How to start a business in India: A simple guide

Dreaming of starting your own business in India? It can be really exciting, but there’s a fair bit to think about before getting started. Don’t fret! We are here to help you through the basics.

Start with a business idea

First things first, you need a gem of a business idea. This isn’t just any old thought that pops into your head; it should be a plan that lights a fire in your belly, something you can natter on about for hours because you love it that much. And it’s even better if you’ve got a proper handle on the subject. If you know your stuff, you’ll likely find it easier to make your business a success.

Now, loving your idea is one thing, but you need to be sure others will dig it too. This is where you roll up your sleeves and dive into market research. You’ll want to have a butchers at what’s already out there, who your competition is, and the folks who are likely to part with their dosh for what you’re selling.

When looking into whether there’s a market for your business idea, think about these questions:

• Who are your potential customers? Get as specific as possible. Are they busy mums, teens into tech, or businesses needing security solutions?
• What problem does your product or service solve for them? Maybe it saves time, makes life easier, or just brings a smile to their faces.
• How eager are people for your offering? You might have the world’s finest tea cosy design, but if nobody’s using teapots, you’ll be in a pickle. 
• And importantly, how much would folk be willing to pay? It’s no good if they like the idea but think it’s too costly.

To answer these questions, you could carry out surveys, hold focus groups, or have a chinwag with people who might buy what you’re flogging. Pay attention to social media chatter and online forums, too – they’re gold mines for knowing what people fancy.

Read also: A step-by-step guide to crafting business proposals in 2024

This research can take a bit of time, but it will be worth it. It’s all too easy to think you’ve got a winner on your hands, only to find out later that nobody is keen on parting with their cash for it. You don’t want to jump too fast and end up disappointed.

Remember, this stage is all about making sure you’ve got a solid foundation for your business. With a belter of an idea that you’re excited about and some proper research that shows there’s a bunch of people who want what you’ve got, you’ll be on a good footing to move ahead with your Aussie business dream.

Make a clear business plan

When you’re sure about your idea, the next step is to write a business plan. This doesn’t have to be super detailed to start with, but it should cover what your business will do, who your customers will be, how you plan to make money, and any potential costs. It’s like a road map for your business and will come in handy when you need to talk to banks or investors.

Once you’ve got a corker of an idea, penning a business plan is your next move. Begin with a rough sketch that outlines the nuts and bolts of your venture:

• Lay out what your business aims to do – think about the products you’ll flog or the services you’ll offer.
• Identify who will fork out for your offerings. Sketch a picture of your ideal customer and why they’d choose you.
• Get to grips with your income stream. How will the cash roll in? Will you sell directly to customers, or maybe you’re looking wholesale?
• Don’t forget to account for expenses. From the cost of creating a product to the bills you’ll pay to keep the lights on, it all adds up.
• Finally, think how you’ll spread the word. Your marketing game plan is key to drawing folks in.

This plan shouldn’t just live in your noggin – scribble it down! It’s a doddle for you to change as your business grows and it’s a must-have for chats with the money-lenders and backers. Your business plan is the blindingly brilliant blueprint that’ll help turn your dream into a sturdy enterprise.

Read also: A step-by-step guide to creating a business model

Getting started: Legal requirements

Diving into the legal stuff might not be as exciting as dreaming up your business idea, but it’s crucial to get it right to avoid a spot of bother later on. Understanding the legal ins and outs sets the stage for a solid business in India.

Choose a business structure

The sort of structure you go for will shape everything from your tax duties to how much legal and financial responsibility you’ve got. The main options are:

• Sole Proprietorship: This business structure allows an individual to have full control and authority over their enterprise, making it perfect for small-scale business enthusiasts with minimal investment needs. The sole owner enjoys the profits but is also solely responsible for any financial losses incurred by the business.
• Partnership Entity: A partnership entity is formed through the collaboration of two or more individuals who decide to run a business together. Profits and losses are shared among the partners as per the agreed terms.
• One Person Company (OPC): Introduced in 2013, an OPC offers a unique opportunity for a solo entrepreneur to function within the corporate structure while maintaining complete control over the business.
• Limited Liability Partnership (LLP): An LLP, recognized as a distinct legal entity, limits the financial liability of its partners to their individual investments. It is suitable for partners seeking minimized liabilities without sacrificing business collaboration benefits.
• Private Limited Company (PLC): A PLC is considered an independent legal entity separate from its creators, where management is conducted by appointed directors, and ownership is represented by shareholders.
• Public Limited Company: Established by at least seven members under the Companies Act of 2013, a Public Limited Company stands as a separate legal identity, safeguarding its members’ liability to their share investment. This format is ideal for larger enterprises seeking ample capital investment from the public market.

