One of the economics concept in the book was thought provoking. The definition of economics given by most of the economists as the “study of societies allocation and distribution of scarce resources”; scarce resource can be money, food, equipments, land, fresh water, oil or anything. But Is that definition true?

According to Paul Zane Pilzer economics is not at all the study of scarce resource instead it is the study of “abundant resource”. Because there are no resources to be scarce, the resources we called today are inventions of human mind. Through out history, if any resource run out human being will define new resource. For instance, 5000 years ago sea oil was something that polluted the water but today it is considered as a great resource. Oil became resources only when human learned how to refine oil and use oil to drive machines so as the land. Land was originally a place to kill animals and go on. Another example is whale oil, in 1850 we harvested lot of whale oil and finally it ended up everyone predicted it as the end of the economy because we don’t have oil to make things. Finally in 1859, we drilled first oil well so we defined new resource then. Considering the same example, oil is now running out so human being are moving into more efficient nuclear system, solar systems, electrical systems etc. So before any resource run out human being will define new resources.

So there are no resources to be run out because they all are fictional inventions of human mind before anything got run out we apply our mind and invent new resources.

The supply of the resource that you have deal with any moment or time is defined by the technology with which you use it. When ever you want to find how much resource is available what you will do is count it, but it is fundamentally wrong. In 1973 average mileage of the car 9 miles a gallon but within 10 years we retool our engineering and made car more efficient to 22 miles a gallon which is still continuing using various electronics systems. So we doubled our resources more  than our supply.

In early days wealth were equivalent to your physical resource available, whether you as an individual or a country.

But today Wealth can be calculated as = P (physical resource) times T (Technology), so the technology with which you use that matters. In the past technology changes happens very slowly, but today it happens every seconds so you have to retool yourself to become competent. Let us consider with a classical example, In 1980, Russia was the country one of the wealthiest nation in terms of land and fresh water. Meanwhile, Japan was the country which has less fresh water and land but today Japan is third largest economy. What they did was they increased and developed new technologies.

Do you still think Economics is the study of scarce resources allocation and distribution? We are living in an economy where we have unlimited opportunities and resources. So all of us have opportunities out there retool yourself to find the best opportunity for you and become a millionaire.

1) How to do Scenario Planning?

2) How to improve cash flow in your organisation?

3) Total Quality Management (TQM)

4) Marketing Healthcare services

5) Multi-criteria decision analysis (MCDA)

6) The Power of an MBA

7) ROI calculator for SEO consultants.

But when you start your venture make sure that you are going in the right direction. I agree the fact that every entrepreneurs makes mistakes but the adage “prevention is better that cure” is applicable here to avoid time and money loss. Having said that, when you start new venture, most of them makes mistakes, it is very good because each mistakes is an learning opportunity.

1) Unclear Goals, Mission & Focus

This is one of the common mistake made by new entrepreneurs, though most of the entrepreneurs come with an innovative idea and business model during its execution they fails to focus. There are several different reason for this. During the execution, entrepreneurs often fail to manage the cash flows, sales etc. This will bring them to focus more on the survival strategies rather than their main business strategy.

Most of the entrepreneurs fails to answer the questions like What is your Goal? What is your mission? What are your success criteria’s? These questions are very crucial for all entrepreneurs. If you are not able to answer those question you may end up with a tragic entrepreneurship story. So whenever you start a new venture sit down and write the answers to the question in a paper and read it often; I swear it really work.

2) Identifying Wrong Primary Customers

It is very important to identify the primary customers for all business ventures. Lot of new entrepreneurs identify wrong primary customers and they usually tend to identify broad customers are primary customers.

Let me consider an example; If someone ask who is the primary customers for McDonald, lots of people misunderstood it as customers who are intend to buy foods from them. But in naturality, their primary customers are customers who would like to franchise McDonald shop.

When you identify the right customers, your business strategy become entirely different. So identifying right primary customers is very important.

3) Early search of venture capital fund

Entrepreneurs usually start with search of venture capitalist or private equity firms or angels before starting the venture. By doing this, the chance for getting a investment become very less and might be end up giving huge equity to the investors. Investors often look at companies who proved the business models, they want to know how much sales have you done? What is the value proposition you are making?

4) Hiring people they like

When building up a team, entrepreneurs tend to hire people they like rather than they need. The team is very crucial for start ups. Each and every penny you invest in start up matters, so hire people who are crucial to business.

I have seen the tendency in universities and schools where friends join together to form company so that they can work together. So hire the right people not for keeping your friendship.

5) Becoming greedy

Having said about point 3, lot of entrepreneurs are not interested in giving out major pie to the investors. Always think about how much value that investment create to your business. If the value creation with an investment is more compared to holding majority of equity in hand then go for things that create value.

6) Thinking about selling the company before starting up

I know most of the investors ask about exit strategy. Everyone come up with exit strategy as selling the company to someone. So you have to think what can make you to reach the height of selling so that you will have the authority when you sell.

7) Not doing realistic self assessment

Some people are good at starting up but they might not be the right person to scale up and they are not ready to give up the power and role as being a CEO. I really admire Bill Gates for this, he is a great strategist who knows when to step down and step up himself.

Right self assessment is necessary for all entrepreneurs and identify your right skills.

Finally and most importantly, if you’re considering seed fund from relatives make sure that you are not messing up your relationships. Try to get money from relatives who are ready to give up that money if something happens for your business. All I want to say is that relationships are very important for human beings than any other business so keep your relatives away unless they are ready to throw away the money they invested so that they won’t be affected by your failure.

