Entrepreneurship Development Paper Code : B601 Unit I

Concept : Need and Significance of Entrepreneurship Development in Global contexts. Entrepreneurship Development Concepts, process, experience and strategies. Dynamics of Entrepreneurship Development.

Concept of Entrepreneurship
Entrepreneurship is the act and art of being an entrepreneur or one who undertakes innovations or introducing new things, finance and business acumen in an effort to transform innovations into economic goods. This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. The most obvious form of entrepreneurship is that of starting new businesses (referred as startup company); however, in recent years, the term has been extended to include social and political forms of entrepreneurial activity. When entrepreneurship is describing activities within a firm or large organization it is referred to as intra-preneurship and may include corporate venturing, when large entities spin-off organizations.[1]

Need and Significance of Entrepreneurship Development

A very core and fundamental role is played by entrepreneurship in any economy and the reasons why it holds such a dominant role in the economy is discussed minutely in the given article. The constructive impact of entrepreneurs on the society is also quiet evident in the given paragraphs. When a 2 year and 10 nation survey was conducted the impact of entrepreneurship stood up evidently saying that the countries have high levels of entrepreneurial activities when compared to countries having lower levels of the same shoed drastic differences in factual data of growth rate. Now let us go in depth of the reasons why entrepreneurship holds a dominant position in the society? The following reasons are responsible for the same;1) Provides employment to huge mass of people - people often hold a view that all those who do not
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get employed anywhere jump into entrepreneurship, a real contrast to this is that 76% of establishments of new business in the year 2003 were due to an aspiration to chase openings. This emphasizes the fact that entrepreneurship is not at all an encumbrance to an economy. Whats more is that approximately 34 million of fresh employment opportunities were created by entrepreneurs from the period of 1980. This data makes it clear that entrepreneurship heads nation towards better opportunities, which is a significant input to an economy. 2) Contributed towards research and development system - almost 2/3% of all innovations are due to the entrepreneurs. Without the boom of inventions the world would have been a much dry place to live in. Inventions provide an easier way of getting things done through better and standardized technology. 3) Creates wealth for nation and for individuals as well- all individuals who search business opportunities usually, create wealth by entering into entrepreneurship. The wealth created by the same play a considerable role in the development of nation. The business as well as the entrepreneur contributes in some or other way to the economy, may be in the form of products or services or boosting the GDP rates or tax contributions. Their ideas, thoughts, and inventions are also a great help to the nation. 4) Sky-scraping heights of apparent prospects - the individual gets maximum scope for growth and opportunity if he enters into entrepreneurship. He not only earns, the right term would be he learns while he earns. This is a real motivating factor for any entrepreneur as the knowledge and skills he develops while owning his enterprise are his assets for life time which usually, lacks when a person is under employment. The individual goes through a grooming process when he becomes an entrepreneur. In this way it not only benefits him but also the economy as a whole. 5) It is a challenging opportunity for the people - although entrepreneurship is a challenging task but in most of the cases the rewards it gives are much more than what one anticipates. It does not only reward an entrepreneur at financial levels but also on individual level. It provides self satisfaction to the entrepreneur. 6) Entrepreneurship provides self sufficiency - the entrepreneur not only become self sufficient but also provide great standards of living to its employees. It provides opportunity to a number of people
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working in the organization. The basic factors which become a cause of happiness may be liberty, monetary rewards, and the feeling of contentment that one gets after doing the job. Therefore the contribution of entrepreneurs makes the economy an improved place to live in.

Significance of Entrepreneurship Development in Global Contexts

The importance of entrepreneurship for some countries is given as under; a) What role does entrepreneurship play in America: American economy is well known for its flexibility, adaptability, and grasping of opportunity and it is all because of prevalence of entrepreneurial culture in the economy. The above statement can be well supported with the help of factual data given; taking into account the period 2003 to 2007 the generation of employment has reached 7.2 millions which is more than the total jobs being generated in Japan and Europe. For this the economy had to work upon the same for 41 months without any postponement. For these jobs the American workforces are taking back home hefty amounts. Post tax earnings have gone up by 9.6% that is $2,840 from the time when the president has taken oven the charge. The growth of America is in leaps and bounds and that is all because of the insistence and efficiency of American entrepreneurs. b) Importance of entrepreneurship in European economy: The importance of entrepreneurial activities was realized by the European economy in the year 1980. Recently a number of fresh opportunities for entrepreneurial proposals are being dug up in European economy. The entrepreneurs are today seen as the catalyst which speeds up the process of creating wealth for the economy, providing jobs, and providing an assorted range of goods and services to the consumers. Entrepreneurial undertakings are now being introduced to college going students which could give them an idea of creating and managing firms, relevance of entrepreneurship firms to European financial system, uniqueness of monetary ventures, managing human resources, pecuniary transactions, legality in dealings, and learning entrepreneurial skills.

