UNIT 1 – ENTREPRENEURAL COMPETENCE

ENTREPRENEUR - CONCEPT / MEANING:

The term 'Entrepreneur' has been derived from a French word 'Entreprendre' meaning to
undertake certain activities. Normally, entrepreneur has to perform two types of functions
which are explained here with the help of pictures given below.

Factors of production viz. land, labour and capital are scattered at different places. All these
factors have to be assembled together. This work is done by enterprise through entrepreneur.
This is an 'Organization Function'. Organization function is the work of bringing the required
factors together and making them work harmoniously.
ENTREPRENEURSHIP AS A CAREER:
Entrepreneurs and small business owners supply the American economy with some of its
jobs. An entrepreneur can be an artist, homemaker, restaurant owner or an inventor who just
came up the latest cell phone application. What defines an entrepreneur is the desire and
courage to strike out on one's own in the world of business instead of working for someone
else. Finding the money to start a business is often the first challenge faced by a new
entrepreneur, but due to the positive effect entrepreneurs may have on the economy, efforts
are made by both private and government lenders to supply promising professionals with
inexpensive capital.

Educatio Educational prerequisites are non-specific; business experience and higher levels
n of education are beneficial regardless of the field

Customer service skills, comfortable with risk, multitasking skills, marketing

Job Skills
skills, bookkeeping skills
Required Education
Educational requirements for entrepreneurs are non-specific; however, a strong business
background can be helpful in securing financial support. While successful entrepreneurs are
well trained in their fields, qualifications can vary. For example, aspiring restaurateurs may
be new graduates of culinary schools and hospitality programs or skilled chefs. However,
someone with a Master of Business Administration (MBA) who knows nothing about
cooking, but has always dreamed of owning a great neighbourhood pub, may also qualify as
an entrepreneur. All entrepreneurs need capital, so the ability to write an effective business
plan is vital.

Required Skills
Entrepreneurs have a tolerance for risk taking and a willingness to leave the security of a 9-5
job. The ability to multitask is key, especially at the beginning of an enterprise, where an
entrepreneur may need to function as a bookkeeper, customer service agent and marketing
expert.

Career Outlook,

Cost Estimators
Cost estimators analyze information and determine approximately how much labour, money
and time may be needed to develop a building, product or service. While cost estimators in
construction may be able to get by without a college degree, completion of an undergraduate
program in building or physical science, business or engineering is the usual minimum
requirement for securing this position. Cost estimators must also be skilled in mathematics.
The BLS reports that employment prospects for cost estimators nationwide are expected to
increase by 9% between 2014 and 2024. In May 2015, professionals employed in this
position earned a median annual wage of $60,390.

Financial Analysts
Financial analysts help businesses and clients make sound investments, such as those related
to bonds or stocks. Relevant undergraduate majors can include economics, engineering,
finance or statistics, among other areas. A Master of Business Administration or Master of
Science may be required for higher-level positions.
Start a New Business Concept
You come up with a new idea for an innovative business be it a new type of hamburger
restaurant, waste hauling service or web site. You figure out what resources are needed to
launch it -- money, retail space, equipment, employees -- and get started.
Buy a Franchise
Some who have a strong desire to own their own business and be their own boss choose to
buy a franchise. A franchise is defined as an agreement between a small business owner, the
franchisee, and the parent company, the franchiser. The parent company gives the franchisee
the right to sell the company's products and often provides support services like advertising
and supplier relationships, in return for a franchise fee and percent of the profits. Franchising
is a very common -- for example, many of the largest fast food chains are franchisers -- and it
can offer an entrepreneur the advantage of starting out with a well-known brand and business
model. But that can come at the cost of sharing your profits and losing some of the
independence and control entrepreneurs value. Some find the franchise system works so well
for them that they end up operating multiple stores for a single franchiser.
Buy an Existing Business
If there's no one innovative idea of your own that you think would make a good business, you
might consider buying an existing business. This offers the chance to start out with an
established small business that already has an income stream and a core set of customers.
You can run your own show without having to go through the initial start-up phase. But it's
critically important to do a thorough job of evaluating the business before you buy it, to have
a clear contract with the seller about what you can each expect after the sale (for example, do
you want a non-compete agreement?), and to understand that existing customers are yours to
lose if you don't manage the business at least as well as the outgoing owner.
Copy an Existing Concept
Find a great local business started by someone else. If there's nothing like it in your own
community, you can study it and transfer it to your community or to a place you want to live.
You need to thoroughly do your research and be sure that a "match" exists between the
concept and demographics of where you choose to locate the business. And of course, while
you can copy a general idea, don't run the risk of a lawsuit -- or worse -- by infringing on
someone else's trademarks, copyrights, or other protected intellectual property.
Become a One Person Firm
You can subcontract your skills and become a one person consulting or services firm. You
have the advantage of being highly focused and can offer your clients lower costs, specialized
services, and greater flexibility than they would have if they tried to hire full-time employees
with the same skills. A great many professional, technical, and clerical specialists have
chosen this career path. Companies find it easier and cheaper to subcontract out work rather
than hiring folks that they may have just laid off in their last round of cost-cutting -- or may
have to lay off next week or next year. It allows them to stay lean and flexible.
Start a "Work at Home" Business
This is one of the hottest areas in the economy today. Many small business ideas can be
launched from home. This can involve everything from stuffing envelopes to running an
Ebay business or starting your own web site.

ENTREPRENEUR – PERSONALITY CHARACTERISTICS OF SUCCESSFUL ENTREPRENEUR:

Creativity
Do not be dissuaded by the challenge to be creative. You need not be the original wheel
creator to improve upon a stone cylinder. By standing on the shoulders of giants, you can take
existing ideas and make small improvements upon them. Your best ideas may come to you as
you are falling asleep or while you are taking a shower. Recognize when you have a fresh
idea and do not let them get away from you. Write them down! Not every idea has to be a
home run. By accumulating your ideas, you will be able to distill the great ones from the rest
and be ready to run with the best.

Risk Tolerance
Rewards rarely come without risk. Your ability to take advantage of an opportunity will
depend, in part, on your tolerance for risk. As the founder of a start-up, investors will expect
you to have a vested interest in your business. If you will not bet on your idea, why should
anybody else? If you cannot afford the risk, financially or emotionally, then you might make
decisions that are too tepid to be successful. To do well, an entrepreneur needs the strong
sense of self-efficacy to believe the risk will be surmountable.
Responsiveness
Opportunity can leave quickly. With the Internet, the spread of information and ideas has led
to deeper, faster competition to be the first mover. The ability to respond to the market and
new business opportunities can be the difference between a successful entrepreneur and a
failed business model. To be responsive, an entrepreneur must have the flexibility of mind
and resources necessary to see and take advantage of new and upcoming possibilities.
Learning from your mistakes and those of others to implement change can keep businesses
afloat. Calcifying rigidity, on the other hand, can turn a start-up into dust.

Leadership
It is up to the entrepreneur to marshal assets. Leaders are challenged with taking possibilities
and turning them into inspiring visions for others. You will inevitably have to sell either your
idea or your product to begin your entrepreneurship. It will be up to the entrepreneur to take
the idea and turn it into actions and products to capitalize on the opportunity. Leadership can
come in many forms, but it is nevertheless essential to entrepreneurship. You must take the
lead for your ideas to come to fruition.

Rights
Intellectual property laws can provide you with exclusive business rights to your ideas. If you
do not protect your ideas, they may be copied -- cheaply. Once an idea is in the public
domain, it may no longer be possible to use that idea as a competitive advantage. Society
values ideas being shared. In exchange for sharing ideas, governments provide limited
monopolies that will allow you to capitalize on them for a period, making up in part for the
costs you have incurred in research and development. Intellectual property professionals can
aid you in seeking such rights.

Risk Bearing
Entrepreneur has to bear risks and uncertainties. For facing uncertainties he may get profit or
may incur loss. This is the 'Risk Bearing Function' and entrepreneur is the risk bearer.
KNOWLEDGE / SKILLS REQUIRED FOR AN ENTREPRENEUR:

1. Resiliency. The ability to weather the ups and downs of any

business since it never goes exactly the way the business plan
described it. This skill enables the entrepreneur to keep going when
the outlook is bleak.
2. Focus. After setting a long term vision, knowing how to “laser
focus” on the very next step to get closer to the ultimate goal. There
are so many distracting forces when trying to build a business that
this skill is not easy to master.
3. Invest for the long-term. Most entrepreneurs are not patient
and focus only on what comes next, rather than where the company
needs to go. Overnight success may take 7 to 10 years.
Entrepreneurs need to stop, pause and plan on a quarterly basis.
4. Find and manage people. Only by learning to leverage
employees, vendors and other resources will an entrepreneur build a
scalable company. They need to learn to network to meet the right
people. Entrepreneurs strive to guarantee they will get honest and
timely feedback from all these sources.
5. Sell. Every entrepreneur is a sales person whether they want to
be or not. They are either selling their ideas, products or services to
customers, investors or employees. They work to be there when
customers are ready to buy. Alternately, they know how to let go
and move on when they are not.
6. Learn. Successful entrepreneurs realize they don’t know
everything and the market is constantly changing. They stay up to
date on new systems, technology, and industry trends.
7. Self-reflection. Allow downtime to reflect on the past and plan
for the future. Always working only leads to burnout physically and
emotionally.
8. Self-reliance: While there is a lot of help for the entrepreneur, in
the end, they need to be resourceful enough to depend on
themselves.
 ENTREPRENEUR – IMPORTANCE, QUALITIES & PROJECT FEASIBILITY

Entrepreneur:

Entrepreneur is a loanword from French. It is defined as an individual who organizes or

operates a business or businesses. Cantillon saw the entrepreneur as a risk-taker while Say
considered the entrepreneur a "planner".

Cantillon defined the term as a person who pays a certain price for a product and resells it at
an uncertain price: "making decisions about obtaining and using the resources while
consequently admitting the risk of enterprise." Successful entrepreneurs have the ability to
lead a business in a positive direction by proper planning, to adapt to changing environments
and understand their own strengths and weakness.

Entrepreneurship:

Entrepreneurship is the process of starting a business or other organization. The entrepreneur

develops a business model, acquires the human and other required resources, and is fully
responsible for its success or failure. Entrepreneurship operates within an entrepreneurship
ecosystem.

In recent years, "entrepreneurship" has been extended from its origins in business to include
social and political activity. Entrepreneurship within an existing firm or large organization
has been referred to as intrapreneurship and may include corporate ventures where large
entities spin off subsidiary organizations. Entrepreneurs are leaders willing to take risk and
exercise initiative, taking advantage of market opportunities by planning, organizing, and
employing resources, often by innovating new or improving existing products. More recently,
the term entrepreneurship has been extended to include a specific mindset resulting in
entrepreneurial initiatives, e.g. in the form of social entrepreneurship, political
entrepreneurship, or knowledge entrepreneurship.

Entrepreneurship given the potential to support economic growth and social, it is the goal of
various government policies to develop a culture of entrepreneurial thinking. This can be
done with a variety of ways: by integrating entrepreneurship into the education system,
legislating to encourage risk taking, and the national campaign.
This phenomenon is by Kauffman.org, working to better understand the phenomenon of
entrepreneurship, the level of education and entrepreneurship training to promote
entrepreneurial business-friendly policies, and to facilitate the commercialization of new
technologies by entrepreneurs and others, which is very promising to improve the economic
welfare of the nation.

Abstract:

The important role of entrepreneurship and innovation is economic growth. We know that
innovative entrepreneurs - those who bring new products and processes to the market - are
disproportionately responsible for the breakthrough or ‘disruptive’ innovations that change
our daily lives and allow for the rapid improvement in standards of living that developed
countries have experienced over the past century, and also disproportionately responsible for
job growth in industrialized economies.

The role of entrepreneurship in the economic growth of developing countries is certainly

even more complex. Studies of this topic often look to history for answers, following the
development path of industrialized or growing nations to find the ‘secret sauce’ for their
success. Just as innovative entrepreneurial activity is vital to the ongoing growth of
developed countries, innovation and entrepreneurship are essential components to a
developing economy’s long-term growth.

Keywords: economic growth, entrepreneurship, innovation, industry dynamics, firm

dynamics, development, data, barriers, entrepreneurs, innovative

Importance of Entrepreneurship Education:

Entrepreneurship is a key driver of our economy. Wealth and a high majority of jobs are
created by small businesses started by entrepreneurially minded individuals, many of whom
go on to create big businesses. People exposed to entrepreneurship frequently express that
they have more opportunity to exercise creative freedoms, higher self esteem, and an overall
greater sense of control over their own lives. As a result, many experienced business people
political leaders, economists, and educators believe that fostering a robust entrepreneurial
culture will maximize individual and collective economic and social success on a local,
national, and global scale. It is with this in mind that the National Standards for
Entrepreneurship Education were developed: to prepare youth and adults to succeed in an
entrepreneurial economy.

Entrepreneurship education is a lifelong learning process, starting as early as elementary

school and progressing through all levels of education, including adult education. The
Standards and their supporting Performance Indicators are a framework for teachers to use in
building appropriate objectives, learning activities, and assessments for their target audience.
Using this framework, students will have: progressively more challenging educational
activities; experiences that will enable them to develop the insight needed to discover and
create entrepreneurial opportunities; and the expertise to successfully start and manage their
own businesses to take advantage of these opportunities.

Importance of Entrepreneurs:

Entrepreneurs Create New Businesses

Path breaking offerings by entrepreneurs, in the form of new goods & services, result in new
employment, which can produce a cascading effect or virtuous circle in the economy. The
stimulation of related businesses or sectors that support the new venture add to further
economic development.

Entrepreneurs Add to National Income

Entrepreneurial ventures literally generate new wealth. Existing businesses may remain
confined to the scope of existing markets and may hit the glass ceiling in terms of income.
New and improved offerings, products or technologies from entrepreneurs enable new
markets to be developed and new wealth created.

Entrepreneurs Also Create Social Change

Through their unique offerings of new goods and services, entrepreneurs break away from
tradition and indirectly support freedom by reducing dependence on obsolete systems and
technologies. Overall, this results in an improved quality of life, greater morale and economic
freedom.

Community Development

Entrepreneurs regularly nurture entrepreneurial ventures by other like-minded individuals.

They also invest in community projects and provide financial support to local charities. This
enables further development beyond their own ventures.

Concept of Entrepreneurship:

The word “entrepreneur” is derived from the French verb enterprendre, which means ‘to
undertake’. This refers to those who “undertake” the risk of new enterprises. An enterprise is
created by an entrepreneur. The process of creation is called “entrepreneurship”.

Entrepreneurship is a process of actions of an entrepreneur who is a person always in search

of something new and exploits such ideas into gainful opportunities by accepting the risk and
uncertainty with the enterprise.

Characteristics of Entrepreneurship:

Entrepreneurship is characterized by the following features:

1. Economic and dynamic activity:

Entrepreneurship is an economic activity because it involves the creation and operation of an

enterprise with a view to creating value or wealth by ensuring optimum utilization of scarce
resources. Since this value creation activity is performed continuously in the midst of
uncertain business environment, therefore, entrepreneurship is regarded as a dynamic force.

