E-mail alert received roughly every three weeks with open solicitations and due dates for the solicitations. Send an email to lyris-at-lyris-dot-pnl-dot-gov (replace -at- with @ and -dot- with .) with words "Subscribe sbir-alert" in Subject of E-mail. Federal agencies like National Science Foundation , Department of Defence - Army and Department of Defence - Navy are major funding agencies for RFID ...

I am back from SBIR conference, held in Omaha. There is lot to share for days to come. SBIR Conference was a great networking event apart from being a excellent learning experience. In coming days, I will be sharing my knowledge that I gained in these 3 days. What is SBIR funding? SBIR stands for Small Business Innovation Research. US Federal government has set aside 2.5% of it's research budget for small businesses. Small businesses are defined as follows: * less than 500 employees * 51% owned by American citizen or Permanent Resident Alien * It is a for profit business * business must be in United States * Principal Investigator for research must be an employee of the business during project. Why use SBIR funding? Venture capital financing is hard, if not impossible, to get at initial stage. SBIR funding, gives businesses access to funding at the stage of feasibility study. Who provides SBIR funding? SBIR funding is provided by various federal agencies like Department of Defen...

I had not posted for nearly a month now, but I wanted everyone to know, I had taken a short break to focus on "real" business. Currently I am attending Small Business Innovation Research (SBIR) conference happening right now at Qwest Center , Omaha. I am planning to write series of blog posts about SBIR / STTR financing, once the the conference is over.

Tracking of students? http://www.msnbc.msn.com/id/6942751/ National ID Cards on the way? http://news.com.com/From+high-tech+drivers+licenses+to+national+ID+cards/2100-1028_3-5573414.html?tag=nefd.lede No way you say? The question, 'why not?' would probably result in a scoff from most people. I don't want to be tracked, the government can't force me to carry a national ID card, and I do not want big brother in my life are just a few answers one could expect. How many state and federal government enforced identification systems were first 'controversial' and now just another fact of life? 'There is a way to make kids safer without making them feel like a piece of inventory.' - Michael Cantrall parent of two students in the California Program. Would you accept a number that is assigned to you from cradle until grave and mandated by law at birth? If you are an American, I am betting you have a social security number that is exactly that. Would you ca...

There was a huge uproar over a California school's RFID Student Tracking. It makes me think, are we ready for RFID in our day-to-day life? Could RFID monitoring had prevented or limited Columbine High School tragedy? Can RFID monitoring make our schools gun-free and drug-free? I don't know the answer, but these questions generate some interesting possibilities. After I posted my request for submitting pilot test projects, on various RFID forums, I received a request for testing from a school technologies developer who is planning to implement RFID technology in schools. This developer is outside US and has an ambitious plan to track thousands of students and teachers. Similar efforts are in progress in Indian sub-continent. Are these people not concerned about privacy or the benefits of using RFID far outweigh privacy issues?

This week's Carnival of the Capitalists is hosted at Weekend Pundit . It has the best round-up of business posts in the blogosphere for the week ending February 13th, 2005. Outstanding job is done in categorizing posts, which makes it easy to follow posts related to investments, economics, marketing, business education, social security (yes..it has become so hot that it is categorized), technology and taxes. Also, do not miss the editor's picks.

RFID must be the pinnacle to all technologies. With Wal*Mart, Target, and the Department of Defense all agreeing on implementation for various application, it must be the next big thing. Let's take a step back from all the hype and understand what is really going on here. Before any technology may truly proliferate, standards must be set and agreed upon, deployed, and enforced. The Department of Motor Vehicles enforces and controls government mandated standards for identifying vehicles and matching them with the identity of their owners. The internationally accepted standard of TCP/IP allows millions of nodes to be identified and networked. EPC Global is creating standards, among them is the task of identity related standardization of individual RFID tags and readers. A six-character license plate without the database with correlating VIN numbers, expiration stickers, associated taxes, and local law enforcement system is merely a scrap of metal. A networked powerful workstation wi...