Register your business

Step 1: Getting Your Digital Signature Certificate (DSC)

First off, because the entire company registration process is done online, you will need digital signatures to fill out and submit forms on the MCA (Ministry of Corporate Affairs) website. A DSC is a must-have for anyone who’s looking to become a director or a subscriber to the company’s Memorandum of Association (MoA) or Articles of Association (AoA). You can get a DSC from agencies approved by the government, and there’s a list of these agencies online.

Step 2: Getting Your Director Identification Number (DIN)

Everyone who wants to be a director in a company needs a Director Identification Number (DIN). When you’re registering your company, you’ll need to include the DINs for all planned directors, along with their names and proof of address.

Step 3: Registering on the MCA Portal

Next, to officially register your company, someone from your team will need to fill out and submit the SPICe+ form on the MCA website. To do this, a director will need to sign up on the MCA portal. After signing up, you can log in whenever to file forms or check public documents.

Step 4: Receiving Your Certificate of Incorporation

After you submit the application and all necessary documents, the Registrar of Companies will check everything. If it all looks good, they will issue your company’s Certificate of Incorporation.

This certificate comes with your company’s PAN and TAN numbers from the Income Tax Department. You’ll also get an email with the Certificate of Incorporation, including your PAN and TAN.

And there you have it, the straightforward process for registering a company covered in four main steps.

Get your finances sorted out

Getting your finances sorted is crucial when starting a business. It’s not just about keeping your cash in check; it’s about setting a foundation for growth and ensuring you can handle the money side of things when it gets busy.

Read also: How to create a budget

Start with a free invoice software

Now, while you can track your income and expenses with nifty accounting software, let’s talk about sorting invoices without parting with a penny. We’re offering a [ompletely free software for invoices, tailored to Aussie businesses. This gem means you can create professional-looking invoices, whip them off to customers, and keep tabs on who’s paid and who hasn’t without spending any of your hard-earned cash.

Send invoices for free

Business bank account

First up, you’ll want to set up a separate business bank account. This helps you keep your personal and business finances distinct, which is a must for clear records and a lot less muddle come tax time. By using a dedicated account for all business transactions, you’ll know exactly what’s coming in and what’s going out. Plus, it looks more professional when customers make payments to a business account rather than your personal one.

When you choose a bank, compare their fees, services, and any perks designed for small businesses. Some banks offer accounts with no monthly fees or they might throw in a deal on transaction fees, which could save you a bit of dosh.

Bookkeeping and accounting software

Keeping track of your finances is much easier with accounting software. Modern software can simplify invoicing, track expenses, monitor your cash flow, and even prepare financial reports.

Make sure the software you pick can handle GST if you’re registered for it, and check that it can link up with your bank account for automatic transaction updates. Regularly reconciling your accounts is much smoother this way, reducing the chances of errors.

Understand your costs

Knowing all your costs – both direct costs like materials and indirect costs like electricity – is crucial when pricing your products or services. Don’t just think about what it costs to produce what you’re selling; also consider overheads like rent, marketing, insurance, and any staff wages.

It’s tempting to set a low price to attract lots of customers, but if it doesn’t cover your costs and leave you with a profit, you’ll struggle to keep the business afloat. So, do your sums and make sure you price for success, taking into account what the market will bear and what customers are willing to pay.

Cash flow management

Good cash flow management is the lifeblood of your business. This means staying ahead of when money will be coming in and going out. It’s about planning for expenses so you’re not caught short when big bills turn up, and it’s about chasing up invoices to keep the cash coming in.

Read also: The ultimate guide to liquidity and cash flow

Financial planning and review

Set aside regular time to review your financial position. This isn’t just a case of checking you’re not spending more than you’re earning. It’s about reviewing financial reports, checking the efficiency of your operations, and ensuring your pricing still reflects cost changes.

Financial planning is all about looking ahead, too. This might include budgeting for future investments, like new equipment or marketing campaigns, and saving for a rainy day because, let’s be honest, every business has them now and again.

Remember, don’t be shy about getting professional advice. An accountant can help you set things up correctly, suggest the best accounting software for your needs, and help with complex financial planning. Getting your finances sorted from the start pays off, literally, in the smooth running of your business and less headache for you down the line.

Starting a business can seem like a huge challenge, but it doesn’t have to be overwhelming. By breaking it down into manageable steps, and making sure you’ve got the important stuff like your business structure, registrations, and insurance figured out, you’ll be well on your way to becoming your own boss in India. Good luck!