2. Related to innovation:

Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an

individual to continuously evaluate the existing modes of business operations so that more
efficient and effective systems can be evolved and adopted. In other words, entrepreneurship
is a continuous effort for synergy (optimization of performance) in organizations.

3. Profit potential:

“Profit potential is the likely level of return or compensation to the entrepreneur for taking on
the risk of developing an idea into an actual business venture.” Without profit potential, the
efforts of entrepreneurs would remain only an abstract and a theoretical leisure activity.

4. Risk bearing:

The essence of entrepreneurship is the ‘willingness to assume risk’ arising out of the creation
and implementation of new ideas. New ideas are always tentative and their results may not be
instantaneous and positive.

An entrepreneur has to have patience to see his efforts bear fruit. In the intervening period
(time gap between the conception and implementation of an idea and its results), an
entrepreneur has to assume risk. If an entrepreneur does not have the willingness to assume
risk, entrepreneurship would never succeed.

5. Development of managerial capabilities:

The biggest significance of entrepreneurship lies in the fact that it helps in identifying and
developing managerial capabilities of entrepreneurs. An entrepreneur studies a problem,
identifies its alternatives, compares the alternatives in terms of cost and benefits implications,
and finally chooses the best alternative.

This exercise helps in sharpening the decision making skills of an entrepreneur. Besides,
these managerial capabilities are used by entrepreneurs in creating new technologies and
products in place of older technologies and products resulting in higher performance.

6. Creation of organizations:

Entrepreneurship results into creation of organizations when entrepreneurs assemble and

coordinate physical, human and financial resources and direct them towards achievement of
objectives through managerial skills.

7. Improving standards of living:

By creating productive organizations, entrepreneurship helps in making a wide variety of
goods and services available to the society which results into higher standards of living for
the people.

Possession of luxury cars, computers, mobile phones, rapid growth of shopping malls, etc. are
pointers to the rising living standards of people, and all this is due to the efforts of
entrepreneurs.

8. Means of economic development:

Entrepreneurship involves creation and use of innovative ideas, maximization of output from
given resources, development of managerial skills, etc., and all these factors are so essential
for the economic development of a country.

Entrepreneurial Process:

Entrepreneurship is a process, a journey, not the destination; a means, not an end. All the
successful entrepreneurs like Bill Gates (Microsoft), Warren Buffet (Hathaway), Gordon
Moore (Intel) Steve Jobs (Apple Computers), Jack Welch (GE) GD Birla, Jamshedji Tata and
others all went through this process.

To establish and run an enterprise it is divided into three parts – the entrepreneurial job, the
promotion, and the operation. Entrepreneurial job is restricted to two steps, i.e., generation of
an idea and preparation of feasibility report. In this article, we shall restrict ourselves to only
these two aspects of entrepreneurial process.
 The Entrepreneurial Process

1. Idea Generation:

To generate an idea, the entrepreneurial process has to pass through three stages:

a. Germination:

This is like seeding process, not like planting seed. It is more like the natural seeding. Most
creative ideas can be linked to an individual’s interest or curiosity about a specific problem or
area of study.

b. Preparation:

Once the seed of interest curiosity has taken the shape of a focused idea, creative people start
a search for answers to the problems. Inventors will go on for setting up laboratories;
designers will think of engineering new product ideas and marketers will study consumer
buying habits.

c. Incubation:
This is a stage where the entrepreneurial process enters the subconscious intellectualization.
The sub-conscious mind joins the unrelated ideas so as to find a resolution.

2. Feasibility study:

Feasibility study is done to see if the idea can be commercially viable.

It passes through two steps:

a. Illumination:

After the generation of idea, this is the stage when the idea is thought of as a realistic
creation. The stage of idea blossoming is critical because ideas by themselves have no
meaning.

b. Verification:

This is the last thing to verify the idea as realistic and useful for application. Verification is
concerned about practicality to implement an idea and explore its usefulness to the society
and the entrepreneur.

Types of Entrepreneurs:

Depending upon the level of willingness to create innovative ideas, there can be the following
types of entrepreneurs:

1. Innovative entrepreneurs:

These entrepreneurs have the ability to think newer, better and more economical ideas of
business organization and management. They are the business leaders and contributors to the
economic development of a country.

Inventions like the introduction of a small car ‘Nano’ by Ratan Tata, organised retailing by
Kishore Biyani, making mobile phones available to the common may by Anil Ambani are the
works of innovative entrepreneurs.

2. Imitating entrepreneurs:
These entrepreneurs are people who follow the path shown by innovative entrepreneurs. They
imitate innovative entrepreneurs because the environment in which they operate is such that it
does not permit them to have creative and innovative ideas on their own.

Such entrepreneurs are found in countries and situations marked with weak industrial and
institutional base which creates difficulties in initiating innovative ideas.

In our country also, a large number of such entrepreneurs are found in every field of business
activity and they fulfill their need for achievement by imitating the ideas introduced by
innovative entrepreneurs.

Development of small shopping complexes is the work of imitating entrepreneurs. All the
small car manufacturers now are the imitating entrepreneurs.

3. Fabian entrepreneurs:

The dictionary meaning of the term ‘Fabian’ is ‘a person seeking victory by delay rather than
by a decisive battle’. Fabian entrepreneurs are those individuals who do not show initiative in
visualizing and implementing new ideas and innovations wait for some development which
would motivate them to initiate unless there is an imminent threat to their very existence.

4. Drone entrepreneurs:

The dictionary meaning of the term ‘drone’ is ‘a person who lives on the labor of others’.
Drone entrepreneurs are those individuals who are satisfied with the existing mode and speed
of business activity and show no inclination in gaining market leadership. In other words,
drone entrepreneurs are die-hard conservatives and even ready to suffer the loss of business.

5. Social Entrepreneur:

Social entrepreneurs drive social innovation and transformation in various fields including
education, health, human rights, workers’ rights, environment and enterprise development.

They undertake poverty alleviation objectives with the zeal of an entrepreneur, business
practices and dare to overcome traditional practices and to innovate. Dr Mohammed Yunus of
Bangladesh who started Gramin Bank is a case of social entrepreneur.
Functions of an Entrepreneur:

The important functions performed by an entrepreneur are listed below:

1. Innovation:

An entrepreneur is basically an innovator who tries to develop new technology, products,

markets, etc. Innovation may involve doing new things or doing existing things differently.
An entrepreneur uses his creative faculties to do new things and exploit opportunities in the
market. He does not believe in status quo and is always in search of change.

2. Assumption of Risk:

An entrepreneur, by definition, is risk taker and not risk shirker. He is always prepared for
assuming losses that may arise on account of new ideas and projects undertaken by him. This
willingness to take risks allows an entrepreneur to take initiatives in doing new things and
marching ahead in his efforts.

3. Research:

An entrepreneur is a practical dreamer and does a lot of ground-work before taking a leap in
his ventures. In other words, an entrepreneur finalizes an idea only after considering a variety
of options, analyzing their strengths and weaknesses by applying analytical techniques,
testing their applicability, supplementing them with empirical findings, and then choosing the
best alternative. It is then that he applies his ideas in practice. The selection of an idea, thus,
involves the application of research methodology by an entrepreneur.

4. Development of Management Skills:

The work of an entrepreneur involves the use of managerial skills which he develops while
planning, organizing, staffing, directing, controlling and coordinating the activities of
business. His managerial skills get further strengthened when he engages himself in
establishing equilibrium between his organization and its environment.

However, when the size of business grows considerably, an entrepreneur can employ
professional managers for the effective management of business operations.

5. Overcoming Resistance to Change:

New innovations are generally opposed by people because it makes them change their
existing behavior patterns. An entrepreneur always first tries new ideas at his level.

It is only after the successful implementation of these ideas that an entrepreneur makes these
ideas available to others for their benefit. In this manner, an entrepreneur paves the way for
the acceptance of his ideas by others. This is a reflection of his will power, enthusiasm and
energy which helps him in overcoming the society’s resistance to change.

6. Catalyst of Economic Development:

An entrepreneur plays an important role in accelerating the pace of economic development of

a country by discovering new uses of available resources and maximizing their utilization.

To better appreciate the concept of an entrepreneur, it is desirable to distinguish him from an

entrepreneur and promoter.

Some Myths about Entrepreneurship:

Over the years, a few myths about entrepreneurship have developed. These are as under:

(i) Entrepreneurs, like leaders, are born, not made:

The fact does not hold true for the simple reason that entrepreneurship is a discipline
comprising of models, processes and case studies.

One can learn about entrepreneurship by studying the discipline.

(ii) Entrepreneurs are academic and socially misfits:

Dhirubai Ambani had no formal education. Bill Gates has been a School drop-out. Therefore,
this description does not apply to everyone. Education makes an entrepreneur a true
entrepreneur. Mr Anand Mahindra, Mr Kumar Mangalam Birla, for example, is educated
entrepreneurs and that is why they are heroes.

(iii) To be an entrepreneur, one needs money only:

Finance is the life-blood of an enterprise to survive and grow. But for a good idea whose time
has come, money is not a problem.

(iv) To be an entrepreneur, a great idea is the only ingredient:

A good or great idea shall remain an idea unless there is proper combination of all the
resources including management.

(v) One wants to be an entrepreneur as having no boss is great fun:

It is not only the boss who is demanding; even an entrepreneur faces demanding vendors,
investors, bankers and above all customers.

Benefits of Entrepreneurship:

 Creation of entrepreneurial thinkers who also have the skills and tools to start their
own businesses.
 Write a business plan
 Apply economic principles
 Determine individual entrepreneurial interests
 Apply basic marketing skills
 Use strategies for idea generation
 Assess feasibility of ideas
 Manage risk
 Identify legitimate sources of capital
 Evaluate ownership structures
 Translate problems into opportunities
 Apply principles of human relations management
 Speak "business" & "entrepreneurship"
 Apply basic accounting principles
 Engage in ethical business practices
 Demonstrate financial management
 Demonstrate skills in business start-up
 Demonstrate skills in maintaining business longevity
 Demonstrate knowledge of business closings versus failure
 Ability to find next level of training or access other resources and services
 Demonstrate business management/ operation skills
 Use components of a business plan
 Determine impact on unemployment
 Changed attitude toward entrepreneurship as a means of making a living
  Changes in personal and career attitudes including

o Self-worth
o Ability to control one's own life
o Self-awareness
o Self-management/ personality responsibility
o Transfer of learning
o Motivation
o Teamwork
o Interpersonal communications
o Problem solving
o Creativity

I. ENTREPRENEURIAL SKILLS:

A. ENTREPRENEURIAL PROCESSES

The Processes and Traits/Behaviors associated with entrepreneurial success.

Discovery:

Assess global trends and opportunities

Assess opportunities for venture creation
Describe idea-generation methods
Generate venture ideas

Concept Development:

Describe entrepreneurial planning considerations

Describe strategies to protect intellectual property

Resourcing:

Distinguish between debt and equity financing for venture creation

Describe considerations in selecting capital resources
Actualization:

Explain the complexity of business operations

Explain the need for business systems and procedures
Describe the use of operating procedures

Harvesting:

Explain the need for continuation planning

B.ENTREPRENEURIAL TRAITS/BEHAIVORS

Understands the personal traits/behaviors associated with successful entrepreneurial

performance
Leadership:

Lead others using positive statements

Develop team spirit
Share authority, when appropriate

Personal Assessment:

Determine interests
Conduct self-assessment to determine entrepreneurial potential

Personal Management:

Demonstrate problem-solving skills

Assess risks

II.READY SKILLS:
A. BUSINESS FOUNDATIONS
Understands fundamental business concepts that affect business decision making
The basic business knowledge and skills that are prerequisites or co-requisites for becoming a
successful entrepreneur
Business Concepts:
Explain opportunities for creating added value
Determine issues and trends in business
Describe the need for and impact of ethical business practices
Business Activities:
Explain marketing management and its importance in a global economy
Describe marketing functions and related activities
Explain the nature and scope of operations management
Explain the concept of management
Explain the concept of financial management
Explain the concept of human resource management
Explain the concept of risk management
Explain the concept of strategic management

B.COMMUNICATIONS AND INTERPERSONAL SKILLS

Understands concepts, strategies, and systems needed to interact effectively with others
Fundamentals of Communication:

Reinforce service orientation through communication

Explain the nature of effective verbal communications
Make oral presentations
Explain the nature of written communications
Write business letters
Write informational messages

Staff Communications

Ethics in Communication

Group Working Relationships

Dealing with Conflict

C.DIGITAL SKILLS

Understands concepts and procedures needed for basic computer operations

Computer Basics:

Determine file organization

Demonstrate system utilities for file management
Compress or alter files & Evaluate credibility of Internet resources
Demonstrate file management skills

Computer Applications:
Solve routine hardware and software problems
Operate computer-related hardware peripherals
Explain the nature of e-commerce
Describe the impact of the Internet on business

D.ECONOMICS

Understands the financial concepts and tools used in making business decisions

Factors of production:
Explain the concept of scarcity
Explain the concept of opportunity costs
Describe the nature of economics and economic activities
Determine forms of economic utility created by business activities

Cost-Profit Relationships

Economic Indicators/Trends

Economic Systems

Describe the relationship between government and business

Determine factors affecting business risk
Describe types of market structures
Determine the impact of small business/ entrepreneurship on market economies

International Concepts:

Describe small-business opportunities in international trade

Determine the impact of cultural and social environments on world trade

E.PROFESSIONAL DEVELOPMENT
Understands concepts and strategies needed for career exploration, development, and growth

Career Planning:

Evaluate career opportunities based on current/ future economy

Select and use sources of career information
Determine tentative occupational interest & Analyze employer expectations in the business
environment & Explain the rights of workers
Explain employment opportunities in entrepreneurship
Job-Seeking Skills:

Utilize job-search strategies

Complete a job application
Interview for a job
Write a follow-up letter after job interviews
Write a letter of application
Prepare a résumé
Describe techniques for obtaining work experience (e.g., volunteer activities, internships)
Explain the need for ongoing education as a worker
Explain possible advancement patterns for jobs
Determine skills needed to enhance career progression
Utilize resources that can contribute to professional development (e.g., trade journals/
periodicals, professional/trade associations, classes/seminars, trade shows, and mentors)

III. BUSINESS FUNCTIONS:

The business activities performed by entrepreneurs in managing the business
A.FINANCIAL LITERACY & MANAGEMENT

Understands the financial concepts and tools used in making business decisions

Money Basics:

Recognize types of currency (paper money, coins, banknotes, government bonds, treasury
notes, etc.)
Read and interpret a pay stub
Explain legal responsibilities associated with use of money

Financial Services:

Describe services provided by financial institutions

Explain legal responsibilities of financial institutions
Explain costs associated with use of financial services

Personal Money Management

Explain types of investments

Accounting
Money Management

Finance:

Explain the purposes and importance of obtaining business credit

Explain the nature of overhead/operating expenses

B.HUMAN RESOURCE MANAGEMENT

Understands the concepts, systems, and strategies needed to acquire, motivate, develop, and
terminate staff

Organizing:

Develop job descriptions

Organize work/projects for others
Delegate responsibility for job tasks

Staffing

Training/Development

Morale/Motivation & Exhibit leadership skills

Encourage team building

Assessment

C. INFORMATION MANAGEMENT
Understands the concepts, systems, and tools needed to access, process, maintain, evaluate,
and disseminate information for business decision-making.
Record Keeping:

Explain the nature of business records

Technology:

Explain ways that technology impacts business

Demonstrate writing/publishing applications
Demonstrate presentation applications
Demonstrate database applications
Demonstrate spreadsheet applications
Demonstrate collaborative/groupware applications
Information Acquisition

D. MARKETING MANAGEMENT

Understands the concepts, processes, and systems needed to determine and satisfy customer
needs/wants/expectations, meet business goals/objectives, and create
new product/service ideas.

