Pricing of services right is not about undercutting the competition or chasing the lowest price. It's about understanding the value you provide, communicating it to your clients, and ensuring that the price reflects the expertise, effort, and positive impact you bring to their business.

However, in reality, is setting your service’s value this straightforward? Let’s find out.

According to the <a href="https://www.trade.gov/pricing-strategy">International Trade Administration</a>, pricing can be the most challenging due to different market forces and pricing structures worldwide. Whether you are in IT or any other industry, finding the right price for your export services is a delicate balancing act.&nbsp;

It is about achieving an equilibrium between profitability, competitiveness, and appeal to international clients while remaining attractive.

There are various strategies to consider with their unique factors.&nbsp;

Pricing strategies must adapt to an ever-shifting economic landscape, considering variations in purchasing power, cultural quirks, and the wild dynamics of local markets.

Thriving in the <a href="https://www.skydo.com/blog/checklist-for-cold-outreach?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">global market</a> requires a comprehensive understanding of how pricing can impact the success of your export business. The unique nature of pricing in the export services industry is influenced by several factors.

The best pricing strategy for a particular business includes considering the type of product or service, the target market, the competition, and the company's financial goals.&nbsp;

To calculate value-added pricing, you can use the following formula:

Value-added price = Fixed Cost&nbsp; Variable Cost + Profit Amount

This <a href="https://docs.google.com/spreadsheets/d/1oYIRqOf3PrCZx7jNx4FpwqCG6MBi5f03n29zmVUukbs/edit?usp=sharing">pricing template</a> helps calculate your value-added price. To edit the template, go to File &gt; Make a copy to save a duplicate that’s accessible to you.

For instance, <a href="https://info.pros.com/rs/195-ZTW-739/images/Accenture_The%20Pricing%20Revolution_PoV.pdf">Accenture's pricing strategy</a> is based on the value they bring to their client's businesses. Rather than competing solely on price, they focus on delivering innovative solutions, deep industry expertise, and a track record of successful implementations. By doing so, they position themselves as a premium service provider, enabling them to charge higher prices for their services.

How can you determine the right pricing strategy for your export service business?

Steps for Developing a Pricing Strategy for Your Export Services Business

In continuation with the example of Ajay’s venture above, here are the steps he may have followed while revising his pricing strategy.

#Step 1: Research the market you want to target

Thoroughly research the market you intend to target. Understand local preferences and purchasing power. Identify any unique market characteristics or factors that may impact pricing decisions.

In Ajay’s case, he engaged in open conversations with his existing clients. He asked for their feedback, listening intently to their concerns, needs, and perceived value. This invaluable information helped him refine his pricing, aligning it with the value his clients expected and were willing to pay.&nbsp;

#Step 2:&nbsp; Estimate pricing potential

Start by assessing your costs, including production, distribution, overhead expenses, desired profit margins, and competitive landscape. Determine the price range to attract customers while covering expenses and generating a reasonable profit.

Through the conversation with his customers, Ajay also realised the best way to price his services in a way that seemed value for money. He no longer had to compromise on his team's compensation or cut corners to stay afloat.&nbsp;

#Step 3: Balance value and business goals

Finding the ideal balance between these two elements can lead to significant benefits for your business, such as:&nbsp;

Ajay understood the value his services brought to businesses and the positive impact they could have on their operations. He prized his offerings to reflect that value, considering the time, effort, and expertise invested by his team.

#Step 4: Evaluate your additional cost to the market

It includes local certification or foreign regulations-related expenses and modifying services to meet market requirements. Incorporate these costs into your pricing calculations.

#Step 5: Consider your competitor's price

There are two primary options when confronted with disparate pricing for similar services.

Conducting a comprehensive competitive analysis helps understand their strengths and weaknesses, thus formulating an appropriate pricing strategy.

Determine specific pricing tactics to achieve your objectives, such as penetration pricing, price skimming, psychological pricing, or value-based pricing.

Regarding the pricing tactics, <a href="https://www.linkedin.com/in/divyankjn/">Divyank Jain</a>, Co-founder of <a href="https://www.linkedin.com/company/twiseidiot/mycompany/">The Wise Idiot</a>, explains, “Our method involves calculating the number of hours required for a project, determining the necessary workforce, considering regional taxes, and incorporating a reasonable profit margin. This approach ensures transparency and reliability and fosters long-term partnerships.”

The final price for your tech service should cover costs, achieve profitability, and align with the market's willingness to pay. Regularly review and adjust your pricing strategy based on market feedback, cost changes, and business goals.