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This is a post series for anyone who want to investigate about their valuation. I am aiming to provide an excel file template at the end of the post series to calculate the valuation of start-up companies.

Estimation of start-up companies requires lot of skills such as due diligence skills, understanding of market, understanding of the competitors, etc. There are mainly three different approach to estimate value of the company.

1) Cost Approach (or Asset Approach): This uses the valuation information to restate the asset at fair market value. This approach is based on mere substitution of fair values of the assets and find the total value of the company; however, for start-up companies this approach is not widely used as the start-up expect a growth which is exponential after some years.

2) Income Approach: This approach is based on the cash flow projection of the company. This method is widely used by most of the companies and private equity investors.

3) Market Approach: This method compares the business with publicly traded companies and estimate the valuation. However, in most cases market approach is a reality check for valuation estimated through income approach.

Yesterday, I attended a session about protecting your idea in the pre-patent phase. Thanks to Alan who taught us an unconventional way without investing any enough money to protect the idea which was really helpful. Though it was not foolproof idea, but it was an idea that can worth try.

Finally, I found some interesting thing yesterday, the majority of participants were females. It was really interesting and surprising for me that more females are taking their career path as entrepreneurship.

Look at this picture they are trying to make the cash flow positive but you can see that the obligation of previous month is still there then how can they make cash flow positive?

1) Negotiate with your supplier for delayed payment. For instance piggyback your this month payment to next month ending so that you can get time to collect money from your customer.

2) Cut unnecessary operational cost. Don’t purchase any items which are not critical for the business. For example your company need transportation it is not a good idea to buy vehicle, instead hire it. Once you hire a vehicle you don’t need to worry about its maintenance, tax insurance etc.

3) Be selective about customers. Try to get customers with good credit history. You can buy those reports from credit agencies where in you will get the full details of payments, credit ratings etc. You can also select customers without good credit history by availing a deposit for using the service.

4) Accurately raise the invoices. Poor administration and handling of invoices delays payment.

5) Re-arrange customer payment cycle. This is very effective if you are doing some service business with a monthly payment. A simple example is if you can re-arrange the cycle and raise the invoice by 20th of every month with a due date on next month beginning collection can be very effective because most of the customers will get salaries at the end of the month so can pay money easily.

6) Offer early settlement discounts. Offer discounts for early settlements, but the downside is it will affect the profitability. Remember one penny today is not one penny tomorrow it is much more depends upon the interest rate. In this case we have to take net present value of the payment into consideration.

7) Compel customer to avail direct debit by offering some difference in transaction charges.

8 ) Diversify your customer base. It is not good to have a 2 or 3 service contract to run a business. Payment delay in any client will affect your cash flow there might be chance for the business to meet financial obligation.

9) Payment reminders, this is very effective sending reminders to the customer compels for payment.

10) Use a third party to collect your debts, make sure that the agency is reputable and recommended by people.

11) Consolidate your loans, if your business have multiple loans consolidate the loan with a single bank and negotiate the interest rates.

Remind Cash is the life blood  of business, so if you are not able to manage cash inflows and outflows don’t do business.

Where  – there are quite a few criteria  which sprout up when you consider these choices. There are established educational  Institutes providing High Quality MBA’s and  there are  a few colleges which would not necessarily come  into your mind unless  you have done thorough research but which match if not exceed the Quality of these established players.
When making  a  choice of an MBA its its very important to look within and try to find out the reasons for doing an MBA and  then letting this reason be the  guiding factor for you.  Here are some o the reasons that I have come across

1) For better  job prospects : this  is a questionable driving force for joining an MBA  , its always better  to have a  more  well thought approach to an MBA  . An MBA is an investment in yourself and if chosen well any MBA would add  this value to you .  But if this is your prime reason for joining an MBA you need to reconsider to make a better choice of school.

2) Have a Business Idea need tools to  make it into a reality  – Well if you are the creative sorts and have business ideas , no matter how far-fetched they seem it would be   a good Idea to join an MBA  programme which has specialization in Entrepreneurship.  There  are many schools who offer this .  Do remember  that sometimes this process can be disillusional and can bring you to  more concrete reality. So an idea might be rejected but from the MBA you would learn to build more  grounded business plans and to be a better critique of the business plan.

3) Haven’t got a clue but am sure an MBA will help  - Its a better idea to choose schools which offer a more holistic  approach to the MBA , an MBA  can be used as a navigational tool , to chart out a career path for yourself as you move ahead in the MBA.  Here its more about a trial an error methods and I would advise aspirants driven  by this motivation to focus on the MBA  experience and make a choice within the programme.

3) Well I think I have tried my hand in strategy and  I want to learn more about it / Want to join a consultancy  - For people who have given deep thought to their past experiences  its a good idea to Join an MBA  which is strong in strategy eg Harvard , Strathclyde etc.  The process of the MBA would equip you with tools to identify the need for , create , implement  and to test out Strategies.

4) I want to specialize   the answer for such people is simple choose a school renowned  for your specialization ad go for it full hearted.

Other  things to consider  -   Duration of course 1  yr – 2 yrs, Return of Income, Class size , ability to network

An MBA  is a learning experience its not so much about the  actual learning its more about how you apply this  in life.Its not an educational course  its a course in changing your life , I would recomment it to all , but its important to know or to identify the takebacks that you need from the  course well in advance.