What entrepreneurs do, the stories of Lijjat and Oberoi, business plans, the functional areas of a business, fixed and variable costs, and profit and loss.
Key ideas
An entrepreneur spots a problem, takes risks with money and time, and combines resources to solve it in a new way.
Lijjat papad began in Mumbai in 1959 with seven homemakers and ₹80; it runs as a cooperative of equal owners who share profits.
Mohan Singh Oberoi began as a hotel clerk in Shimla on ₹50 a month and bought his first hotel in 1934.
A business plan sets out the idea, customers, costs and funding, location, pricing, marketing and risks.
The four functional areas are operations, finance and accounting, human resources, and marketing and sales.
Fixed costs, like rent, stay the same whatever the output; variable costs, like raw materials, rise with output.
A startup is a young company with a new product or service; one valued at over a billion dollars is a unicorn.
Remember
Total cost
fixed cost + variable cost
Revenue
price × quantity sold
Profit
total revenue − total expenses (a loss if expenses are more)
Profit after tax
profit before tax − tax
Inventory
goods and materials held to make or sell
Lijjat
started 1959, registered 1962; “lijjat” means tasty
Watch out
Treating revenue as profit: subtract all the expenses first.
Calling rent a variable cost: it stays the same whatever the output.
Seeing failure as the end: entrepreneurs learn from it and try again.
Worked example
Lijjat began in 1959 and was registered in 1962. (a) How many years after starting was it registered? (b) How many years before 2037 did it begin?