Common Pitfalls in Pricing and How to Avoid Them

Price setting is tricky for your global business, often threatening profitability. Here are some common pitfalls in pricing and tips on how to avoid them:

Concerning pricing complexity, <a href="https://www.linkedin.com/in/mejo-kuriachan/">Mejo Kuriachan</a>, CEO of <a href="https://www.everything.design/">Everything Design</a>, explained, "Pricing is a function of demand and supply. With time, as you become an expert in a niche, you will have the leverage (demand for your service will increase) to increase your price and deliver better quality output.

Additionally, your pricing strategy decides the kind of customers you will attract. As a branding and website design agency, we did this successfully, which helped us attract the right kind of clients."

In today's highly competitive global market, having a well-defined pricing strategy is not just important—it's the key to unlocking the door to success for your export business. By strategically setting prices, you can navigate the delicate balance between profitability and market penetration, allowing your services to shine internationally.

Q1. What are the methods of pricing services?

Ans: Methods of pricing services vary and may include cost-based pricing, where the service cost determines the price; value-based pricing, based on perceived value to customers; and competitive pricing, considering rates charged by competitors.

Q2. What are the steps in pricing services?

Ans: Pricing services include several steps, such as defining pricing objectives, analysing costs, researching market demand, setting the pricing strategy, determining the final price, and regularly reviewing and adjusting prices as needed.

Q3. What do you need to consider when pricing services?

Ans: Considerations for pricing services include understanding customer needs, evaluating the uniqueness of the service, analysing competitors' pricing, factoring in costs, and maintaining flexibility to adapt pricing strategies based on market dynamics.

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The life of any startup can be divided into two parts — before product/market fit and after product/market fit. —<a href="https://en.wikipedia.org/wiki/Marc_Andreessen"> Marc Andreessen</a>

With the fast-paced nature of startups and businesses, many face a crucial challenge that few truly overcome: creating a product that resonates with the market's needs. Recent statistics reveal that<a href="https://marketsplash.com/startup-failure-statistics/#:~:text=Startups%20that%20scale%20appropriately%20experience,than%20those%20that%20rise%20prematurely.&amp;text=29%25%20of%20businesses%20need%20more,they%20can%20get%20fully%20established.&amp;text=The%20most%20significant%20reason%20cited,market%20need%20for%20their%20product.%22"> 42%</a> of startups fail as there is a lack of market need for their product.

<a href="https://www.skydo.com/blog/an-indian-tech-exporter's-journey-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Successful businesses</a> understand that achieving product-market fit (PMF) is essential for success. PMF is the bridge that connects a product's value to the market's needs. But it isn't just about launching a product; it's about ensuring that it seamlessly integrates into people's lives and meets their expectations.&nbsp;

To stay ahead of ever-evolving trends, businesses need to be proactive, anticipating future needs and developments to remain relevant and indispensable in an increasingly competitive landscape.

Product-market fit is achieved when a product effectively meets the specific needs of its target buyer personas within corresponding market segments and channels. This alignment ensures that the product resonates with customers, addressing their pain points and delivering value. This crucial state signifies a harmonious match between what the product offers and what the market demands, enhancing the potential for business success.&nbsp;

Without this alignment, a product may struggle to gain traction or sustain customer interest. Pursuing product-market fit is fundamental for businesses, emphasizing the importance of understanding and catering to the unique requirements of the intended audience to maximize market acceptance and overall success.

Product-Market Fit (PMF) is about striking a balance. It's about creating a product or service that addresses the specific needs, wants, and challenges of a particular market segment. Entrepreneurs need to be fast learners and find Product Market Fit quickly by having a flexible marketing strategy to adjust their product according to customer needs faster than large, slower corporations.

Peter Thiel - the author of<a href="https://www.amazon.com/Zero-One-Notes-Startups-Future-ebook/dp/B00J6YBOFQ?keywords=zero+to+one&amp;qid=1651641038&amp;sprefix=zero+to+one,aps,116&amp;sr=8-1&amp;linkCode=sl1&amp;tag=sachinrekhi-20&amp;linkId=6e544ae452f4371878711298a1390a6f&amp;language=en_US&amp;ref_=as_li_ss_tl"> Zero to One</a>, says, "As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage. Anything less than an order of magnitude better will probably be perceived as a marginal improvement and will be hard to sell, especially in an already crowded market."&nbsp;

Achieving Product/Market Fit (PMF) requires more than just having a presence in the market. It is about understanding and empathising with the needs and desires of your target audience. Erez Druk shares in his<a href="https://www.erezdruk.com/post/a-new-way-to-think-about-product-market-fit"> article</a> that PMF is better visualised as a landscape with three distinct areas: PMF Desert, PMF Mountain, and PMF Mountain Peak. Each area requires an appropriate strategy, from making bold moves in the desert to scaling and building a real company at the mountain peak.