Product/Service Creation:

Assess opportunities for import substitution

Determine initial feasibility of product/service ideas
Plan product/service mix
Build brand/image

Marketing-Information Management

Explain the concept of market and market identification

Determine market segments
Select target markets
Explain the concept of marketing strategies
Describe the nature of marketing planning

Promotion:

Develop promotional plan for a business

Write a news release
Write sales letters
Manage online (www) activities

Pricing:

Establish pricing objectives

Select pricing strategies

Selling:

Acquire product information for use in selling

Analyze product information to identify product features and benefits
Prepare for the sales presentation
Establish relationship with client/customer
Determine customer/client needs
Determine customer's buying motives for use in selling
Recommend specific product
Convert customer/client objections into selling points
Close the sale
Demonstrate suggestion selling
Plan follow up strategies for use in selling
Process sales documentation
Prospect for customers
Plan strategies for meeting sales quotas
Analyze technology for use in the sales function
Manage online sales process

E. OPERATIONS MANAGEMENT
Understands the processes and systems implemented to facilitate daily business operations.

Business Systems

Channel Management

Purchasing/Procurement

Daily Operations

F.RISK MANAGEMENT
Understands the concepts, strategies, and systems that businesses implement and enforce to
minimize loss
Business Risks:

Describe types of business risk

Determine ways that small businesses protect themselves against loss

Legal Considerations:

Explain legal issues affecting businesses

Protect intellectual property rights
Select form of business ownership

G.STRATEGIC MANAGEMENT
Understands the processes, strategies, and systems needed to guide the overall business
organization

Planning:

Evaluate business acquisition options

Develop company goals/objectives
Develop business mission
Forecast income/sales
Conduct break-even analysis
Develop action plans
Develop business plan

Controlling:

Interpret financial statements

Qualities of Entrepreneur:

1. Not being afraid of delegating tasks. As entrepreneurs, we tend to always have a full
plate and feel that we can take on any task. In reality, if we keep adding to the already-full
plate it is eventually going to collapse and create a mess. Don’t be afraid to delegate tasks to
an experienced member of your company that has the ability to get tasks completed.

2. Managing time effectively. Proper time management is necessary to distinguish between

extremely urgent tasks and those that can wait. Use a notebook or whiteboard to prioritize
your tasks by writing them down. Mobile devices and tablets have calendars and notepads,
but nothing is more effective than actually writing down your “to-do” list. Focus on one task
at a time and don’t let new “to-do’s” disrupt your focus. Knock them out one at a time.

3. Visualizing goals and success. You need to see your goals and success in your mind first
if you plan on making them a reality. Not only do you need to visualize the end result, but
you also need to visualize every step that it is going to take to get there. Napoleon Hill said it
best: “What the mind can conceive and believe it can achieve.”
4. Listening and communicating well. If you aren’t a good listener and communicator it
will result in miscommunications and wasted time, not to mention added work to correct the
miscommunications. Time is one thing that all entrepreneurs would like more of. How often
have you wished there was more hours in a day? Avoid wasting priceless time repeating and
redoing tasks due to poor communication.

5. Understanding your time is valuable. While it would be great to be able to give everyone
the time that they wanted, it would leave you with little to no time to accomplish the things
that you need to get done. If a sales representative has a question, they should address it with
the sales manager. If a customer has a question they should be speaking with your customer-
care representative. While people might demand your time, it doesn’t mean that you have to
grant them the time. Your time is valuable, so don’t waste it on disruptions that should be
handled by other members of your organization.

6. Seeking help when you need it. We often let our stubbornness prevent us from asking for
help. Have you ever been stumped and someone comes along with the answer and you think,
“Why in the world didn’t I think of that?” Often times a clear mind and different viewpoint
can quickly solve a problem or provide an answer to a question. Don’t be afraid to ask for
help when you need it, as it can also help to strengthen the communication within your
organization.

7. Getting out of the office. As an entrepreneur, you have probably spent several 18-hour
days behind your computer or worked through the night late at your office until the sun came
back up. It is important to break your day up, for both your physical and mental health. Take
a few breaks throughout the day and walk around the office or take a walk outside to clear
your head and give your eyes a break from the computer. Leave your office for lunch, even if
you bring it -- go eat outside and get some fresh air. Want to jumpstart your day and have
healthy energy throughout the day? Go to the gym bright and early before you hit the office
every morning and get a good workout in. You will have a clear mind, abundant energy and
improved mental focus.

8. Giving back. It is important to understand how lucky we are, as entrepreneurs, to do what

we love. When you are appreciative of what you have accomplished and then take a step back
to see what you can do to give back, it gives you a feeling like no other.
5 important roles for an entrepreneur:

1. Chief Customer Officer. Let’s face it if you don’t have customers, you don’t
have much of a business. Here the challenge many business owners face: they
confuse great customer experience with great customer service.
2. Chief Financial Officer. Ah, the part of running a business almost everyone
would like to get rid of bookkeeping, accounting and tax. The reality is these
are some of the most important functions in your business and your numbers
actually tell a story a story of where you’ve been, how healthy your business is
and what you should change to be successful in the long term.
3. Chief People Officer. You may not have employees yet but nonetheless,
you’re now in a leadership role. The most important person you need to look
after? You! It’s easy as an entrepreneur to get caught up in everything that
needs to get done and find yourself working all hours of the day and night.
Doing something you love and are passionate about makes time fly by.
However, while you’re caught up in the adrenaline rush called
entrepreneurship you can get burned out, so make sure you take time to look
after you and exercise, eat properly and get some rest and down time. You’ll
need it to keep fuelling the passion!
4. Chief Innovation Officer. So this may not be the most common title but it’s
critical to your long term success and sustainability. In order to stay relevant,
competitive and on the top of your game, you need to reinvent yourself
challenging the status quo, innovating and looking for new offerings that keep
your customers coming back. Time spent innovating truly is an investment so
don’t overlook how important this role is.
5. Chief Executive Officer. The CEO of any company spends a great deal of
time looking at the big picture, planning for the future and creating a vision.
At the same time, when you’re running the show, it’s easy to get bogged down
in the details. Make sure you are spending a significant amount of your time
on the strategy it’s what will lay the foundation for your future success.

The Importance of Entrepreneurs - Building Their Personal Brand:

Devise a social-media strategy. Where are the people you need to reach? LinkedIn,
Facebook, Pinterest, Twitter and other social-media platforms can appeal to different
audiences and can serve different objectives. They often work best when used at the same
time as they create the echo chamber for information about you.

Create a content strategy. What information will you post on and through these channels?
What is the unique value proposition of your company? What problem do you solve? Start to
write several articles or opinion posts you can put on these channels.

Research. Look at what others founders and executives of companies in your space are doing
to get an idea of how your content can be different or complementary. What visual elements
can you add to make your content come to life?

Go beyond social. Outside of social channels, consider your local newspaper or other print
outlets. Many have reporters who write entrepreneur profiles, cover start-ups or are looking
for round ups about current trends.

But before you jump all in, make sure you consider these things.

Understand how each social channel works. How long is too long? When is the best time
to post new content? What features of each approach can you leverage? Understand how to
be informative and authentic. Avoid being overly sales-oriented and long winded – it’s a
huge turn-off.

Be prepared to feed the best. Once you start, you shouldn’t stop. Your audience will get
used to seeing fresh content from you. A lull in information means interested parties may get
disenchanted and turn away.

Factors affecting Entrepreneurship:

Entrepreneurship is a complex phenomenon influenced by the interplay of a wide variety of

factors.

Some of the important factors are listed below:

1. Personality Factors:

Personal factors, becoming core competencies of entrepreneurs, include:

(a) Initiative (does things before being asked for)

(b) Proactive (identification and utilization of opportunities)

(c) Perseverance (working against all odds to overcome obstacles and never complacent with
success)

(d) Problem-solver (conceives new ideas and achieves innovative solutions)

(e) Persuasion (to customers and financiers for patronization of his business and develops &
maintains relationships)

(f) Self-confidence (takes and sticks to his decisions)

(g) Self-critical (learning from his mistakes and experiences of others)

(h) A Planner (collects information, prepares a plan, and monitors performance)

(i) Risk-taker (the basic quality).

2. Environmental factors:

These factors relate to the conditions in which an entrepreneur has to work. Environmental
factors such as political climate, legal system, economic and social conditions, market
situations, etc. contribute significantly towards the growth of entrepreneurship. For example,
political stability in a country is absolutely essential for smooth economic activity.

Frequent political protests, bandhs, strikes, etc. hinder economic activity and
entrepreneurship. Unfair trade practices, irrational monetary and fiscal policies, etc. are a
roadblock to the growth of entrepreneurship. Higher income levels of people, desire for new
products and sophisticated technology, need for faster means of transport and
communication, etc. are the factors that stimulate entrepreneurship.

Thus, it is a combination of both personal and environmental factors that influence

entrepreneurship and brings in desired results for the individual, the organization and the
society.

Project - Feasibility Analysis:

Starting a new business project is inherently risky because there is no guarantee that a new
company, product or service will be profitable. A feasibility study is an analysis that attempts
to assess whether a new project has the potential to succeed. Feasibility studies are commonly
used in the early stages of planning new ventures to help managers decide whether to go
forward with new projects. Feasibility studies technically aren't required to launch new
ventures, but they can provide valuable insights that help managers make better decisions and
avoid costly mistakes.

Technology and system feasibility:

The assessment is based on an outline design of system requirements, to determine whether

the company has the technical expertise to handle completion of the project. When writing a
feasibility report, the following should be taken to consideration:

 A brief description of the business to assess more possible factors which could affect
the study
 The part of the business being examined
 The human and economic factor
 The possible solutions to the problem

At this level, the concern is whether the proposal is both technically and legally feasible
(assuming moderate cost).

Legal Feasibility:
Determines whether the proposed system conflicts with legal requirements, e.g. a data
processing system must comply with the local Data Protection Acts.

Operational Feasibility:

Operational feasibility is a measure of how well a proposed system solves the problems, and
takes advantage of the opportunities identified during scope definition and how it satisfies the
requirements identified in the requirements analysis phase of system development.

The operational feasibility assessment focuses on the degree to which the proposed
development projects fits in with the existing business environment and objectives with
regard to development schedule, delivery date, corporate culture, and existing business
processes.

To ensure success, desired operational outcomes must be imparted during design and
development. These include such design-dependent parameters such as reliability,
maintainability, supportability, usability, producibility, disposability, sustainability,
affordability and others. These parameters are required to be considered at the early stages of
design if desired operational behaviors are to be realized. A system design and development
requires appropriate and timely application of engineering and management efforts to meet
the previously mentioned parameters. A system may serve its intended purpose most
effectively when its technical and operating characteristics are engineered into the design.
Therefore operational feasibility is a critical aspect of systems engineering that needs to be an
integral part of the early design phases.

Economic Feasibility:

The purpose of the economic feasibility assessment is to determine the positive economic
benefits to the organization that the proposed system will provide. It includes quantification
and identification of all the benefits expected. This assessment typically involves a cost/
benefits analysis.

Technical Feasibility:

The technical feasibility assessment is focused on gaining an understanding of the present

technical resources of the organization and their applicability to the expected needs of the
proposed system. It is an evaluation of the hardware and software and how it meets the need
of the proposed system.

Schedule Feasibility:

A project will fail if it takes too long to be completed before it is useful. Typically this means
estimating how long the system will take to develop, and if it can be completed in a given
time period using some methods like payback period. Schedule feasibility is a measure of
how reasonable the project timetable is. Given our technical expertise, are the project
deadlines reasonable? Some projects are initiated with specific deadlines. It is necessary to
determine whether the deadlines are mandatory or desirable.

Industry or Market Feasibility:

A feasibility study typically includes a market analysis that looks at the current state and
direction of a market and whether a new venture would be viable in the market.

Financial Feasibility:

Even if consumers are interested in a new product or service, a business can't succeed unless
it can produce and deliver the product to customers at a price that is profitable. A feasibility
study can assess the start-up and operational costs of a venture and make revenue projections
to estimate whether a project is likely to be profitable. If a product is too expensive to
produce to be profitable, managers can look into ways to cut costs to make it financially
feasible.

Resource feasibility:

This involves questions such as how much time is available to build the new system, when it
can be built, whether it interferes with normal business operations, type and amount of
resources required, dependencies, and developmental procedures with company revenue
prospectus.

Cultural feasibility:

In this stage, the project's alternatives are evaluated for their impact on the local and general
culture. For example, environmental factors need to be considered and these factors are to be
well known. Further an enterprise's own culture can clash with the results of the project.

Product/Service Feasibility:

Is an assessment of the overall appeal of the product or service being proposed? The idea is
that before a prospective firm rushes a product or service into development, it should be
confident that the product or service is what its prospective customers want.

The two components of a product/service feasibility analysis are:

i. Concept testing:

A concept test entails showing a representation of the product or service to

prospective users to gauge customer interest, desirability, and purchase
intent.
There are three primary purposes for a concept test:
i. To evaluate the underlying premises of a product or service that an entrepreneur thinks is
compelling
ii. To help develop an idea
iii. To estimate the potential market share the product or service might command.

ii. Usability testing:

 Is the method by which users of a product are asked to perform certain tasks in order
to measure the product’s ease‐of‐use and the user’s perception of the experience?
  Usability tests are sometimes called user tests, beta tests, or field trials, depending on
the circumstances involved.
 While it is tempting to rush a new product or service to market, conducting a usability
test is a good investment of an entrepreneur’s or firm’s resources.
 Many products that consumers find frustrating to work with have been brought to
market too quickly.

