How to Start a Business in India: Key Factors to Consider

• • Market Research

If you’re wondering how I can start a business in India, know that a business’s success or failure significantly depends on market supply and demand. You may love your business idea, but if there isn’t a target market for it, it will not flourish. Similarly, if there are already many players in the niche, you will struggle.

So, before you proceed with your business, identify the current market size, the growth potential, and the gaps you can fill. Understand your customer’s problems and how they are solving them currently. Brainstorm on what it is that you can offer as a better and more efficient solution.

Business Idea

Having a clear and viable business idea is a must. You cannot proceed without it. Once you’ve studied the market, list down different ideas that can be a relevant market fit. Next, check if the ideas align with your interests and skills. Many entrepreneurs start businesses that they do not have an understanding of. As a result, they waste a lot of time learning on the go and even suffer significant monetary losses.

You must always choose a business you are passionate about. Today’s entrepreneurs can explore options in manufacturing, hospitality, tourism, and agriculture under the ‘Make in India’ initiative.

Competition Analysis

Knowing your competition is also key. With digitisation advancing rapidly, competition is becoming fiercer. Your target market can search for information about you instantly and compare you with others in the market. So, know what you’re venturing against to accordingly plan your way forward.

You can start with an online search for terms related to your business idea. Check out what your competitors are offering. Is there something you have and they don’t, and vice versa? Study their pricing strategy. Read customer reviews. Gather every piece of information to identify gaps and plan out the best way to fit in.

Business Plan

You will need a thorough and well-designed business plan to guide your business’s operations at every step and attract potential investors. The components of your business plan must include:

• Executive summary: Start with a description of your business vision and mission.
• Market analysis: Give detailed information about your target audience, customer persona, and competitors.
• Operational plan: Mention your business’s operation style, including processes and staffing.
• Marketing strategy: Highlight your plan to promote your products or services and reach your target audience.
• Financial projections: Include details related to budget estimates, expected revenue, and break-even analysis.

Business Structure

Your business structure defines liability, tax, and legal compliance. In India, you can choose from the following four business structures:

• Sole proprietorship firm
• Partnership firm
• Limited Liability Partnership
• Private Limited Company

The first two structures offer unlimited liability, but there’s no separate legal entity from partners or owners. Nevertheless, the registration cost is low with fewer compliances. The other two have limited liability, and there’s a distinct legal segregation between the entity and the owners. However, the compliances are also stricter.

Legal Formalities

If you search the internet for “how can I open a company in India,” you’ll learn that you must register your business and secure relevant licenses and permits. To register the business, you must have decided on a name and an office location. Registration gives your business legal recognition. You must also buy a domain for your business’s website online.

You may also need a Goods and Services Tax (GST) certificate, zoning and health permits, and industry-specific licenses, depending on the nature of your business. Find out what is required and apply to the different departments to complete legal formalities.

Securing Finances

You need finances to start and sustain any business. Some entrepreneurs start a business in India with their own savings or with funds collected from friends and family. Most small businesses in India with low investment are self-funded. However, there are also other options to secure finances. Make sure you understand your financial requirements before exploring these options.

• You can apply for working capital or term loans at banks.
• You can raise capital through crowdfunding. In this approach, you take money from friends, family, neighbours, or the general public by giving them a share in your company.
• Venture capitalists and angel investors are another option. Many forums offer opportunities to secure funds from these investors.

Brand Identity

Your business’s brand identity helps in attracting and retaining customers. It comprises the brand name, logo and design, and online presence. Make sure you choose a relevant name that describes your business values. The logo must also look professional and contain cohesive design elements aligned with your marketing strategy.

Some of the most profitable businesses in India with low investment thrive because of the strong presence they create online. Be active on social media platforms and engage with your target audience.

Pricing Strategy

You must plan the pricing of your product or service strategically. This requires careful research and planning. Take into account fixed and variable costs, and also include the initial investment. Study the pricing offered by competitors to ensure that you’re in sync with them.