Consider the case of Grammarly, a digital writing assistant. Grammarly stands out from other spell-check and grammar tools. Instead of correcting mistakes, it provides context, tone suggestions, and clarity improvements to help writers, students, and professionals communicate more effectively. This recognition of user pain points has resulted in dedicated users who have propelled the tool's exponential growth from a simple tool to a household name in digital writing assistance.

Other notable examples include<a href="https://mailchimp.com/resources/product-market-fit/"> Netflix and Slack</a>. Netflix is a prime example of adapting to changing market needs, while Slack shifted from its original idea of game creation to become one of the most popular communication platforms.

The only thing that matters in the first 12–18 months of a company is figuring out how to get your product into the hands of the right people. A lot of people can build a product, but figuring out what your market is and how to reach it is the biggest obstacle to getting a business off the ground. —<a href="https://twitter.com/ranjithkumaran"> Ranjith Kumaran</a>, PunchTab Co-Founder

Achieving Product Market Fit (PMF) is crucial for startup success. Here's a concise guide:

By employing these strategies, startups can increase their chances of discovering and achieving Product Market Fit.

Embracing the Future: Key Building Blocks for Achieving Product-Market Fit

Marc Andreessen's "<a href="https://pmarchive.com/guide_to_startups_part4.html">On product/market fit for startups</a>," says, "The customers are buying the product just as fast as you can make it -- or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can."

<a href="https://blog.hubspot.com/service/customer-centric">HubSpot</a> states that a customer-centric company goes beyond simply providing excellent customer service. It means creating an enjoyable experience for customers, from the initial awareness to receiving purchased items and beyond. This strategy is centred around always putting your customers first. You must prioritise customer feedback and refine your product based on real user insights and experiences to achieve this.

Through regular <a href="https://www.skydo.com/blog/ready-set-launch-8-key-elements-for-launching-your-tech-export-business-today?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">market research</a> and consistent communication, businesses can gain a competitive edge by staying informed on their target audience's changing needs and preferences. Leaders like Henry Ford and Steve Jobs were known for their ability to predict customers' wants before they even knew it themselves. This forward-thinking strategy shows that customer satisfaction lies at the heart of any successful organisation.

Today's digital world offers a range of communication channels to interact with customers, such as chat, email, phone calls, and in-app messages. As such, brands need to take advantage of these mediums to receive quantitative and qualitative feedback from their customers.&nbsp;

For example, finding product-market fit in the Indian context comes with a unique set of challenges. As Emeritus <a href="https://emeritus.org/in/learn/product-market-fit/#:~:text=He%20defined%20product%2Dmarket%20fit,that%20customers%20want%20to%20buy.">Amitesh Kumar writes</a>, detailed market research, cultural sensitivity, and a compelling value proposition are crucial.&nbsp;

An average Indian’s cultural nuances, varied preferences, and significant price sensitivity. Understanding these dynamics is essential to tailor products that genuinely meet the needs of the Indian consumer base.

"Agile innovation methods have revolutionised information technology. Over the past 25 to 30 years they have greatly increased success rates in software development, improved quality and speed to market, and boosted the motivation and productivity of IT teams." - Darrell Rigby, Jeff Sutherland, and Hirotaka Takeuchi, HBR.

In today's ever-evolving business landscape, agility is no longer a simple buzzword but a requirement. Having an iterative approach to product development allows companies to remain competitive, up-to-date, and able to respond quickly to the changing market.&nbsp;

An agile mindset is about being prepared for any change or uncertainty that could come your way. As Nadeem Ali mentions in his<a href="https://www.linkedin.com/pulse/agile-mindset-embracing-change-uncertainty-entrepreneur-nadeem-ali"> article</a>, it's about "embracing change and uncertainty as an entrepreneur."

The<a href="https://hbr.org/2016/05/embracing-agile"> Harvard Business Review</a> states that agile organisations are static and flexible, enabling them to shift resources and change direction when new opportunities arise. To effectively adopt this approach, leaders must understand the fundamentals of agile, begin with a pilot program, allow teams to adjust it according to their needs, act agilely, and remove any factors that prevent people from utilising agile practices.