Process of Entrepreneurship Development

Of course, there are many ways to organize the effort of planning, launching and building a venture. But there are a set of fundamentals that must be covered in any approach. We offer the following as a way to break down the basic activities necessary. It is useful to break the entrepreneurial process into five phases: idea generation, opportunity evaluation, planning, company formation/launch and growth. These phases are summarized in this table, and the Opportunity Evaluation and Planning steps are expanded in greater detail below.

1. Idea Generation: every new venture begins with an idea. In our context, we take an idea to be a description of a need or problem of some constituency coupled with a concept of a possible solution. (A characterization of this phase is still work in process on this site.)

2. Opportunity Evaluation: this is the step where you ask the question of whether there is an opportunity worth investing in. Investment is principally capital, whether from individuals in the company or from outside investors, and the time and energy of a set of people. But you should also consider other assets such as intellectual property, personal relationships, physical property, etc.

3. Planning: Once you have decided that an opportunity, you need a plan for how to capitalize on that opportunity. A plan begins as a fairly simple set of ideas, and then becomes more complex as the business takes shape. In the planning phase you will need to create two things: strategy and operating

plan.

4. Company formation/launch: Once there is a sufficiently compelling opportunity and a plan, the entrepreneurial team will go through the process of choosing the right form of corporate entity and actually creating the venture as a legal entity.

5. Growth: After launch, the company works toward creating its product or service, generating revenue and moving toward sustainable performance. The emphasis shifts from planning to execution. At this point, you continue to ask questions but spend more of your time carrying out your plans.

Although it is natural to think of the early steps as occurring sequentially, they are actually proceeding in parallel. Even as you begin your evaluation, you are forming at least a hypothesis of a business strategy. As you test the hypothesis, you are beginning to execute the first steps of your marketing plan (and possibly also your sales plan). We separate these ideas for convenience in description but it is worth keeping in mind that these are ongoing aspects of your management of the business. In the growth phases, you continue to refine you basic idea, re-evaluate the opportunity and revise your plan. This website is focussed on the early phases of new ventures. It does not delve into the process of generating the original idea. Nor does it cover the phases of growing a company much beyond it's initial launch. However, the topics of evaluation and business planning remain relevant well into the early life of the company. The focus here is the evaluation and planning phases. We first develop a framework for understanding and analyzing this process. This table summarizes this framework:

Opportunity

evaluation

(investment prospectus)

Company's plan

Execution

Strategy

Market research Marketing Business development Forecasting Sales planning R&D management Operations management People management Process and infrastructure Budgeting Financing

Target customer Business model Position Milestones / company objectives

Need / problem Solution Competitive position Team Risk / reward profile

Operating plan

Company timeline Staffing plan Budget Financing plan

Unit II
Entrepreneurship Quality / Motivation : The Entrepreneurship Myths and Misconception, qualities, characteristics and role demanded of an entrepreneur, Process of developing Entrepreneur Qualities.

Entrepreneurship Myths and Misconception

Top Ten Myths & Misconceptions about Entrepreneurship 1. Entrepreneurship is About Making Money 2. Entrepreneurs are Born, not Made 3. Entrepreneurship is About Great Ideas 4. Entrepreneurship is About Great Entrepreneurs 5. There is a Shortage of Capital 6. Entrepreneurs Fail Most of the Time 7. Jobs at Entrepreneurial Firms are Inferior 8. Entrepreneurs & Small Businesses Are Essentially the Same 9. Small Firms are the Job Creators You have to be small/new to be entrepreneurial 10. We Can Have Innovation without Innovators;