Organizational Feasibility:
Is concerned with determining whether the business itself has sufficient skills and resources
to bring a particular product or service idea to market successfully
a. management expertise
b. organizational competence
c. resources
d. There are two primary issues to consider in this area:
i. Management process & ii. Resource sufficiency

Starting a Business - 10 Steps Every Entrepreneur Needs to Know:

Step 1 – Write a Business Plan:

Yeah, yeah, you know you should write a business plan whether you need to secure a
business loan or not. The thing is, a business plan doesn’t have to be encyclopaedic and it
doesn’t have to have all the answers. A well-prepared plan – revisited often – will help you
steer your business all along its growth curve. Try to think of your business plan as a living,
breathing project, not a one-time document. Break it down into mini-plans – one for
marketing, one for pricing, one for operations, and so on. Take a look at SBA’s Business
Planning Guide for more ideas.

Step 2 – Get Help and Training:

Starting a business can be a lonely endeavour, but there are lots of free in-person and online
resources that can help advise you as you get started. Check out what‘s offered at your Small
Business Development Centers; SCORE (which offers free mentoring services); Women’s
Business Centers, or your local SBA office.
Step 3 – Choose Your Business Location:

Where you locate your business may be the single most important decision you make. Many
factors come into play such as proximity to suppliers, the competition, transportation access,
demographics, and zoning regulations. Check out SBA’s Tips for Choosing a Business
Location and this blog: How to Choose the Best Location for your Business.

Step 4 - Understand your Financing Options:

You may choose to bootstrap, fall back on savings, or even keep a full-time job until your
business is profitable, but if you are looking for an external source of financing, these
resources explain your options.

Step 5 – Decide on a Business Structure:

Going it alone or forming a partnership? Thinking of incorporating? How you structure your
business can reduce your personal liability for business losses and debts. Some choices can
give you tax benefits. To help you determine the right structure for your business, here’s an
overview of your options and some information on how to file the necessary paperwork in
your state and the tax implications of your decision. You might also want to read:

 Should You Incorporate Your Freelance or Consulting Business?

 “Working Together” – How to Start and Formalize a Business Partnership

Step 6 – Register Your Business Name (“Doing Business As”):

Registering a “Doing Business As” name or “trade name” is only needed if you name your
business something other than your personal name, the names of your partners, or the
officially registered name of your LLC or corporation. Here’s how to register your “Doing
Business As” name.

Step 7 – Get a Tax ID:

Not every business needs a tax ID from the IRS (also known as an “Employer Identification
Number” or EIN), but if you have employees, run a business partnership, a corporation or
meet certain IRS criteria, you must obtain an EIN from the IRS. You’ll also need to start
paying estimated taxes to the IRS; this blog explains more about this process.

Step 8 – Register with Tax Authorities:

Employment taxes, sales taxes, and state income taxes are handled at the state-level. Learn
more about your state’s tax requirements and how to comply.

Step 9 - Apply for Permits and Licenses:

All businesses, even home-based businesses, need a license or permit to operate. This guide
explains more and includes a handy “Permit Me” tool that lets you determine what your
permit and licensing needs are, based on your zip code and business type.

Step 10 - Hiring Employees:

If you’re hiring employees, follow these 10 steps. If you’re working with a contractor, read 5
Things to Know about Hiring Independent Contractors.

Some Legal Issues to be overlooked for a Business Start - Up:

1. Failing to incorporate early enough.

One problem that arises here is the so-called "forgotten founder": a partner involved in
starting the venture subsequently drops out. When the venture gets financing or is ready to go
public, this partner returns, perhaps with an inflated view of what his or her contribution was,
demanding equity.

2. Issuing founder shares without vesting.

Simply put, vesting protects the members of the founding team who take the venture forward.
If people remain on the team and are productive, their shares will vest. If they leave earlier,
that stock can be retrieved and given to whoever is brought in to replace them.
3. Hiring a lawyer not experienced in dealing with entrepreneurs and venture
capitalists.

Many venture capitalists say that they often rate the judgment of entrepreneurs by their
choice of legal counsel. Lawyers who have no experience working with entrepreneurs and
venture capitalists will most likely focus on the wrong things while failing to recognize some
of the more subtle potential traps.

4. Failing to make a timely Section 83 (b) election.

If the advice in #3 is followed, then shares will be issued, subject to vesting, to the founders
as well as new employees. If stock is acquired and it's subject to what the (Internal Revenue
Service) IRS calls a substantial risk of forfeiture, then the IRS doesn't view the purchase as
being closed until that risk goes away. When the stock vests, that risk evaporates, so the IRS
considers the deal closed. The IRS then calculates the difference between the price paid at the
outset and the fair market value at that later date, then taxes this difference as ordinary
income.

5. Negotiating venture capital financing based solely on the valuation.

Valuation is not the only thing one should consider when selecting a venture capitalist or
when negotiating the deal. There are many other ways for venture capitalists to get
compensated if they end up paying a high price for shares. These include requiring
participating preferred with a high cumulative dividend, redemption rights exercisable after
only several years, and ratchet anti-dilution protection with no cap.

6. Waiting to consider international intellectual property protection.

Patents are granted on a country-by-country basis (with a single application available for the
European Union). In the United States, if an invention is sold or made public, there's a year's
grace period to file a patent application.
7. Disclosing inventions without a nondisclosure agreement or before the patent
application is filed.

If patent protection hasn't been obtained, or in cases where a patent is not available, the only
protection is to maintain something as a trade secret. To do so, one must show that they've
taken reasonable steps to keep it secret from competitors.

8. Starting a business while employed by a potential competitor or hiring employees

without first checking their agreements with the current employer and their knowledge
of trade secrets.

The law is clear that if someone is currently working for a company, particularly if her or she
is a key employee, they cannot operate a competing business. Even just incorporating may
spark a lawsuit from the current employer.

9. Promising more in the business plan than can be delivered and failing to comply with
state and federal securities laws.

If someone promises to do something and knows that they can't perform that promise, that's
considered fraud. In a business plan, one must make an honest appraisal of what's doable and
set forth their assumptions, so the person putting up money can judge whether they are
realistic.

10. Thinking any legal problems can be solved later.

There's a tendency to think, "Once I get my funding, once I'm up and running, then I've got
time to hire the lawyers; right now, I'm running as fast as I can to get my business plan done
and raising money." This is short-sighted logic. Many of the points made here are problems
that can't just be patched up later.

Conclusion:

Starting a small business is complex, time-consuming and life-altering. There are many more
things that go into running it than just providing the product(s) or service(s) that your
business offers, however. You'll also be responsible for your business's finances, protecting
your business and personal assets, keeping your business legal, paying taxes, keeping records,
managing employees and more.

If you understand what you're doing and know how to minimize the risks and challenges, the
independence, personal satisfaction and financial rewards you can achieve as an entrepreneur
can make starting a small business the best decision you'll ever make.
 UNIT 2 – BUSINESS ENVIRONMENT

ROLE OF FAMILY AND SOCIETY:

First and foremost, business produces and distributes goods and services to satisfy certain
public needs. To fulfil this task, business has to be very flexible and constantly research
consumer demands:
Second, business creates job opportunities. More than that, most jobs business helps create
are productive jobs, i.e., people employed by business ventures produce “real” goods and
services.
Third, business provides income – here we come at last to the money matter 🙂 But don’t
forget: income that business provides is by no means restricted to the profit its owners get. It
pays salaries and wages to its employees, and this way, makes the whole business world go
round: they spend the money they earn buying all kinds of goods and favour further
development of business ventures.
Fourth, business contributes to national well-being. It does it in several ways: by means of
taxes it pays which make it possible for the government to maintain all kinds of public and
social institutions and services; by investing money in developing science and technology and
constructing new enterprises; by full use of local recourses, including those located in remote
rural areas, and in a number of other ways.
Fifth, business helps enlighten and educate people and encourages their further personal
growth. High level of competition makes it vital for both businessmen and their employees to
be involved in the constant process of learning and developing their personal qualities such as
creativity, determination, communication skills and vision for new business opportunities.

Goals of Individuals and Society

One important goal that the people have set for their economy is Full Production in order to
achieve full employment. We want to make full use of the productive resources that are
available -labour, capital and natural resources -and use these resources efficiently.
A second major goal is Stable Growth. We want the economy to become bigger and better
through the years. We measure the amount of our national output of goods and services by
looking at statistics of Gross National Product. Economic growth is a steady increase in GNP
per person (total GNP divided by the nation’s population). We want GNP to increase more or
less at a steady rate – about 4 or 5% each year (informal sector estimate) – without having
business recessions or rapidly rising prices (inflation), or increases in unemployment.
Production, employment and growth of GNP are all pretty easy to measure. When we come
to certain other economic goals, however, we have to talk about them in more general terms.

Freedom of Choice is a goal that practically everyone would include high on the list. But
what does it mean in concrete terms? Economists have pointed out that freedom of choice is
important for consumers, for workers, and for business.
Freedom of consumer choice means that consumers will be able to select the goods they want
to buy from a fairly wide range of alternatives, according to individual needs and preferences.
We are not satisfied with a system where the consumer is told: “You can have any size and
colour hat you want – as long as it’s medium and black!”

Freedom of occupational choice is an important area of economic freedom. Men and women
want to be able to choose the kind of work they will enjoy doing and that will provide
adequate wages and personal satisfaction.
Equality of Opportunity for men and women in the society is another goal. It is closely
related to freedom of choice, because it says that all people should approximately the same
degree of freedom – to exercise their rights as consul workers and enterprises.
The goal of Economic Security means that we want the members of economic society to
have enough money to be able to buy adequate food, clothing, shelter and other necessities.
Widespread poverty not only means failure to achieve the goal of economic security for these
people, but it also raises serious questions about whether we are achieving the goal
of Economic Justice in society. Not everyone agrees on the meaning of fairness and justice
in economic life, but it goal that nearly everyone feels is important to define and work toward
Finally, there is one economic goal that is not limited to the boundaries of the country, but
spreads overseas to other countries. This is the goal of International Balance. We want to
maintain a strong and balanced relationship in foreign trade and international payments.
Failure to achieve this goal not only causes serious economic problems at home and abroad,
but also increases international tensions threaten world peace.

ENTREPRENEURSHIP DEVELOPMENT TRAINING:

Skill Development EDP
Some skills can be acquired through short term programmes which are offered through EDII.
If funding is available through agencies of Government these are offered as free
programmes. If not, these are offered on self-finance basis as Paid Programmes. Skill
Development Programmes are organized based on demand.
The following are some of the common activity Skill Development Programmes:
 Food Processing Programmes, Fish Processing, Healthy Foods, Organic Foods,
Confectionery and Bakery, Milk and Milk Products, Masaala Powder, Pickles, Jam
Preparation.
 Tailoring, Beautician Course, Aari and Jardosi, Fashion and Designing, LED
assembling, Mobile Phone service and repairs
 Web designing, Hardware and Networking, Digital Marketing
 Lathe and Welding
Higher level of skills namely Technology is also offered through Technology based
Entrepreneurship Development Programme (TEDP)
Some TEDPs:
 CNC machine operator
 Two wheeler/Four wheeler mechanism
EDP components:
Sales and Marketing
 Digital Marketing
 Export and Import Procedures
 Taxation
 Risk Management and Insurance

Business EDP
Entrepreneurship Development Programmes in various topics to expose the businessmen to
areas of interest and enhance their skill.
 Export and Import Procedures
 Sales and Marketing
 Digital Marketing
 Financial Management through Tally
 Bank Fund Management
  CAD/CAM
 Taxation and Insurance

SHG EDP
 Creation of common assets based on the value addition activity
 Access to Higher credit linkages from banking institutions
 Common Marketing Procurement of products/ raw materials by concrete partnerships.
 Profitable price realization for the products
 Technical assistance to improve the quality of the products
 Reducing the cost of production by common procurement of raw materials

MSME Clusters
 Unable to compete in tenders due to their low sales turnover and plant capacity even
though they are capable of producing goods at lower cost.
 Not able to enter international market due to non-maintenance of homogenous
standard products with regular supply in bulk quantity
 Due to smaller size investment and labour force, they are not able to provide even
need based skill trainings to their employees.
 Not able to have teams to make study on market intelligence, technology usage etc.
 Due to limited funds not able to maintain any Research and Design division and hence
face difficulty in competing with market changes.
 Issues in raising funds for installing machinery required to overcome environmental
and safety problems.

A Technology Business Incubator (TBI) is a place and network that provides support for a
technology start-up business, usually started by young promoters, college students or fresh
graduates.
In our context, the word Incubator is defined as a place, especially with support staff and
equipment, made available at low rent to new small business.
Good incubated TBI companies should apply a new technology with an innovative business
model.
The Ventures normally promoted in a TBI have the following characteristics:
The foundational business idea is based on a specific technology or a direct application of
that technology.
The venture must develop a specific technology or convert an idea into usable technology
It uses new and unproven technologies
The venture has a relatively high risk
The venture should not be using a proven business model with established technology, high
customer availability and financially viable. That is not to say that a TBI start-up may not
enter into a traditional industry. If the business leverages technology with a completely new
approach, it would be a good candidate for a TBI.

Types of Business Incubators

There are several types of TBIs. Although all of them offer start-up assistance to ventures,
they vary in scope and approach. Generally, Start-up ventures need assistance in the
following areas:
S.N Types of Examples
o. Assistance or
Facilities

1 Information and Books and Information Bulletins, Subscription to Magazines,

Knowledge Frequent Interaction with experts

2 Training and Courses on Entrepreneurship, Product Development, Pitching for

Orientation Venture Capital, Development of a Business Plan, Valuation and
Recruitment and Management of People.

3 Mentors and Experts who can guide and mentor Founders

Coaches

4 Legal Assistance Creating an initial Partner Agreement, Statutory Compliance,

etc.,

5 Technology Equipment, Machinery, Lab, Computing Facility, Assistance from

Development Professors and Research Scholars
Assistance

6 Financial Angel Funding, Grants, Subsidy services

Assistance

7 Marketing Connections to potential customers

Assistance

SUPPORT ORGANIZATIONAL SERVICES:

1. Industrial Development Bank of India:

IDBI was established on July 1, 1964 by the Government of India under an Act of Parliament
as the principal financial institution in the country.

Main Functions of IDBI

(a) The IDB1 provides assistance to the small scale sector through its scheme of refinance
and bills rediscounting scheme.

(b) The financial assistance has been indirect in the form of refinancing of loans and the
State Financial Corporations (SFCs).

(c) In order to assist the small scale sector, the IDBI has set up Small Industries
Development Fund (SIDF) in May 1986. This fund basically aims at providing a focal point
to co-ordinate financial and non-financial inputs required for growth of small industries
sector.
(d) In association with Government of India, IDB1 has constituted National Equity Fund
(NEF) to prevail equity type of support to tiny and small scale units which are engaged in
manufacturing activities. The scheme is administered by IDB1 through nationalised banks.

(e) The IDBI has also introduced the single window assistance ‘scheme for grant of term
loans and working capital assistance to tiny, small and medium scale enterprises.

(f) The IDB1 has also set up a Voluntary Executive Corporation Cell (VECC) to use the
services of experts, professionals for counselling small units and for providing consultancy
support in specified areas.