In his article "<a href="https://www.linkedin.com/pulse/navigating-change-agility-essence-agile-leadership-jim-lemanowicz">Navigating Change with Agility: The Essence of Agile Leadership</a>," Jim Lemanowicz explains the transformation from traditional hierarchical approaches to Agile Leadership. This new mindset focuses on flexibility, transparency, and empowerment and encourages effective collaboration between leaders and teams. This creates an atmosphere in which decisions are made quickly, with feedback incorporated into the process for continual improvement. Thus, Agile Leadership stands in stark contrast to the hierarchical organisational structures of the past.

When organisations embrace the mindset to continuously learn, they position themselves for long-term success and ensure they stay relevant, innovative, and one step ahead in an ever-evolving world. Adaptability is the key to an organisation's successful future.

Time and again, technology advancements demand that organisations and employees foster a continuous learning culture.&nbsp;From encouraging personal growth to helping individuals stay fulfilled in their jobs, it's clear that implementing a continuous learning culture benefits everyone involved. Plus, this mentality helps us realise that learning is an ongoing process with no end in sight. It's truly a win-win situation for all.

Organisations that want to outpace their competition must prioritise learning at all levels. According to<a href="https://www.forbes.com/sites/forbeshumanresourcescouncil/2023/04/24/how-to-create-a-company-culture-of-continuous-learning-and-development/?sh=6b76314c387d"> Forbes</a>, fostering an environment encouraging employees to take ownership of their development, recognize curiosity, and provide formal and informal learning opportunities will create a continuous growth and development culture.

<a href="https://www.pluralsight.com/resources/blog/leadership/continuous-learning-culture">Pluralsight</a> emphasises the importance of leadership when it comes to personal and professional development. Leaders should not only encourage continuous learning but showcase it themselves. They can be an example for their teams and show them how necessary it is to stay on top of the constantly changing job market. Investing in regular skill development initiatives, such as workshops, training sessions, online courses, or certifications, is essential for organisations to remain competitive and relevant in this digital age.

The world is rapidly changing, and organisations must be proactive in staying competitive to keep up with the times. Market research, attending industry conferences, and connecting with industry thought-leaders are all important for staying informed of new trends and developments. By taking this proactive approach to their business, organisations will be better prepared for any challenges that may arise in the future.

In this digital era, organisations must remain competitive by adapting to and anticipating changing trends.&nbsp;

As technological advancement continues to speed up, what's considered innovative today may quickly become outdated. Companies should remain constantly vigilant about new technologies that could revolutionise or even disrupt their industry. It is important not only to adopt these technologies but also to understand their potential implications.&nbsp;

Establishing strong networks and fostering collaborations is a critical part of the journey to product-market fit. They allow us to learn from our peers, discover new opportunities, build partnerships, and break into new markets.

Networking with industry peers and experts is essential to stay up-to-date on the ever-changing market trends, customer preferences, and potential pitfalls. These connections can provide invaluable feedback, share their experiences to guide decisions, and even introduce you to potential customers or partners.

National Hog Farmer's<a href="https://www.nationalhogfarmer.com/our-events/competition-collaboration-and-convergence-equals-product-market-fit"> article</a> highlights the importance of collaboration and communication in achieving Product-Market Fit. This is even more important in niche industries, as having a great product is only one piece of the puzzle. Networking and collaborating with key players can provide essential feedback, resources, and support to help refine the product until it resonates with its target market and stands out from its competitors.

<a href="https://fastercapital.com/content/Why-Collaboration-Is-Essential-to-Entrepreneurship.html">FasterCapital</a> understands how important it is to collaborate with other businesses and industry experts to gain unique perspectives on product development, marketing strategies, customer engagement, and more. By entering into joint ventures, co-marketing initiatives, or even product integrations with a business that aligns with your goals, both parties can benefit from the collaboration and experience mutual growth.

This method enables organisations to envision different market conditions, estimate the impacts of each, and create strategies to manage both positive and negative outcomes. By evaluating different responses more effectively, this approach can offer greater confidence and agility when navigating uncertain times.

Businesses should always have a contingency plan for every scenario they develop. This way, no matter what happens, the company can make the necessary adjustments and changes to ensure their success. Contingency plans range from product and marketing modifications to financial planning and operational shifts.