An effective pricing strategy should balance value and profitability. It can make or break your business. For instance, Jio adopted a low pricing strategy that helped it disrupt the Indian telecom industry.

Marketing Strategy

Having a well-defined marketing strategy is a must for every business. It helps to inform potential customers about the business’s existence and attract them to make a purchase. The following approaches can help you build the best business in India with low investment in marketing:

• Digital marketing: Create engaging and interactive campaigns on social media. Build conversations with your target audience. Focus on search engine optimisation and content creation as well.
• Promotions and deals: Give out interesting discounts and offers during launch to attract customers.
• Networking: Build professional relationships within the industry to enhance credibility and visibility.

Operational Planning

Create a detailed document on how to start a startup in India, clearly highlighting your business’s daily operations model. Discuss the workflow and processes. Understand how things will move smoothly and at maximum efficiency.

Develop customer service plans. How will you provide after-sales services and respond to customer queries? Prepare an inventory and supply chain framework to ensure you’re never low on stock. Lastly, have a quality control process. Delivering high-quality products is vital to the success of your business.

Scope of Scalability

The scope for business opportunities in India is endless. Most entrepreneurs don’t think about expansion before the launch. However, it is a vital step. Plan out how you will expand in the future without breaking. Look for cities that might have a relevant target audience. Study the consumer demographics. Identify how your product will suit their requirements and if there is a need for you to tweak it for acceptance at a larger audience level. Think about the different digital channels you can focus on to reach a wider audience.

Moreover, plan out product extensions beforehand to make scalability easier at a later stage. For instance, if you’re launching an apparel brand for women, make sure the name isn’t too women-oriented, and you have the option of adding apparel for men and kids in the future.

Handling Challenges

When you start a business in India, challenges are sure to come your way. And if you’re prepared for them, it becomes easier for you to manage them effectively without interrupting business operations or suffering financial losses.

The first step in preparing yourself for challenges is combining your business and insurance. There are many commercial policies to protect your valuable assets against uncertain events such as theft, fire, or other natural disasters.

Next, be ready to commit significant time and effort. The initial stages of your business will require hard work and several hours, sometimes even more than what you’ve anticipated. Lastly, a business takes time to generate profits. Make sure you are financially comfortable and can support yourself during the initial period.

Support and Guidance

It isn’t easy to start a business in India. You may feel confused and overwhelmed at times. Seeking support from experienced individuals can help. Here are a few examples:

• Mentorship: Try to find a mentor with experience in your industry. You may gain valuable guidance and insights from this person.
• Professional advisors: Reach out to financial, legal, and marketing professionals whenever you have doubts to ensure you’re on the right track.
• Networking groups: Become members of local or online entrepreneurial communities. This helps you engage in conversations with other startup founders and share experiences.

Exit Strategy

It is good to think ahead even at launch. You can include an exit strategy in your business plan. Think about family succession, selling to a competitor, or issuing an IPO. Your business structure and marketing strategy will depend on your exit strategy.

There are certain legal compliances that you will need to fulfil in case you want to issue an IPO later. Investors may also ask you about this at the time of investing if you’re seeking to raise funding from angel investors or venture capitalists.

There are many benefits of starting a business in India. There is immense potential for growth and profitability considering the evolving market landscape. However, with immense potential comes the need for thorough planning and a deep understanding of the legal, financial, and operational aspects.

You must be careful at every step, from niche selection and company registration to marketing and tax compliance. With the right guidance, you can avoid common mistakes, and with a comprehensive insurance plan, you can protect your business.

TATA AIG offers business insurance policies to help you secure your business from financial losses caused by unforeseen events. Whether you face losses due to theft, fire, workplace accidents resulting in employee injuries, or loss of cargo, we’ve got you covered.

Our shop insurance plans protect the property, inventory, furniture, and cash in case of theft, burglary, fire, natural disasters, etc. So, if you want to safeguard your valuable investment, our SME insurance plans are here to help you with it.