2. Industrial Finance Corporation of India Ltd.:

The Industrial Finance Corporation of India was set up by the Government of India under
IFC1 Act in July 1948. It is an important financial institution which gives financial assistance
to the entrepreneurs through rupee and foreign currency loans, underwriting, direct
subscriptions to shares, debentures and guarantees. It also extends other financial facilities
like equipment procurement, equipment finance, buyer’s and supplier’s credit, equipment
leasing and finance to leasing and hire-purchase companies.

The IFCI has devised new promotional schemes such as

(a) Consultancy fees, subsidy schemes for assisting small scale entrepreneurs in marketing
sector.

(b) Interest subsidy schemes for women entrepreneurs.

(c) Pollution control in small and medium scale enterprises.

(d) Encouraging the modernisation of tiny, small and medium scale industries

3. Industrial Credit and Investment Corporation of India Ltd. (ICICI):

The ICICI was established by the Government of India under the Companies Act 1956, with
the objective of providing financial assistance to the small and medium scale sectors. The
main functions of ICIC1 are as follows

(a) Financial assistance is extended by way of rupee and foreign currency loans,
underwriting and direct subscriptions to shares, debentures and guarantees.

(b) Financial facilities such as deferred credit, leasing credit, instalment sale, asset credit
and venture capital are given by ICICI.

(c) It also guarantees loans from other private investment sources, small scale units are the
major beneficiary of the ICICI assistance.

4. Life Insurance Corporation of India (LIC):

The LIC was established under the L1C Act in 1956. It offers many insurance policies to give
social security to various segments of society. As per its investment policy, LIC invests 75%
and above in Central and State Government’s securities including government-guaranteed
marketable securities and in the socially-oriented sector. The LIC gives loans for activities
like housing, rural electrification, modernisation of industry, expansion, diversification of
industrial ventures, water supply and sanitation etc.

5. Unit Trust of India (UTI):

The UTI was set up by the Government of India in 1964 under an Act of Parliament. The
chief objectives of UTI are to mobilise savings of small investors through sale of units and to
channelise these savings towards corporate investment. The UTI has introduced many
schemes which aimed at common investors. These schemes are mainly Primary Equity Fund,
Retirement Benefit Plan, Grihalaxmi Unit Plan, Unit Scheme 1995 and Columbus India
Fund. The UTI also provides financial assistance to corporate sector in the form of term loans
and underwriting direct subscriptions to shares and debentures.

6. Small Industries Development Bank of India (SIDBI):

SIDBI was established in 1989 as a subsidiary of IDBI under a Special Act. The main
functions of SIDBI are the promotion and development of small scale industries by way of
financing. It commenced its operations from 2 April, 1980 with its head office at Lucknow.
The initial authorised capital of SIDBI was 25 crore, which can be .extended upto 1,000
crores.

The functions of SIDBI are as follows :

(a) To promote small scale industries in semi-urban areas to create more employment
opportunities.

(b) To undertake technological upgradation and modernisation of existing small scale

industries.

(c) To expand the channels for marketing the products of SSI sector on both domestic and
international markets.

(d) To extend seed capital or soft loan assistance under National Equity Fund Scheme /
MahilaUdyam Nidhi Scheme.

(e) To great direct assistance and refinance for exports of small scale sector.

(f) To provide financial assistance to SFCs, SIDCs, Commercial Banks, RRBs through
existing credit delivery system.

(g) To provide factoring and leasing service.

(h) To provide financial assistance to the institutes, organisations for undertaking EDPs.

(i) Special emphasis and the new schemes of assistance for marketing support to the small
scale sector.
Small Industries Development Bank of India (SIDBI):
SIDBI was set up in April 1990 as a wholly owned subsidiary of IDBI (Industrial
Development Bank of India) t provide financial assistance to the entrepreneurs under an Act
of the Parliament, namely Small Industries Development Bank of India Act 1989.

The Bank has been delinked from IDBI with effect from March 27, 2002. The Bank caters all
SSIs –tiny, village and cottage—through its Head Official at Lucknow.

Channels of SIDBI’s Assistance:

1. Indirect Finance:
By way of refinance and bills discounting through more than 901 primary lending institutions
having over 65000 outlets across the country.

2. Direct Finance:
Direct finance is given through SIDBI’s own 38 offices by means of several tailor-made
schemes to reach assistance to specific target groups.

3. Promotional and Development Activities:

Involving accredited Non-Government organizations voluntary organizations, Scientific and
Research Institutions, Technology Institutions, Management Institutions, etc.

Thus SIDBI is the principle financial institution for promotion, financing and development of
small scale industries in India. It co-ordinates functions of existing institutions engaged in
similar activities.

Accordingly, SIDBI has taken over the responsibility of administering Small industries
Development Fund and nation Equity fund which were earlier administered by IDBI

Functions of SIDBI:
The important functions of SIDBI are:

(i) To initiate steps for technological up-gradation and modernization of existing units.
(ii) To expand the cannels for marketing the products of SSI sector in domestic and
international markets.
(iii) To promote employment oriented industries especially in semi-urban areas to create
employment opportunities and thereby checking migration of people to urban areas.
(iv) To refinance loans and advances extended by the primary lending institutions to SSI units
and also provides resources to them.
(v) To discount and rediscount bills arising from sale of machinery to or manufactured by
industrial units in the SSI sector.
(vi) To provide services like leasing, factoring etc. to industrial concerns in the SSI sector.
(vii) To expand financial support to State Small Industries Development Corporation for
providing scare raw-materials to industrial units in SSI sector.
(viii)To grant loan and advances to any person engaged in exporting or executing any turnkey
project abroad.
(ix) To subscribe to or purchasing stocks and shares, bonds and debentures of any state
/financial Corporations.
Scope of SIDBI:
The SIDBI covers all industrial undertakings like any concern engaged in business activities
and which is regarded as a small scale undertaking under Section 11-B of the Industrial
Development and Regulation Act, 1951.

The following business activities undertaken by small scale sector are covered under the
scope of SIDBI:

(i) The manufacturing preservation or processing of goods;

(ii) Shipping industry;

(iii) Mining industry;

(iv) Hotel industry

(v) Transport of passengers or goods by road/water/air;

(vi) Generation or distribution of electricity or any other form of power;

(vii) Maintenance, repair, testing or servicing of machinery of any description or vehicle or

vessels or motor boats or trailers or tractors;

(viii) Assembling, repairing or packing any article with the aid of machinery or power;

(ix) The development of any contiguous area of land as an Industrial Estate;

(x) Fishing or providing stores facilities for fishing or maintenance thereof;

(xi) Providing special or technical knowledge or other services for the promotion of industrial
growth; or

(xii) The research and development of any process or product in relation to any of the matters
aforesaid.

The financial assistance of SIDBI is channelized through the existing credit delivery system
comprising SFC, State Industrial Development Corporation, Commercial Banks and DRRBs.

7. Industrial Reconstruction Bank of India (IRBI):

The IRCI was set up in 1971 under the Companies Act to act as an agency to rehabilitate the
sick units. But, in the year 1984, the Government of India renamed the IRCI as Industrial
Reconstruction Bank of India (IRBI) by an Act of Parliament. Thereafter, it acts as a
reconstruction agency to revive, reconstruct and rehabilitate the sick industrial concerns.
IRBI plays a significant role in promoting entrepreneurial and industrial development in the
country by performing the following functions

(1) It provides financial assistance to industrial concerns.

(2) It acts as an agency of State Government, Union Government and other financial
institutions as per the authorisation of the Government.

(3) It provides consultancy and merchant banking services for reconstruction and
development of industrial units.

(4) It also helps in providing infrastructural facilities, raw materials, machineries and other
tools on the basis of hire-purchase and lease schemes.

8. State Financial Corporations (SFCs):

IFCI provides financial assistance only to large sized industrial undertakings. In order to cater
to the needs of the small scale units, the Government of India passed the State Financial
Corporations Act in 1951 under which the State Financial Corporations (SFCs) were set up.
The first SFC was set up in Punjab in 1953. Today, there are 18 SFCs functioning in the
country. State Financial Corporations are managed by a Managing Director, Board of
Directors and the Executive Committee is headed by a chairman.

The functions of SFCs are as follows

(a) To advance term loans to small scale and medium scale industrial units.

(b) It underwrites the issue of stocks, shares, debentures and bonds of industrial units.

(c) It grants loans to the industrial concerns which is repayable within a period not more
than 20 years.

(d) It subscribes to debentures floated by industrial concerns.

(e) It provides financial assistance to small road transport operators, tour operators,
hoteliers, hospitals, nursing homes, etc.

9. National Bank for Agriculture and Rural Development (NABARD) is an apex

development bank in India for all rural credit having headquarters based in Mumbai
(Maharashtra) and other branches are all over the country. The Committee to Review
Arrangements for Institutional Credit for Agriculture and Rural Development
(CRAFICARD), set up by the Reserve Bank of India (RBI) under the Chairmanship of Shri
B. Sivaraman, conceived and recommended the establishment of the National Bank for
Agriculture and Rural Development (NABARD). It was established on 12 July 1982 by a
special act by the parliament and its main focus was to uplift rural India by increasing the
credit flow for elevation of agriculture & rural non farm sector and completed its 25 years on
12 July 2007. It has been accredited with “matters concerning policy, planning and operations
in the field of credit for agriculture and other economic activities in rural areas in India”. RBI
sold its stake in NABARD to the Government of India, which now holds 99% stake. It is
active in developing financial inclusion policy and is a member of the Alliance for Financial
Inclusion.

Objectives of NABARD

NABARD was established in terms of the Preamble to the Act, “for providing credit for the
promotion of agriculture, small scale industries, cottage and village industries, handicrafts
and other rural crafts and other allied economic activities in rural areas with a view to
promoting IRDP and securing prosperity of rural areas and for matters connected therewith in
incidental thereto”.

The main objectives of the NABARD as stated in the statement of objectives while placing
the bill before the LokSabha were categorized as under

(1) The National Bank will be an apex organisation in respect of all matters relating to
policy, planning operational aspects in the field of credit for promotion of Agriculture, Small
Scale Industries, Cottage and Village Industries, Handicrafts and other rural crafts and other
allied economic activities in rural areas.

(2) The Bank will serve as a refinancing institution for institutional credit such as long-
term, short-term for the promotion of activities in the rural areas.

(3) The Bank will also provide direct lending to any institution as may be approved by the
Central Government.

(4) The Bank will have organic links with the Reserve Bank and maintain a close link with
in.

Role and Functions of NABARD

NABARD is the apex institution in the country which looks after the development of the
cottage industry, small industry and village industry, and other rural industries. NABARD
also reaches out to allied economies and supports and promotes integrated development. And
to help NABARD discharge its duty, it has been given certain roles as follows:

(1) Serves as an apex financing agency for the institutions providing investment and
production credit for promoting the various developmental activities in rural areas

(2) Takes measures towards institution building for improving absorptive capacity of the
credit delivery system, including monitoring, formulation of rehabilitation schemes,
restructuring of credit institutions, training of personnel, etc.

(3) Co-ordinates the rural financing activities of all institutions engaged in developmental
work at the field level and maintains liaison with Government of India, State Governments,
Reserve Bank of India (RBI) and other national level institutions concerned with policy
formulation

(4) Undertakes monitoring and evaluation of projects refinanced by it.

(5) NABARD refinances the financial institutions which finances the rural sector.
CENTRAL AND STATE GOVERNMENT INDUSTRIAL POLICIES AND REGULATIONS:

Industrial policy can be defined as a statement stating the role of government in industrial
development, the position of public and private sectors in industrialization of the country,
the comparative role of large and small industries.

In short, it is a proclamation of objectives to be achieved in the fields of industrial

development and the steps to be taken for achieving these objectives. So, the industrial
policy formally represents the spheres of activity of the public and private sectors.

Objectives
It enlists the rules and procedures that will monitor the growth and pattern of industrial
activity. The industrial policy is neither fixed nor flexible. It is constructed, modified and
further modification is done according to the changing situations, requirements and
perspectives of developments.

The major objectives of industrial policy are discussed below.

Rapid Industrial Development

The industrial policy of the Government of India focuses at increasing the level of industrial
development. It explores ways to construct favorable investment environment for the private
sector and also for mobilizing resources for the investment in public sector. In this way, the
government roots to promote rapid industrial growth in the country.

Balanced industrial Structure

The industrial policy is crafted to correct the prevailing downgraded industrial structure. Say
for example, India had some fairly developed consumer products industries before
independence but the capital goods sector was not at all developed, also basic and heavy
industries were by and large absent.

Thus, industrial policy had to be enclosed in such a way that imbalances in the industrial
structure are corrected by laying stress on heavy industries and development of capital goods
sector. Industrial policy explores methods to maintain balance in industrial structure.

Prevention of Concentration of Economic Power

The industrial policy explores to facilitate a borderline of rules, regulations and reservation
of spheres of activities for the public and private sectors. This is targeted at minimizing the
dominating symptoms and preventing focus of economic power in the hands of a few big
industrial houses.

Balanced Regional Growth

Industrial policy also targets at correcting differences of region in industrial development. It
is a well-known fact that some regions in our country are quite developed industrially, like
Maharashtra and Gujarat, while others are marked as industrially backward regions, like
Bihar and Orissa. It is the job of industrial policy to amend some programs and policies,
which will result in the development of industries or industrial growth.

The first industrial policy statement of the Government of India was formed in 1948 and was
modified in 1956 in industrial development policy dominated by the public sector till 1991
with some minor modifications and amendments in 1977 and 1980.The year 1991 noticed
far reaching changes that were made in the 1956 industrial policy. The new Industrial Policy
of July 1991 witnessed the border outline for industrial development at present.

Industrial Policy Resolution 1956

In April 1956, the Indian Parliament adopted Industrial Policy Resolution of 1956 (IPR
1956). It is marked as the first comprehensive documented statement on industrial
development of India. It systematizes three different groups of clearly defined industries.

The policy of 1956 regulated to design the basic economic policy for a very long time. The
Five-Year Plans of India confirmed this fact. With respect to this Resolution, the
establishment of a socialistic pattern of society was seen through the objective of the social
and economic policy in India. It ensured more powers to the governmental authorities.

Companies were grouped into categories. These categories were −

 Schedule A − Those companies which were considered as an exclusive responsibility

of the state or the society.
 Schedule B − Companies which were marked as progressively state-owned and in
which the state would basically establish new companies, but in which private
companies would be anticipated only to supplement the effort of the state.
 Schedule C − The left companies and their future development would, in general, be
neglected and would be entirely dependent to the initiative and enterprise of the
private sector.

Even though there was a category of companies left to the private sector that is those
companies that are above Schedule C. The sector was monitored by the state by a system of
licenses. So to set up a new company or to widen production, obtaining a license from the
government was a prerequisite to be fulfilled. Launching of new companies in economically
backward areas was incentivized through easy licensing and subsidization of important
inputs, like electricity and water. This step was taken to encounter regional differences that
existed in the country. In fact, the license to boost the production was issued by convincing
the government that the economy required more of the products and services.