As Marty Kagan, Founder of SVPG <a href="https://www.svpg.com/behind-every-great-product/">writes</a>, the situation of Netflix in 1999, when they moved to an online subscription model, was dire. They were offering their viewers unlimited movies for a flat monthly fee. The problem was, that they couldn’t stock all of it; it would be too expensive.&nbsp;&nbsp;

Therefore, in three months, they created and shipped a completely new business model/software service–Netflix as we know it now–and the rest was history.&nbsp;

Scenario planning is a proactive approach to business forecasting that can help organisations stay ahead of the competition.&nbsp;

It encourages teams to think outside the box and consider potential market changes that can be used to their advantage. By anticipating risks and seizing opportunities, businesses can position themselves for success while adapting to changes in the market. This method fosters a forward-thinking culture, allowing those involved to remain agile and responsive to shifts in the market, as highlighted by<a href="https://www.profitand.com/blog/the-undeniable-importance-of-scenario-planning-how-can-it-help-organisations"> Profitand</a> and<a href="https://business.adobe.com/blog/basics/scenario-planning"> Adobe</a>.

Here is the step-by-step<a href="https://www.netsuite.com/portal/resource/articles/financial-management/scenario-planning.shtml"> scenario planning approach of Netsuite</a>

Success in the dynamic world of entrepreneurship is rarely a linear path. Reaching product-market fit requires more than just foresight but also adaptability, resilience, and a consistent effort to understand the market's ever-changing demands. It's not simply about predicting the next trend or technology; it's about establishing a flexible and proactive attitude that's ready to pivot when necessary, learn from feedback loops, and continuously refine its product offer.

Entrepreneurs must understand that product-market fit is not a one-time event but an ongoing journey. They must remain open to feedback and know their target audience's needs to succeed. As the business world shifts and changes, those curious, collaborative, and dedicated to customer satisfaction will survive and flourish.

Ans: To gauge product-market fit, employ metrics like Net Promoter Score, customer surveys, and retention rates. Analysing user feedback and engagement levels helps quantify the alignment between product offerings and customer needs.

Ans: Achieving product-market fit involves understanding customer pain points, iterating based on feedback, and continuously testing. Start by identifying a target audience and adapting the product until it resonates with users.

Q3. What is the first step in defining a great product-market fit?

Ans: The primary step is understanding the target audience's needs. Conduct thorough market research to identify pain points, preferences, and behaviours, guiding the product's development and ensuring it meets customer expectations.

Ans: The four types include Product-Customer fit, Product-Channel fit, Product-Category fit, and Product-Adjacent fit. Each type emphasises aligning specific aspects of the product with corresponding market elements to achieve optimal market fit.

Q5. What is the 40% rule product-market fit?

Ans: The 40% rule suggests that achieving a 40% "very disappointed" customer response in surveys indicates a strong product-market fit. It signifies a substantial user base finding significant value in the product, a key indicator of market alignment.

Q6. How do you confirm a product-market fit?

Ans: Confirming product-market fit involves assessing customer satisfaction, retention rates, and revenue growth. Regularly gather feedback, monitor customer behaviour, and analyze key metrics to validate that the product effectively addresses market needs.

Q7. What is after the product-market fit?

Ans: Post-product-market fit, the focus shifts to scaling and expanding market presence. Efforts concentrate on optimizing operations, scaling customer acquisition, and exploring additional market segments, ensuring sustained growth and long-term success.

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Selecting the right business structure is important as it can significantly affect various aspects, such as tax obligations, legal liabilities, and growth opportunities. Moreover, altering the structure down the line can prove to be a time-consuming and costly endeavor.&nbsp;

Therefore, it becomes crucial to carefully consider and choose a suitable legal framework from the outset.

In India, the most common business structures are:

In the financial year 2021-22, <a href="https://trak.in/tags/business/2022/04/20/457-new-companies-were-registered-every-day-in-india-1-67-lakh-company-registrations-in-2021-22/">as many as 1.67 lakh new companies</a> registered with the Ministry of Corporate Affairs, bringing the total to 14,13,249 registered private companies and 2,52,460 limited liability partnerships, while more than 60% of all registered businesses are sole proprietorships.&nbsp;

Six Factors to Consider When Choosing a Business Structure

If you want to start a business, you can look towards starting a private limited company. Private limited companies can have a minimum of 2 and a maximum of <a href="https://vakilsearch.com/blog/maximum-number-members-private-company/">200 members</a>. This structure suits medium to large-sized businesses requiring significant investment, infrastructure, and compliance requirements.&nbsp;

Partnerships involve a minimum of two and a maximum of 20 partners, making it suitable for small to medium-sized businesses that require less investment, have lower compliance requirements, and are easier to set up. Some examples are Maruti Suzuki, Mahindra and Mahindra and Hindustan Petroleum.&nbsp;

