Abhishek and Ruchika are both software professionals. Before Abhishek took the entrepreneurial plunge, both worked in Gurgaon in a company called Xchanging Technology, earning good salaries. While Abhishek saved for initial funding for the venture, Ruchika’s salary ran the household. “There was always the temptation to spend more, but I wanted to save as much — and as fast — as possible to start my business,” he recounts.
A combined income of about Rs 26 lakh per year meant they could buy a house of their own, a big and expensive one at that, as most banks would have funded an EMI of about Rs 1 lakh. They did buy a house, but a smaller one. They did take a home loan, but took on a smaller liability, one they could service comfortably when they switched to a single salary scenario.
The Sharmas settled for an EMI (equated monthly instalment) of Rs 15,000. Their annual income is currently down to Rs 14 lakh a year (her salary), but even then the home loan EMI is only 14 per cent of their income. The Sharmas made a similar trade-off on their car, settling for a second-hand one. Says Abhishek: “I didn’t want to take a car loan and increase my outflow. So, I settled for what I could support from cash in hand.”

One of the biggest hurdles to overcome in taking the entrepreneurial plunge is to get over the comfort of a fixed salary. Start-ups take time to settle and generate revenues. One should be prepared to support household expenses for at least 12 months through savings or alternative sources of income, or a bit of both. If one of the spouses is working, as in the case of Sharmas, it becomes relatively easier provided one has planned for it well.

There are financial decisions to be taken on the business side as well. Abhishek is committed to making QSquare a pre-eminent testing services company. At some stage, he hopes to get a venture capitalist to join in and fund growth. For now, though, funding has to come from the partners.

In the early stage of the business, the key is to save money and prioritise expenses, without throttling growth or innovation. QSquare is paying to get the best talent. Yet, they share office space with another entrepreneur. Similarly, the company has invested in top-notch software testing tools, but the office is fitted to be functional. Penny saved is penny earned.

Abhishek also ensures the company’s accounts are managed professionally, and the personal and professional don’t mix. There is always the temptation to book personal expenses in company accounts to offset tax liabilities. But in a partnership, and more so when you want to fund the company externally, it is critical you maintain transparency and integrity.

Most businesses, even with smart plans, take longer than planned to break even — and more money than budgeted. It is therefore critical to have a contingency plan. Keep some money aside or identify a source of contingency funding at an early stage.

Be clear on your reasons to start a business. Building a business is all about deferred gratification and hard work. There are a lot of sacrifices to be made in the short term. One should have a convincing reason to leave the comfort of a fixed salary. If it’s just about a nagging boss or more money, there is a good chance you will want out when the going gets tough. However, if it’s guided by a powerful context, whatever the challenge, you will be more inclined to deal with it.

With a few business deals in the bag, Abhishek is happy with his decision. Ruchika is looking forward to moving into their own house, which is likely to be handed over to them in a couple of months. Even as the business settles and the rent stops going out, the available funds should go towards saving for the education of their one-year-old son, Aryan.

The writer is CEO, Cornerstone Wealth Management
rattan.chugh@cstone.in