Some other salient behavior of the IPR 1956 was fair and non-biased treatment for the
private sector, motivating the village and small-scale companies, eradicating regional
differences, and the requirement for the provision of amenities for labour, and attitude to
foreign capital. This Industrial Policy of 1956 is also referred to as the Economic
Constitution of the country.

Policy Measures
Some of the essential policy measures were declared and procedural simplifications were
undertaken to opt for the above stated objectives. Following are some of the policy measures

Liberalization of Industrial Licensing Policy

A list of goods demanding compulsory licensing is reviewed on an ongoing regular basis.
Currently, only six industries are monitored under compulsory licensing mainly on account
of environmental, safety and strategic considerations that need to be taken care of. In the
same way, there are only three industries reserved specifically for the public sector. The lists
of goods under compulsory licensing and industries reserved for the public sector are
included in Appendix III and IV respectively.

Introduction of Industrial Entrepreneurs' Memorandum (IEM)

Companies which don’t require compulsory licensing are expected to file an Industrial
Entrepreneurs' Memorandum (IEM) to the Secretariat for Industrial Assistance (SIA).
Industrial approval is not needed for these types of exempted industries. Amendments are
also permitted to IEM proposals filed after 1.7.1998.

Liberalization of the Locational Policy

A crucially reformed locational policy in tune with the liberalized licensing policy is in
place. Approval from industries are not required from the Government for locations not
within the range of 25 kms of the periphery of cities having a population of more than one
million apart for those industries, where industrial licensing is compulsory. Non-polluting
enterprises like electronics, computer software and printing can be located within 25 kms of
the periphery of cities with more than one million population. Other industries are allowed
in such locations only if they are located in an industrial area so designated prior to 25.7.91.
Zoning and follow land use regulations as well as environmental legislations.

Policy for Small Scale Industries

Reservation of goods that are manufactured exclusively for small scale industries ensures
effective measure for protecting this sector. Since 24th December 1999, entrepreneurial
undertakings with a maximum investment up to rupees one crore are within the small scale
and ancillary sector.

Non-Resident Indians Scheme

The general policy and provisions for Foreign Direct Investment as available to foreign
investors or company are completely applicable for NRIs as well. With addition to this, the
government has broadened some concessions mostly for NRIs and overseas corporate bodies
having more than 60% stake by the NRIs. These include investment by NRI/OCB in the real
estate and housing sectors, domestic airlines sector up to 100%.They are also permitted to
invest up to 100% equity on non-repatriation basis in all activities except for a small
negative list.

EHTP vs STP Scheme

For constructing strong electronics company along with a view to modify export, two
schemes viz. Electronic Hardware Technology Park (EHTP) and Software Technology Park
(STP) are in function. Under EHTP/STP scheme, the inputs are permitted to be procured
free of duties.

Policy for Foreign Direct Investment (FDI)

Promotion of FDI forms a vital part of India's economic policies. The role of FDI in
boosting economic growth is by way of infusion of capital, technology and modern
management activities. The Department has put in place a liberal and transparent foreign
investment regime where all the practices are opened to foreign investment on automatic
route without any limit on the extent of foreign ownership.

INTERNATIONAL BUSINESS:

International business includes commercial transactions such as private, governmental, sales,

investments, logistics, and transportation that occurs between two or more countries apart
from their political boundaries. Generally, such transactions are undertaken by private sector
companies to generate profit. The government sector also undertakes them to earn profit as
well as for political reasons.

The term "international business" describes business activities which are engaged in cross
border transactions of products, services, resources between two or more nations.
Transaction of economic resources comprises of capital, skills, people, etc. for international
production of physical products and services. For example, finance, banking, insurance,
construction, etc.

International marketing consists in identifying and satisfying consumers abroad; better than
the national and international competitors.

Several type of companies are major participants in international marketing. Among the
leaders are −

 Multi-National companies(MNCs)
 Exporters
 Importers
 Service companies
There are many companies that realize their target will be limited if they only concentrate on
the US market and the global marketplace is competitive. So to increase their market share
they look for various opportunities throughout the world.

Importance of International Business

The International Business principles stresses on the following −

 Creating awareness of the interdependency of one nation's political policies and

economic practices on another nation or nations.
 Learning to improvise international business relationships by using appropriate
communication strategies and techniques.
 Acknowledging the global business environment, the relationship the nation’s share
through their cultural, political, legal, economic, and ethical systems with one
another.
 Seeking clarity on concepts of international finance, management, marketing, and
trade relations.
 Specifying forms for ownership of enterprises and international business
opportunities.

By stressing on the above points, entrepreneurs will gain a better and clear understanding of
political economy. These are raw materials that would help future entrepreneurs to build a
bridge between the economic and political gap between countries.

Factors in Business
Business at an international level is also affected by various factors. These can be due to the
physical location of the country or due to some political matters in the country.

Some of the major factors in business are as follows −

 Geographical factors − Many different geographical factors like the geographical

size, the climatic challenges occurred recently, the available natural resources in a
specific region, the population distribution in a nation, etc. affect international
business.
 Social factors − The internal factors or happenings inside a nation also plays a very
important role in internal business. These include −
o Political policies − Political conflicts, mostly those that result in military
confrontation can disturb trade and investment.
o Legal policies − National and international laws have a crucial role in
framing how an enterprise can operate overseas.
  Behavioral factors − In a foreign unknown surrounding, the related studies like
anthropology, psychology and sociology assists the managers to have a better
understanding of values, attitudes and beliefs.
 Economic forces − Economics explains the differences among countries in terms of
costs, currency values and market size.

Basic Modes of Entry

Modes of entry into international markets are the Internet, Licensing, International Agents,
International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacture and
International Sales Subsidiaries.

 Licensing − Licensing is where the own organization charges fee or royalty for the
use of the technology or brand.
 International agents and distributors − Agents are individuals or organizations
those who deal with business/marketing on your behalf in any country. Agents
represent more than one organization and for this one needs to set some targets to
check the level of commitment of the agent. They tend to be expensive to recruit,
retain and train.
 Strategic Alliances − It describes a series of different relationships between
companies that market internationally.
 Joint ventures − It means working equally, i.e. a new company is set up with parties
owning half of the business.
 Overseas Manufacture or International Sales Subsidiary − It means the
organization invests in plant, machinery and labor in the overseas market. This is
also known as Foreign Direct Investment (FDI).

These were the basic modes describing how international marketing is initiated between two
nations or more.

Risk of Business
Business at national as well as international level is all about taking risks, nothing is certain
and an entrepreneur has to take chances or risks to earn profit. These risks can at times give
fruitful result and at times may lead to losses.

Given below are some of the major risks faced in international business −

Strategic Risk
An organization should always be prepared, acknowledge the competition and be ready to
face it on the international market. Many companies or competitors would prove to be good
to be the replacement for products or services of an unrecognized company. An excellent,
creative and innovative strategy will help and make a company successful.

Operational Risk
A company should acknowledge the production costs and make sure there is no waste of
time and money. If the expenditures and costs are monitored properly, it will create and
maintain efficient production and also help for internationalization.

Political Risk
How a government monitors a nation deeply affects the operations of a company. The nation
might have a corrupted, hostile, totalitarian government but this is a negative picture of
government around the globe. A company’s reputation and status can change if it functions
in a nation monitored by that type of government. An unstable political situation proves to
be risky for multinational firms. Any unexpected event like elections or any other political
event can change the complete situation of a nation and put a company at risk.

Technological Risk
Technological development brings in many benefits, along with some disadvantages. Like
lack of security measures in electronic transactions, higher cost of developing new
technology, and the fact that these new technology may fail. When all of these paired with
an old fashioned outdated existing technology, the result invites new dangerous effect in
doing business at the international level.

Environmental Risk
Companies that set up supplementary or factory outside the residential country are expected
to be conscious regarding the externalities they will produce. Negative externalities include
noise, pollution or some other disturbances like, natural calamities, etc. The mass may want
to fight against the company to maintain a natural and healthy environment or nation. This
type of condition can change the customer’s point of view regarding the firm and create a
negative image.

Economic Risk
Economic risks arise due to inability of a nation to satisfy its financial obligations. It is very
difficult to conduct international business due to changing foreign investment or domestic
fiscal or monetary policy because of the effect on exchange rate and interest rate.

Financial Risk
A nation has financial risks due to the fluctuating currency exchange rate, government
flexibility in allowing the companies to repatriate profits or funds outside the nation. Also,
the taxes that a company pays have the probability of either being advantageous or not. It
might be more or less in the host or strong nations.

Terrorism Risk
A terrorist attack opposite to a company or a nation is done intentionally to hurt or cause
damage by violence. It is hatred that pushes people to do it and it is usually based on a
religion, culture, political ideas, etc. Thus, it is very difficult to operate where the
surrounding is tensed and scary and in countries that are likely to be attacked.

Bribery Risk
Bribery is a global issue. Multinational companies must be careful and concerned about it.
Companies functioning or marketing at the international level have a major role on
combating bribery accompanied by the governments, trade unions, etc.

Importance of Culture
A noticeable advantage in International Business is hiked through the knowledge and use of
language. An International entrepreneur fluent in the local languages has the following
advantages −

 The talent of communicating with employees and customers directly.

 Acknowledging the way of speaking within business in the local area to increase total
productivity.
 Gaining respect of customers and employees from speaking with them in their native
tongue.

In some cases, it is next to impossible to completely understand a culture's buying habits

without first taking the time to study the culture properly. Few examples of the benefit of
understanding local culture include the following −

 Facilitate marketing techniques that are precisely tailored for the local market.
 Studying how other enterprises function and what might or might not be social taboos
or myths.
 Having a complete knowledge on the time structure of an area.

Some societies or in some regions people are more focused on "being on time" while others
focus on doing business at "the right time”. Thus, while establishing a business at the
international level one cannot neglect the customs, traditions and culture of various nations.

UNIT 3 – BUSINESS PLAN PREPARATION

SOURCES OF PRODUCT FOR BUSINESS:
1. Personal investment
When borrowing, you invest some of your own money—either in the form of cash or
collateral on your assets. This proves to your banker that you have a long-term commitment
to your project.
2. Love money
This is money loaned by a spouse, parents, family or friends. A banker considers this as
"patient capital", which is money that will be repaid later as your business profits increase.
When borrowing love money, you should be aware that:
Family and friends rarely have much capital.
They may want to have equity in your business; be sure you don't give this away.
A business relationship with family or friends should never be taken lightly.
3. Venture Capital
The first thing to keep in mind is that this funding source is not necessarily for all
entrepreneurs. Right from the start, you should be aware that venture capitalists are looking
for technology-driven businesses and companies with high-growth potential in sectors such
as information technology, communications, and biotechnology.
Venture capitalists take an equity position in the company to help it carry out a promising but
higher risk project. This involves giving up some ownership or equity in your business to an
external party. Venture capitalists also expect a healthy return on their investment, often
generated when the business starts selling shares to the public. Be sure to look for investors
who bring relevant experience and knowledge to your business.
4. Business Incubators
Business incubators (or "accelerators") generally focus on the high-tech sector by providing
support for new businesses in various stages of development. However, there are also local
economic development incubators, which are focused on areas such as job creation,
revitalization and hosting and sharing services.
Commonly, incubators will invite future businesses and other fledgling companies to share
their premises, as well as their administrative, logistical, and technical resources. For
example, an incubator might share the use of its laboratories so that a new business can
develop and test its products more cheaply before beginning production.
Generally, the incubation phase can last up to 2 years. Once the product is ready, the business
usually leaves the incubator's premises to enter its industrial production phase and is on its
own.

5. Grants and subsidies

It's not always easy to bring innovations to light so government agencies provide aid to
Canadian companies. You may have access to this funding to help cover expenses, such as
research and development, marketing, salaries, equipment and productivity improvement.
Technically, a grant is a sum of money conditionally given to your business that you don't
have to repay. However, you're bound legally to use it under the terms of the grant, or
otherwise you may be asked to repay it. As well, once you are granted money from one
government source, it is not uncommon to receive further funding from the source if you
meet program requirements.
Criteria
Getting grants can be tough. There may be strong competition and the criteria for awards are
often stringent. Generally, most grants require you to match the funds you are being rewarded
and this amount varies greatly, depending on the granter. For example, a research grant may
require you to find only 40% of the total cost.
Generally, you will need to provide:
A detailed project description, including location
An explanation of the benefits of your project
A detailed work plan with full costs
Details of relevant experience and background on key managers
Completed application forms when appropriate

Most reviewers will assess your proposal based on the following criteria:
Significance
Approach
Innovation
Assessment of expertise
Need for the grant
Some of the problem areas where candidates fail to get grants include:
The research/work is not relevant.
Ineligible geographic location.
Applicants fail to communicate how their ideas will be addressed.
The proposal makes without a strong rationale.
The research plan is unfocused.
There is an unrealistic amount of work.
6. Bank loans
Bank loans are the most commonly used source of funding for small and medium sized
businesses. Consider the fact that all banks offer different advantages, whether it's
personalized service or customized repayment. It's a good idea to shop around and find the
bank that meets your specific needs.
In general, you should know bankers are looking for companies with a sound track record and
that have excellent credit. A good idea is not enough; it has to be backed up with a
solid business plan.
PRE-FEASIBILITY STUDY:
Technical Feasibility

 Technology and manufacturing process : Proven/new technology, basis of selection of

technology, competing technologies, performance data of plants based on the
technology, details of licensor of technology, process flow chart and description
 Location of the Project : Locational advantage, availability of raw material and other
utilities, infrastructure facilities, availability of labour, environmental aspects
 Plant and Machinery : List of machinery & equipment, details of suppliers,
competitive quotations, technical & commercial evaluation of major equipment
 Raw material, Utilities and Manpower: Details of raw materials and suppliers,
electricity and water supply, basis of manpower estimates, details of manpower eg.
managerial, supervisory, skilled/unskilled, training needs
 Contracts : Agreement with contractors detailing on know-how, engineering,
procurement, construction, financial soundness and experience of contractors
 Project monitoring and implementation: Mode of implementation, details of
monitoring team, detailed schedule of implementation.

Environmental Aspects: Air, Water and Soil Pollution, list of pollutants / Hazardous
substances, their safety, handling and disposal arrangements, compliance with national
and International Standards, Clearances and No objection certificates required and
obtained etc.

Commercial Viability

 Existing and potential market demand and supply for the proposed product in respect
of volume and pattern
 Share of the proposed product of the company in the total market through marketing
strategy
 Selling price of the product and export potential, if any.
 Buy-back arrangements, if any.