A single individual owns proprietorships, making them suitable for small businesses requiring minimal investment, low compliance requirements, and easy to manage.&nbsp;

Liabilities include all the business's financial obligations, such as debt, which they are legally liable to repay. However, some business structures differentiate between the enterprise and the owner to protect the owners from being personally liable to compensate liabilities.&nbsp;

You can start a private limited company if you want to have limited liability to the extent of the share capital ie your contribution to the company. Your personal assets will be safe.&nbsp;

However, in the case of general partnerships, you and your partners will be jointly liable for the business’s debts and obligations. That means, your personal assets will be at risk. If you do not want unlimited liability but want to create a partnership firm, you can start a limited partnership (LLP). LLPs have at least one general partner with unlimited liability and one or more limited partners whose liability is limited to the extent of their contribution.&nbsp;

Here, starting a proprietorship may not be the right decision as the sole owner has unlimited liability and is personally liable to repay all the financial obligations.&nbsp;

Every business is legally liable to pay tax on the profits. However, as taxes reduce the overall profits, you should choose among the three based on their tax implications.&nbsp; For example, if you do not want to start a business liable to pay high taxes, you can pass on starting private limited companies and partnerships as they must pay taxes on the profits at a flat 30% rate, plus surcharge and cess as applicable.

In the case of proprietorships, the sole owner personally receives the profits. Hence it is taxed per personal income tax laws as per the applicable tax slab. Sole proprietorships involve paying fewer taxes and prove an ideal choice if reducing tax liability is a vital business factor.&nbsp;

4. Cost and complexity of setup and maintenance

All entrepreneurs want to start a business that does not include higher costs and complex processes. If you have high capital and the efforts to start a big business, you can choose private limited companies as the business structure. Private limited companies require a minimum share capital of Rs. 1,00,000. They also require a higher initial investment for legal fees, registration fees, and other compliance requirements. The complexity of setup and maintenance is also higher than other business structures.&nbsp;

However, if you want a business structure which is relatively affordable and easier to set up, a partnership firm will be an apt business structure as the minimum capital required is Rs 50,000. It requires minimal legal formalities, and the cost of maintaining a partnership is also lower than a private limited company, as it has fewer compliance requirements.

The best business structure for the lowest cost and complexity is a sole proprietorship, which does not require extensive registration or legal formalities. Many proprietors don’t even register the company, running it in their name with their personal bank accounts.&nbsp;

Some entrepreneurs want total control over all business affairs, while some seek the expertise and skills of others to make mutual decisions. If you are the former, you can choose sole proprietorship as the business structure. The sole owner of the proprietorship has complete control over the management and the profits, as it is not a separate legal entity. 

However, if you are the former, you can create a partnership firm, as all the partners have ownership and control based on the profit-sharing ratio determined at the time of incorporation. In the case of private limited companies, the shareholders have ownership, but the board of directors controls the entity. Hence, the decision-making is collective and requires mutual agreement on implementing business ideas.&nbsp;

Funding is an important aspect of the success of a business, allowing entrepreneurs to ensure constant cash flow into the business. Private companies are the ideal business structure to create a business that can raise funds as needed. Private limited companies are popular when choosing a business structure, as they can issue equity shares to investors. Private limited companies can raise funds through venture capital, private equity, angel investors, and even an initial public offering (IPO) if they meet specific criteria. It becomes easy to issue new shares, buy back old ones, or sell or buy them.

Partnerships can only raise funds through the personal resources of the partners, whereas proprietors leverage personal resources or borrow funds from banks and other financial institutions. Both business structures can not issue equity shares to investors or borrow funds by pledging their assets as collateral. If they want to change the partnership structure or add investors, they must dissolve the current partnership and create a new one.

Registered under the Companies Act 2013 with the Ministry of Corporate Affairs are legal business entities held privately by various shareholders.&nbsp;

Private limited companies in India need approval by the Registrar of the Company concerning their name and can have a minimum of two and a maximum of 200 members/directors. Shareholders have limited liability that extends only to their share capital. Foreigners can invest in private limited companies under the automatic route, and owners can transfer ownership through share transfer.

Examples of businesses suitable for Pvt Ltd

The business structure of a private limited company is suitable for businesses that require high investment and are large to medium size. This can include capital-intensive manufacturing, IT, real estate, retail and large-scale service enterprises.&nbsp;

Questions to ask yourself before you choose Pvt Ltd

Ponder upon the following questions before choosing the private limited structuring.