Financial Appraisal
  Cost of the Project: This includes the cost of land & site development, building, plant
& machinery, technical know-how & engineering fees, miscellaneous fixed assets,
preliminary & preoperative expenses, contingencies, margin money for working
capital. Your company is expected to submit realistic estimates and reasonableness of
the cost of the project will be examined with reference to various factors such as
implementation period, inflation, various agreements, quotations etc.
 Means of Financing: Means of financing shall have to conform to proper mix of
share capital and debt. This includes share capital, unsecured loans from
Promoters/associates, internal accruals, term loans, Government subsidy/grant.
Reasonableness of Promoters' contribution in the form of equity and interest-free
unsecured loans, if any, is ascertained in view of commitment to the Project.
 Profitability Projections: Past records of financial performance of Your company will
be examined. Your company needs to submit profitability estimates, cash flow and
projected balance sheet for the project and for the Company as a whole. Based on the
projections, various financial ratios such as Debt -Equity ratio, Current ratio, Fixed
asset coverage ratio, Gross profit, Operating profit, Net profit ratios, Internal rate of
return(over the economic life of the project), Debt Service Coverage ratio, Earning
per share, Dividend payable etc. would be worked out to ascertain financial soundness
of your Project.

Economic Viability

 Your company will have to take real value of input as against the value accounted in
financial analysis for the purpose of economic evaluation of the project.
 Your company should carry out social cost benefit analysis as a measure of the costs
and benefits of the project to Society and the Economy.

Economic analysis is therefore aimed at inherent strength of the Project to withstand

international competition on its own
CRITERIA FOR SELECTION OF PRODUCT:
Supply-gap: The size of the unsatisfied market demand which constitute a source of business
opportunity will dictate, to a great extent the need to select a particular product. The product
with the highest chances of success as reflected in its demand will be selected. In essence,
there must be existing obvious demand for the selected product.
Fund: The size of the funds that can be mobilized is another important factor. Adequate fund
is needed to develop, produce, promote, sell and distribute the product selected.
Availability of and Access to Raw Materials: Different products require different raw
materials. The source quality and quantity of the raw materials needed are factors to be
seriously considered, Are the raw materials available in sufficient quantities? Where are the
sources of raw materials located? Are they accessible? Could they be sources locally or
imported? Satisfactory answers should be provided to these and many other relevant
questions.
Technical Implications: The production process for the product needs to be considered.
There is need to know the technical implications of the selected product on the existing
production line, available technology and even the labour force. The choice of a particular
product may require either acquisition of the machineries or refurbishing of the old ones. The
product itself must be technically satisfactory and acceptable to the user.
Profitability/Marketability: Most often, the product that has the highest profit potential is
often selected. However, a product may be selected on the basis of its ability to utilize idle
capacity or complement the sale of the existing products. The product must be marketable.
Availability of Qualified Personnel: Qualified personnel to handle the production and
marketing of the product must be available. The cost of producing the product must be kept
to the minimum by reducing wastages. This is achievable through competent hands.
Government Policies: This is quite often an uncontrollable factor. The focuses of
government policies can significantly influence the selection of product. For instance, a
package of incentives from government for a product with 100% local input contents can
change the direction of the business’s R & D and hence the product selected.
Government objectives: The contributions of the product to the realization of the company’s
short and long range objectives must be considered before selection. For instance, the
company goal maybe the achievement of sale growth, sales stability or enhancement of the
company’s social value.
OWNERSHIP:
A small business is a business that is privately owned and operated, with a small number of

employees and relatively low volume of sales. Small businesses are normally privately-

owned corporations, cooperatives, partnerships, or sole proprietorships.

Private Limited Company (Ltd)

A small to medium-sized business that is often run by the family or the small group who

owns it. The owners and managers are only liable for the business up to the amount they have

invested in the company, and are not liable for the debts incurred by the company unless they

have signed a personal guarantee.

Public Limited Company

A business with limited liability, and a wide variety of shareholders. The owners and

managers are only liable for the business up to the amount they have invested in the

company, and are not liable for the debts incurred by the company (unless they have signed a

personal guarantee, which usually is not the case for a large corporation).

Unlimited Liability
A situation in which owners of a business are liable for all the debts that the business may

incur.

Limited Liability
A situation in which the liability of the owners of a business is limited to the full, paid-

up value of the share capital. In the United States and some other countries, a limited

company is known as either a corporation or a limited liability company (LLC) .

Sole Proprietorship

A business owned by one person. The owner may operate on his own or may employ others.

The owner of the business has total and unlimited personal liability of the debts incurred by

the business

Partnership
A partnership is a form of business in which two or more people operate for the

common goal of making profit. Each partner has total and unlimited personal liability of the

debts incurred by the partnership.

Cooperative Business
Cooperative businesses are often referred to as a co-ops. The cooperative business structure is

for-profit, with limited liability, but with members of the co-op sharing decision-making

authority. Co-ops normally fall into three types: (1) Consumer co-ops, (2) producer co-ops

(common in agriculture) and (3) worker-owned companies. Co-ops are fundamental to the

ideology of economic democracy.

CAPITAL:

In terms of entrepreneurship, capital can be described as a region's funding with factors

conducive to the construction of new entrepreneurship and it creates a positive impact on the
region's economic output.

Higher level of entrepreneurship capital regions express higher levels of output and
productivity, in contrast to those lacking entrepreneurship capital that tend to produce lower
levels of output and productivity. The result of entrepreneurship capital is powerful than that
of knowledge capital.

Entrepreneurs are expected to hold three types of capital to acquire success in starting a new
venture −

 Social capital − It is a quality acquired from the structure of an individual’s network

relationships. It is not an intrinsic feature of an individual. The network is owned by
the members of the network and is not solely the property of the individual. Social
capital ensures the relationships by which an entrepreneur receives opportunities to
utilize human and financial capital.

 Human capital − It indicates attributes possessed by individuals like personality,

education, intelligence, and job experience. Creating value by the acquisition of
human capital, specifically building a management team tends to be the biggest
challenge for seed stage founders and investors of new ventures. A start-up with an
experienced management team will receive a higher valuation by investors.

 Financial capital − It is any economic resource scaled with respect to money used by
entrepreneurs and businesses to purchase what they need to make their products, or
to facilitate their services to the sector of the economy upon which their operation is
based, like retail, corporate, investment banking, etc.

BUDGETING PROJECT PROFILE PREPARATION:

1. The hardest project budget you’ll ever write is the first one. After that, you have both a
model for budgeting similar projects, and the experience for writing detailed budgets going
forward. For your first budget, get help from an experienced team member or mentor. If
you’re a collaborative group, get input from everyone’s work estimates. The point is, you
don’t have to do this alone.
2. Learn from other projects. Find a past project that was similar in type or scope to the
current one, and use it a model. Some teams turn to their project management tool to mine
data and information on how much time and money went into certain projects and identify
where resources were added or subtracted.
3. Know your core costs. Start by entering costs the absolute must-haves to get the project
up and running. They include team members, equipment, software, travel, etc. Next, compare
those core costs to the total budget. If your costs fit under the total cost figure, you fit under
the cap. If not, you need to have that first conversation with your boss or stakeholders about
how to scale the project to be completed within the budget or about expanding the budget.
4. Prepare to change budget estimates. Most initial estimates are just that estimates. With the
common occurrences of scope creep, unexpected surprises and the nature of doing business,
at some point in the project the budget can easily change. This fact just underscores the need
to manage the project budget continually. Vigilant project manager compares actuals-to-date
against the initial budget and then against anticipated costs toward completion at regular
intervals. And then it’s time to tweak the work plan to bring expenses in line with the total
budget.
4. Monitor resources. You want your team members working on the right tasks to their full
potential. Salaries are a big component of the budget, so review resource usage weekly to
make sure that everyone is working the highest priorities and putting the proper amount of
hours per week into their tasks.
6. Be transparent. Keep your team informed of the evolving budget forecast. Communicate
what’s expected of them to stay within budget. People might start watching how they
designate hours and other costs to your project. And they’ll understand any requests to
change directions if they come up.
7. Manage scope. Scope creep busts budgets. To avoid unplanned work that leads to cost
overruns, create change orders for work that goes beyond initial project requirements, with
accurate projections of additional cost. Seek additional funding for the project to cover
change orders.
MATCHING ENTREPRENEUR WITH THE PROJECT:
Step 1: Selection of the Product
An entrepreneur may select a product according to his own capacity and
motivation. As an innovative entrepreneur he may design a new product or like an imitative
one he may copy an established existing product in thefirms of additional uses, comfort or
saving in cost.
Step 2: Selection of firm of ownership
The most commonly chosen firms of ownership for SSI are
· Sole proprietorship
· Family ownership
· Partnership
· Private limited company
Step 3: Selection of Site
An entrepreneur has ve options for the selection of site,
1. From state development corporation like SIDCO, SIPCOT, MMDA, TNHB
2. From the industrial estate constructed by the state industrial development agency (SIDA)
3. Choose from plot/sheds developed by private developers
4. Buy private land and develop the same for industrial use
5. The last option is to select a site/shed available in free trade zone
Step 4: Designing Capital Structures
The initial capital of a new venture comes from the following sources,
· Own capital
· Long term loan
Step 5: Acquisitions of manufacturing know-how
Many institution like government research laboratories, research and development divisions
of industries and also individual consultants provide the manufacturing know - how. In the
case of ancillary units, it is provided by the main unit itself, both domestic as well as foreign.
Step 6: Preparation of Project Report
The project report may contain the following feasibility
· Technical feasibility
· Economic viability
· Financial implication . Managerial competency
FEASIBILITY REPORT PREPARATION AND EVALUATION CRITERIA:
In simple terms, a feasibility study involves taking a judgment call on whether a project is
doable. The two criteria to judge feasibility are cost required and value to be delivered. A
well-designed study should offer a historical background of the business or project, a
description of the product or service, accounting statements, details of operations and
management, marketing research and policies, financial data, legal requirements and tax
obligations. Generally, such studies precede technical development
and project implementation.
A feasibility study evaluates the project's potential for success; therefore, perceived
objectivity is an important factor in the credibility of the study for potential investors
and lending institutions.

1. Economic Feasibility - helps organizations assess the viability, cost, and

benefits associated with projects before financial resources are allocated. It also
serves as an independent project assessment, and enhances project credibility,
as a result. It helps decision-makers determine the positive economic benefits
to the organization that the proposed system will provide, and helps quantify
them. This assessment typically involves a cost/ benefits analysis of the project.
2. Legal Feasibility - investigates if the proposed system conflicts with legal
requirements like data protection acts or social media laws.
3. Operational Feasibility - this involves undertaking a study to analyze and
determine whether your business needs can be fulfilled by using the proposed
solution. It also measures how well the proposed system solves problems and
takes advantage of the opportunities identified during scope definition.
Operational feasibility studies also analyze how the project plan satisfies the
requirements identified in the requirements analysis phase of system
development.
 4. Scheduling Feasibility is the most important for project success. A project will
fail if not completed on time. In scheduling feasibility, we estimate how much
time the system will take to complete, and with our technical skills we need to
estimate the period to complete the project using various methods of
estimation.
5. Technical Feasibility - assessment is cantered on the technical resources
available to the organization. It helps organizations assess if the technical
resources meet capacity and whether the technical team is capable of
converting the ideas into working systems. Technical feasibility also
involves evaluation of the hardware and the software requirements of the
proposed system.

Benefits of Conducting a Feasibility Study

Conducting a feasibility study is always beneficial to the project as it gives you and
other stakeholders a clear picture of your idea. Below are the key benefits of
conducting a feasibility study:

 Gives project teams more focus and provides an alternative outline.

 Narrows the business alternatives.
 Identifies a valid reason to undertake the project.
 Enhances the success rate by evaluating multiple parameters.
 Aids decision-making on the project.

Apart from the approaches to feasibility study listed above, some projects also require
for other constraints to be analyzed -

 Internal Project Constraints: Technical, Technology, Budget, Resource, etc.

 Internal Corporate Constraints: Financial, Marketing, Export, etc.
 External Constraints: Logistics, Environment, Laws and Regulations, etc.

Preparation of Project Report:

Prepare a Project Report covering certain important aspects of the project as detailed below:

 Promoters background/experience
 Product with capacity to be built up and processes involved
 Project location
 Cost of the Project and Means of financing thereof
 Availability of utilities
 Technical arrangements
 Market Prospects and Selling arrangements
 Environmental aspects
 Profitability projections and Cash flows for the entire repayment period of financial
assistance
 Spreadsheets formats attached with this document will help you prepare a Detailed Project
Report for your Bank. You may omit the manufacturing related information in case you are
applying for a non-manufacturing project.

Since the appraisal of the Project involves evaluation of the Project in the following areas,
your company/you would be required to submit certain documents/information in the matter.

Management Evaluation

 Memorandum and Articles of Association : Object, authorised and paid-up share

capital, promoter’s contribution, borrowing powers, list of directors on the Board,
terms of appointment of directors
 Your company as the Promoter : Corporate plan of the Company, projects
promoted/implemented/under implementation, Bankers' report on dealings and
repayment of past loan assistance, details of group companies, operations, balance
sheet and profit & loss account of the promoter company
 New Promoters : Educational background, any industrial experience, family
background, sources of income, details of personal properties, banker's reference,
income tax/ wealth tax returns

Management and Organisation set up : Broad composition of the Board, details of full time
directors and their responsibilities, details of Chief executive and functional executives
including qualification, experience, organisation set-up for existing company and during
project implementation for new company

UNIT 4 - LAUNCHING OF SMALL BUSINESS

FINANCE AND HUMAN RESOURCE MOBILIZATION OPERATIONS PLANNING:
Financial resources:
Financial resources are the cash funds that fill the deficit arising from the Timing differences
between a company's cash receipts and cash disbursements. Financial resources are provided
by different Investors (shareholders, lenders, debt holders) in exchange for remuneration
(dividends, interests, capital gains).
Definition of Financial Resources of Business:

Companies often need funding for starting or continuing business operations. Small
businesses typically need start-up funds, while medium and larger companies may need
funding to expand operations or purchase competitors. Different types of funding are usually
available based on the company s size and needs. Companies may choose to use traditional
funding sources such as banks and equity investors or apply for government grants or venture
capital funds. Each funding type offers different advantages to companies
Types:

Traditional funding methods for business operations include banks and equity investors.
Banks and other lenders usually require information on a company s finances and operations
before lending funds. Small businesses may have a more difficult time obtaining bank loans
since they may have limited business history. Larger or publicly held companies may find
individual investors, mutual funds or other equity investors to purchase stock in the company.
Venture capitalists are private investment groups willing to invest large sums of money into
businesses.