Compliance and Role of CAs and Lawyers in Pvt Ltd Companies

Compliance is critical to running a private limited company in India. Seek the advice and guidance of qualified professionals, such as Chartered Accountants (CAs), Company Secretaries (CS) and lawyers, to ensure effective compliance with all legal and regulatory requirements.&nbsp;

<a href="https://cleartax.in/s/government-schemes-businesses">Government Schemes</a>

The Indian government has established numerous schemes to support private limited companies such as:

Partnership firms have at least two members who agree to share profits based on a pre-defined ratio. There are two types: general partnership and limited liability partnership (LLP).&nbsp;

General partnerships are registered under the Partnership Act of 1932. The partners have unlimited liability with a maximum of twenty members.&nbsp;

LLPs are registered under the Limited Partnership Act of 2008. Partners in LLPs have limited liability and can have an unlimited number of partners.

Examples of businesses suitable for partnerships

Compared to private limited companies, partnerships are easier to set up and do not require a high initial capital investment. This business structure is ideal for mid to small-scale businesses. Some examples are professional services such as CAs, lawyers, retail or wholesale businesses and small-scale manufacturing businesses.&nbsp;

Questions to ask yourself before you choose Partnerships

What makes partnerships an ideal business structure? Here are some questions to consider before starting a partnership firm.

Partnerships in India must comply with legal and regulatory requirements. A CA or lawyer can help manage financial matters, create and manage the partnership deed, and ensure the firm obtains a PAN and TAN Card. CAs assist with bookkeeping, accounting, and relevant financial documents. Lawyers help ensure stability in case of disputes or dissolution of the firm.

An individual owns, controls, and manages a proprietorship business with minimal regulatory compliance and no registration with government authorities. However, the proprietor must obtain relevant licences and tax registrations from the State/Central government based on the business's nature. Proprietorships have unlimited liability, and a person can be the company’s stakeholder.

Examples of businesses suitable for Proprietorships

Proprietorships as a business structure are the most sought-after for individuals who want to open a <a href="https://www.skydo.com/blog/scale-faster-with-skydo-payment-solution?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">small-scale business</a> without the hassle of extensive regulatory and registration processes.&nbsp;

Some examples of businesses suitable for proprietorships are freelancers and consultants for content writing, graphic design, agriculture businesses, retail shops, small-scale manufacturing and online businesses such as e-commerce stores.&nbsp;

Questions to ask yourself before you choose Proprietorships

Proprietorships provide the highest flexibility to run a business. However, consider the following questions before choosing the business structure.

Compliance and Role of CA and Lawyers&nbsp;

CAs and lawyers are limited in proprietorships as they do not require registration under the Companies Act. Proprietorship owners may <a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">engage a CA</a> to obtain tax and business licences and file taxes. Lawyers can assist in legal disputes with creditors or third parties.

Choosing an ideal business structure is critical to creating an effective blueprint for the business and ensuring that the execution of business activities leads to success. However, you must consider factors such as size and nature, liability protection, tax implications, costs and complexity, ownership and control with the funding aspect before choosing among the three business structures.&nbsp;

It is always wise to seek professional advice from experts who analyse the objectives and goals of the business to pitch you with the right structure. Once your business has the right structure, you can move forward and execute further business activities to attain profitability, sustainability and success.&nbsp;

Q1. Which is better proprietorship or partnership?

Ans: The choice between proprietorship and partnership depends on factors like individual preferences, risk tolerance, and business goals. Proprietorship offers sole control, while partnership allows shared responsibilities. You can choose one that suits your envisioned goals.

Q2. Is Pvt Ltd better than a proprietorship?

Ans: Private Limited (Pvt Ltd) companies often provide more credibility, limited liability, and potential for growth compared to proprietorship, making them generally preferable for businesses seeking formal structure and expansion.

Q3. Which is better partnership or Pvt Ltd?

Ans: The decision between a partnership and a Pvt Ltd company hinges on factors like ownership structure, liability concerns, and growth aspirations. Pvt Ltd entities usually offer a more formal structure and limited liability.

Q4. Is it better to be a partnership or a limited company?

Ans: Choosing between a partnership and a limited company depends on factors like business size, structure preferences, and liability considerations. Limited companies provide a more formal structure, limited liability, and potential for substantial growth, making them suitable for larger enterprises.

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Despite the efforts of business owners to manage their finances, they face various international payments-related problems, such as late payments, non-payment, fraudulent transactions, and fluctuating currency rates. These issues significantly impact a business's cash flow, profitability, and general operations.

Moreover, banks impose significant fees for payment-related services, including transaction, currency conversion, and processing fees. A study by Forrester found that companies lose an average of 2% of their revenue to payment processing fees.&nbsp;

Let’s drill down five major payment problems that business owners frequently encounter.