Features:

Venture capitalists may have more requirements when investing funds into companies.
Companies may need to offer venture capitalists a fixed rate of return, significant ownership
stake in the business or input on major management decisions to obtain their investment
funds. Venture capitalists require these options to ensure that they earn sufficient return on
their invested capital. Start-up companies or companies operating in industries or business
sectors with high risk may need to offer more benefits to venture capitalists in return for an
investment.
Considerations:

Companies should carefully consider the terms of each funding source before agreeing on the
investment structure. Banks and other traditional lenders usually require fixed payments
starting almost immediately. This creates a negative cash flow for businesses that may be
struggling to generate revenues in their early years. Equity investors require companies to
maintain consistent periods of income growth. Failing to provide a decent rate of return may
lead equity investors to sell investments and lower the company s wealth.
Benefits:

Working capital is the funds generated through normal business operations. External financial
resources allow companies to maintain their working capital for daily operating purposes.
Companies may also be able to negotiate favourable terms with lenders to defer payments or
limit negative cash flows. Using internal working capital may also allow companies to avoid
short-term financing needs; short-term funding sources generally have the most unfavourable
terms for companies.
Human Resources:
Definition:

The department or support systems responsible for personnel sourcing and hiring, applicant
tracking, skills development and tracking, benefits administration and compliance with
associated government regulations.
A human resources department is a critical component of employee well-being in any
business, no matter how small. HR responsibilities include payroll, benefits, hiring, firing,
and keeping up to date with state and federal tax laws.
Any mix-up concerning these issues can cause major legal problems for your business, as
well as major employee dissatisfaction. But small businesses often don't have the staff or the
budget to properly handle the nitty-gritty details of HR. Because of this, more and more small
businesses are beginning to outsource their HR needs.HR outsourcing services generally fall
into four categories: PEOs, BPOs, ASPs or e-services. The terms are used loosely, so a big tip
is to know exactly what the outsourcing firm you're investigating offers, especially when it
comes to employee liability.
Need for HR Value Changing Dynamics

Company focus
Nature of work
Employee profile
Employee aspiration

Evolution of HR Roles

Employee Champion
Administrative Expert
Change Agent
Strategic Partner
MARKET AND CHANNEL SELECTION:
A marketing analysis is a study of the dynamism of the market. It is the attractiveness of a special
market in a specific industry. Marketing analysis is basically a business plan that presents
information regarding the market in which you are operating in.

There are certain dimensions which help us to perform a marketing analysis. These things
help us understand the market we operate in better. These dimensions include;

 Market Size
 Growth rate of the market
 Market trends
 Market profitability
 Key success factors
 Distribution channels
  Industry cost structure
Market Size – The size of the market is a key factor in a marketing analysis. The bigger the
market the more competitors you are likely to have. For a big market, you need to make sure
your products and services stand out. Otherwise, the customers can easily switch to a rival
product. Not only that, a bigger market makes you rethink your pricing policy. Set your price
too high then you are going to lose your customer base to other competitors. Set it too low
and people will think that you are just providing cheaper poor quality goods. If the market
size is small then you can get away with charging a high price. All these facts are kept in the
marketing analysis. Based on that you go ahead with your marketing plan.
Growth rate of the market – The market growth rate is a huge factor in any sort of
marketing analysis. This is because you get the idea of how long the said market will last.
Before you make an investment you need to analyze the market’s growth rate. If it is likely to
grow over time then you can invest more in it. If it has no growth then you are likely to be
discouraged from investing anything at all. How much time and importance you give to the
market depends on its growth rate.
Market Trends – Market trends are a significant part of the marketing analysis. Having
knowledge about the trends help you to decide what kind of product you are going to sell.
When you are starting off a business you need to know what the current trend is. What is the
thing that the customers like? How much they are willing to spend? What other trends may
capture their attention? These are the sort of things which will go on your analysis. On the
other hand, market trends can change any day. This can turn out to be an opportunity for your
business. If that’s the case then you can seize it and make the most of it. Changes in trend can
also be a threat for you. If you are comfortable producing one kind of good then a market
trend change will affect you the most.
Market Profitability – Most companies’ motive to get into the business is to make a profit.
In other words, they are profit-motive businesses. So before getting into a business you need
to analyze the profitability of the market. If the market has a good profitability then only you
are going to invest heavily. Otherwise, it would be a waste of your time and capital. In order
to calculate the profitability of the market, there are a few things one has to consider. These
things include; buyer power, supplier power, barriers to entry and so on.
Key Success Factors – The key success factors are those elements which help the business to
achieve great success in the market. Such elements are required to stand out among the rest
of the competition. These are things which you did well that have enabled you to produce
great results. Key success factors include;
1. Technology progress
2. Economies of scale
3. Efficient utilization of resources
Distribution Channels – Distribution channels are very important for a business. Without
those, you won’t be able to get your products to your customers. So it becomes a big factor in
a marketing analysis. This is because you need to assess how well the channels are. If the
existing ones are good enough or you need to develop newer ones. Sometimes you come up
with brand new channels like online marketing.
Industry Cost Structure – The industry cost structure is a significant factor while running a
business. It basically sees how much cost is required to get your products for sale. Sometimes
firms can come up with ways to decrease that cost and thereby make a bigger profit without
increasing the market price. Doing a marketing analysis will help you to come up with newer
ways to reduce cost. At the same time, it helps to create strategies for developing a
competitive advantage of your rivals.

GROWTH STRATEGIES:

Small companies or businesses always look for ways to grow their business and increase
sales and profits. There are probable techniques that companies must use for executing a
growth strategy. The technique used by a company to expand business is highly dependent
upon its financial situation, the competition and even government regulations and policies.

Some common growth strategies marked in small scale business are −

 Market penetration
 Market expansion
 Product expansion
 Diversification
 Acquisition
Market Penetration
One of the growth strategies reported in business is market penetration. A small company
uses a market penetration strategy when it agrees to market existing products within the
same market. Increasing market share is the only way of growing through existing products
and markets.
Market share is the share of unit and dollar sales a company acquires within a certain market
when compared to all other competitors. The best way to increase the market share is by
lowering the prices of the commodities.

Market Expansion
Market expansion is another remarkable growth strategy, which is often referred to as
market development that involves selling current products in a new market. There are
different reasons explaining why a company needs to consider a market expansion strategy.

Competition may be such that there is no scope for growth within the current market. If an
entrepreneur is unable to search for new markets, then it is not possible to increase sales or
profits. A small company considers using market expansion strategy if it successfully finds
use of its product in a new market.

Product Expansion
A small scale company can expand its line of products or add new features to increase sales
and profits. When small companies use a product expansion technique, it is also referred as
product development.

The selling continues within the current market. A product expansion growth strategy
basically works well when there is a change in technology. Companies may also be
compelled to add new products as older ones become outdated.

Diversification
Growth strategies in business involve diversification. By diversification, we mean a
company selling new products in new markets. This type of strategy is highly prone to risk
and losses.

A small company acknowledges the plan carefully while utilizing a diversification growth
strategy. Marketing research is important to identify if consumers in the new market will
potentially like as well as buy the new products.

Acquisition
Growth strategies or method to expand business also engages acquisition of other
businesses. In acquisition, a company purchases another company to expand its functions. A
small company uses this type of strategy to bolster its product line and enter new markets.
An acquisition growth strategy is very risky, but not as risky as a diversification strategy, as
in this case the products and market are already authorized. A company must have complete
knowledge of exactly what it wants to achieve when using an acquisition strategy, mainly
due to the significant investment required to execute it.

PRODUCT LAUNCHING:

New strategies are required to get the attention one deserves. Following 10 steps are
essential to be considered while launching a new product in the market −

 Start early − Reporters will write when there is a news and not when you want. Get
a head start and start preparing long before the release date. Initiate outreaching
practices 6 to 8 weeks before the official release date and then keep the news and the
level of practice going up and above the official release date.

 Reach out to your influencers − It is considered as a sub-step for the first step.
Influencers can be cordial customers, aspects, prospects, or even bloggers who have
a noticeable online presence. Motivating people to use the products or services and
then documenting it to review articles or posts. These people are excellent resources
to interact with analysts offering an excellent pre-launch platform.

 Brief the industry analysts − During the initial phase, it is very important to analyze
the industry completely. Scheduling calls with industry analysts and investing time
to document compelling briefing requests is very crucial.

 Fill the social space with leaks − Focus on people who are naturally anxious to learn
about the offerings. For example, ‘arriving shortly’ tweets and ‘leaked’ photos of a
product creates intrigue and builds interest.

 Don’t expect a "big bang" release − Until and unless the product or service to be
launched is truly revolutionary, or unless you have a huge release event planned, the
official launch date should only represent the day that the product will be actually
available.

 Keep the release rolling − Nobody knows when reporters will have time to write, so
give them their own space and some chance to write about the offering after the
official release date. Update the products with some fresh news like announcements
concerning novel use of the product, discounts, customer stories, details about how
the offering provides return on investment (ROI) to customers, etc. to stay in the
news.
  Do something unusual − Do something out of the box, to generate curiosity about
the product or service and grab attention rather than following the usual product
launch method used by zillions of companies.

 Involve all the partners − Channel and marketing partners who have a financial
stake in the successful launching of the product are natural allies. As the number of
people that are talking about the launch increases, the better chances it will gain
market share.

 Make the product accessible − Free trials, downloads, product videos, and demos
make it very easy for the customers as well as the sellers to learn and study about the
product or service, so this should be taken care of.

 Ignore the elements that do not drive the business − Unless the contribution
appeals to the mass customers, don’t stress on likings on social site like the number
of Facebook likes and Twitter followers you collect. Instead try using these social
channels for more meaningful engagement.

MONITORING AND EVALUATING BUSINESS

PREVENTING SICKNESS AND REHABILITATION OF BUSINESS UNITS:

The prevention of sickness cannot be the sole responsibility of any one agency. It is to be
checked at various stages by developing close and continuous dialogue with each other
through effective communication. The preventive measures can be taken individually or
jointly by having discussions and consultations. In preventing the sickness, therefore, the role
of the following agencies has been identified with respective distinction
• Term Lending Institutions • Commercial Banks • Entrepreneur • Government
These agencies can effectively stem the sickness if they make use of signals and symptoms
that are generated by the industrial unit in its working and by using information and reporting
system of important key parameters of the industrial enterprise.
1. Role of Term Lending Institutions: The task of the term lending institutions to avert
sickness commences with the identification of the sick unit. Many industrial projects are born
sick because either proper appraisal has not been done, or market survey has not been carried
out while sanctioning term loan to an entrepreneur.
2. Role of Commercial Banks: A commercial bank is of vital importance to an industrial unit
as it provides to the unit liquid resources needed to keep the unit going. Their everyday
dealing with sick units enables them to be closer to the operation of the unit and read their
pulse. Thus, commercial banks can detect early warning signal of sickness and, thus take, like
suitable and timely action to prevent the incidence of sickness.
3. The Role of the Entrepreneur: In a way, it should be the sole responsibility of the
entrepreneur, who commences, implements and manages the project, to avert sickness in the
unit set up by him. This can normally be done if the entrepreneur does his homework
properly while drawing up the project, if he pays adequate attention to the deficiencies
pointed out by the appraising officers of the financial institutions, if he selects the suppliers of
machinery and process carefully, if he appoints the financial and other staff in time, if he
affects economy to keep the project cost within the original estimates and implements the
same according to the time schedule.
4. The Role of the Government: The Government can help in controlling sickness by not
making sudden and frequent changes in the industrial policies. It has to be appreciated that
setting up of an industrial unit is an investment decision, which has to take into account
further returns.
Sudden changes in industrial policy: When several changes are made successively in the
industrial policy by the government, it not only may discourage new investment but also
upsets further plans causing sickness in the established units. Withdrawal of subsidies can
also result in sickness. It would be only in the fitness of things if the term lenders, who are
expected to know the pulse of each industry financed by them, are taken into confidence by
the government, before effecting any major modifications in the industrial policy. The
financial institutions and the representatives of industry can also be prompted to come
together occasionally with or without government participation with a view to discussing the
problems of the industry in general or of any particular industry and evolving solutions
including recommendations to the government to modify its existing policies.
Resistance to change: The law as it stands today does not empower the term lenders to make
changes in the management of an assisted unit even when they are convinced that incipient
sickness in the unit is entirely due to the incompetence and/or dishonesty of the existing
management and it is apparent to them that without a change in management, the unit would
soon become chronically sick. Strangely enough, when the management is efficient and
honest, any changes suggested in the management by the lenders are readily accepted but a
management which is not above board usually resists management changes.
Power to change: It would be a greater help if the apex term lenders are vested by the
government with powers to make management changes in units assisted by the public
financial institution when it is proved to its satisfaction that sickness in a unit has set in and
the same can be attributed entirely/mainly to deficient management. In particular, term
lenders may be authorized to appoint in units suffering from incipient sickness whole time
financial, technical and marketing directors. Such directors, of course, would have to be
empowered to report to the financial institutions and also given immunity from penalties for
acts done in good faith. Term lenders can be required to prepare a panel of experienced
persons, who could take up such challenging assignments, while retired officers from the
public and private sector with adequate background could be one source for building up such
a panel.
EFFECTIVE MANAGEMENT OF SMALL BUSINESS:
Educate Yourself
One of the first things that you should do is educate yourself about the various aspects of
finance. For starters, learn how to read financial statements (if you don’t already know how).
This is one important statement that tells you all about your money – where it originated
from, how many hands it changed, and where it is.
Financial statements contain 4 essential details – cash flow statement, income statement,
balance sheet, and statement of shareholders’ equity. The cash flow statement analyzes
operating activities, investments, and financial in/outflow. The balance sheet provides
information related to the company’s assets, liabilities and shareholder’s equity. The income
statement reflects the revenue earned within a specific period of time. Shareholder’s equity
represents the amount by which the company is financed through common and preferred
shares.
Separate Personal and Business Finances
Always keep your personal and business finances separate. This entails getting a business
credit card and putting all related expenses on it. This should help you track your outlays and
keep you in control.
You will also do well in opening a savings account dedicated to your business, wherein you
can transfer a certain amount of money from each payment that you receive and gradually
build a considerable corpus. You can use this money to pay taxes.
Cut Costs
It is important that entrepreneurs stay tight-fisted to keep their expenses in check without
hampering customer satisfaction. This, especially, holds true for small businesses.
Every business endures 2 types of costs – fixed and variable. While fixed costs have to be
borne irrespective of whether your business is making money or not, there is scope for
savings in variable costs.
For example, instead of buying costly branded software, you could work with free, cloud-
based, open-source software, which is equally good. Conduct free online calls, video
conferences instead of travelling lost distances. You could also try bartering your services
with other professionals and cut costs.
Invest in Cloud-based Accounting Software
While you can definitely download regular accounting software to manage your finances, it
will never give you the kind of convenience cloud-based accounting software can.
Web-based software provides you with real-time insights as most allow you to store, update,
track, and access data from anywhere at any time. Whether you’re at home, office or are
travelling, you can conveniently work with your data from anywhere you like. It is error-free,
hassle-free and dependable.
Monitor and Measure Performance
It is crucial that you, as a business owner, keep tabs on the movement of your money,
especially when large amounts are involved. Keep looking at your company’s financial
performance in comparison to the past financial statements to project your future revenue,
expenses and cash flow.
Being aware of these aspects will help you make informed decisions for your business.
Hire Professional Help
Everyone needs help, especially a budding entrepreneur interested in making a huge success
of his venture. Sometimes, it pays off to engage the services of an expert, even if it is on a
part-time basis. They can help you determine where your business is, where it is heading by
using and analyzing your data. Make sure you hire someone you trust, though.
Whether it is tax planning for the next financial year, or payment for the current year, their
expertise can go a long way in guiding you and bringing you peace of mind.