#1: Complicated processes and high fees of banks

Banks are vital for financing, foreign exchange transactions, and international payments. However, their products and services are often not tailored to specific business needs, resulting in high fees, poor experience, and cumbersome processes.&nbsp;

Navigating the banking world can feel like a game of Minesweeper, where a wrong move could result in an explosion of high fees and cash flow difficulties. For instance, if you choose a bank with high foreign transaction fees, you could lose more money every time you transfer funds.&nbsp;

Choosing between a standard checking account and an <a href="https://www.skydo.com/blog/eefc_account_overview_full_form_meaning_eligibility_benefits">EEFC account</a> can be further challenging. An EEFC account allows foreign currency transactions, while a standard one allows local currency transactions exclusively. Different banks have distinct requirements for opening and maintaining an EEFC account. Choosing the right account type can help manage cash flows efficiently and minimise foreign exchange risks.

#2: Inefficient and expensive payment systems such as PayPal and Stripe

<a href="https://www.skydo.com/blog/top-paypal-india-alternatives-for-international-payment">PayPal</a> and Stripe are popular payment systems used for international payments. However, these payment systems have high <a href="https://www.skydo.com/blog/cut-international-transaction-costs?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">transaction fees</a>, conversion charges, and regulatory issues that may affect your profit. Additionally, they take longer to provide the FIRA document, which is proof of payment for foreign transactions.

Freelancer.com faced financial difficulties in 2018 when PayPal froze $380,000 of its funds due to restrictions on certain transactions and compliance with <a href="https://economictimes.indiatimes.com/industry/banking/finance/paypal-faces-rs-96-lakh-penalty-for-violating-indias-anti-money-laundering-processes/articleshow/79823500.cms?from=mdr">anti-money laundering</a> regulations. Freelancer.com had to explore alternative payment methods to continue its global operations and mitigate the risks of relying solely on PayPal for its transactions.

Similarly, in December 2020, Patreon faced a backlash from the community when they passed on new fees from Stripe to their creators. The new fees included additional fees for international and European transactions, resulting in higher transaction costs for Patreon creators and impacting their earnings.

Comparison of PayPal and Stripe as payment systems–

#3: Currency exchange and fluctuation issues

<a href="https://www.skydo.com/blog/how-to-choose-the-right-currency-exchange-rate-for-invoicing?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Currency exchange</a> rate fluctuations can significantly impact your profitability in the global market, requiring constant monitoring and adjusting prices.

Currency exchange providers add a markup to the exchange rate, an additional fee they charge for the service. By overlooking the hidden foreign exchange costs and focusing solely on the sale price, you may have unknowingly incurred losses due to FX markup.

While this cost may seem like a small percentage, it compounds over time. This markup can affect the money you receive, reducing the exchange rate and increasing the transaction cost.&nbsp;

Furthermore, currency exchange volatility caused by the pandemic has significantly impacted business owners, leading to the following.

You can take several steps to manage currency exchange and fluctuation issues, such as–

Payment security is a concern due to fraudulent transactions, inaccurate invoicing, and cybersecurity threats like phishing and hacking. 74% of companies experienced attempted or actual payment fraud in 2020, with wire transfer fraud being the most common.

Additionally, disparate payment systems and processes across different countries and currencies can create complexities and inefficiencies, further complicating payment tracking and reconciliation.

Some common security threats in export payments include the following.

Ensuring proper documentation, using secure payment methods, and verifying the counterparty's identity can help mitigate these risks, ensure smooth transactions, and stay vigilant against potential fraud or cyber-attacks.

#5: Cash Flow issues due to delayed payments

Delayed payments in a business are like that one friend who always promises to pay you back but never actually does. You may feel like you're constantly chasing them down for payment, but in the end, you still have to wait for the money to come in. Some common reasons for delayed payments for business owners are–

<a href="https://iccwbo.org/publication/global-survey/">64% of respondents</a> in a related survey reported that late payments significantly impact their business operations, with 33% indicating that it affects their ability to pay suppliers. It further results in cash flow problems and affects their ability to fulfil orders, pay suppliers, and invest in future business ventures.&nbsp;

Additionally, you may lose customer trust and credibility if you cannot manage your finances effectively.

Then, how can you manage payments effectively?

In the highly competitive landscape of today's business world, you need a reliable partner to traverse the intricacies of international trade. Skydo assists you in managing international payments by setting up international accounts to accept payments seamlessly and unlock:

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