Characteristics and role demanded of an entrepreneur

Who is an entrepreneur? An entrepreneur is a person who develops a new idea and takes the risk of setting up an enterprise to produce a product or service which satisfies customer needs. All entrepreneurs are business persons, but not all business persons are entrepreneurs. Let us now think of why all business persons are not entrepreneurs. Think of a woman who sits by the roadside leading to your home and who has been selling the same type of food, from the same size of saucepan or pot, from the same table top, and may not have been able to change her standard of living to any appreciable extent. Such a woman may be a business person but not an entrepreneur. The entrepreneur, on the other hand is the business person who is not satisfied with his/her performance and therefore always finds ways to improve and grow. Now let us consider the characteristics or some special qualities and strengths which make an entrepreneur different from a business person. It is important for us to note that a successful entrepreneur possesses the following characteristics. Initiative An entrepreneur takes actions that goes beyond job requirements or the demand of the situation.They Crate ideas that bring about phenomenal changes Opportunity seeking An entrepreneur is quick to see and seize opportunities. He/she does things before he/she is asked to work by people or forced by situation. Persistence An entrepreneur is not discouraged by difficulties and problems that come up in the business or his/her personal life. Once she sets a goal she is committed to the goal and will become completely absorbed in it. Information seeking An entrepreneur undertakes personal research on how to satisfy customers and solve problems. He/she
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knows that different people have different capabilities that can be of help to them. He/she seeks relevant information from his/her clients, suppliers, competitors and others. He/she always wants to learn things which will help the business to grow. Demand for quality and efficiency An entrepreneur is always competing with others to do things better, faster, and at less cost he/she strives to achieve excellence. Risk taking Are you afraid of uncertainties? Then you cannot be an entrepreneur. Entrepreneurs are not high risk takers. They are also not gamblers; they calculate their risks before taking action. They place themselves in situations involving moderate risk so they are moderate risk takers. Goal setting An entrepreneur sets meaningful and challenging goals for him/herself. An entrepreneur does not just dream. Him/she thinks and plans what he/she does. He/she is certain or has hope about the future. Commitment to work An entrepreneur will work long hours after into the night just to be able to keep his/her promise to his/her client. He/she does the work together with his/her workers to get a job done. He/she knows how to make people happy to work for him/her due his/her dynamic leadership. Systematic planning and monitoring An entrepreneur plans for whatever he/she expects in the business. He/she does not leave things to luck. He/she plans by breaking large tasks down into small once and puts time limits against them. Since and entrepreneur knows what to expect at anytime he/she is able to change plans and strategies to achieve what he/she aims at. Persuasion and networking An entrepreneur acts to develop and maintain business contacts by establishing good working
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relationship. Uses deliberate strategies to influence others. Independence and self confidence Most entrepreneurs start business because they like to be their own boss. They are responsible for their own decisions.

Process of Developing Entrepreneur Qualities

Personal Characteristics First, examine your personal characteristics, values, and beliefs. Do you have the mindset that's typical of successful entrepreneurs?

Optimism: Are you an optimistic thinker? Optimism is truly an asset, and it will help get you through the tough times that many entrepreneurs experience as they find a business model that works for them.

Vision: Can you easily see where things can be improved? Can you quickly grasp the "big picture," and explain this to others? And can you create a compelling vision of the future, and then inspire other people to engage with that vision?

Initiative: Do you have initiative, and instinctively start problem-solving or business improvement projects?

Desire for Control: Do you enjoy being in charge and making decisions? Are you motivated to lead others?

Drive and Persistence: Are you self-motivated and energetic? And are you prepared to work hard, for a very long time, to realize your goals?

Risk Tolerance: Are you able to take risks, and make decisions when facts are uncertain? Resilience: Are you resilient, so that you can pick yourself up when things don't go as planned? And do you learn and grow from your mistakes and failures? (If you avoid taking action because you're afraid of failing, our article on Overcoming Fear of Failure can help you face
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your fears and move forward.) Interpersonal Skills As a successful entrepreneur, you'll have to work closely with people this is where it is critical to be able to build great relationships with your team, customers, suppliers, shareholders, investors, and more. Some people are more gifted in this area than others, but, fortunately, you can learn and improve these skills. The types of interpersonal skills you'll need include:

Leadership and Motivation: Can you lead and motivate others to follow you and deliver your vision? And are you able to delegate work to others? As a successful entrepreneur, you'll have to depend on others to get beyond a very early stage in your business there's just too much to do all on your own!

Communication Skills: Are you competent with all types of communication? You need to be able to communicate well to sell your vision of the future to investors, potential clients, team members, and more.

Listening: Do you hear what others are telling you? Your ability to listen can make or break you as an entrepreneur. Make sure that you're skilled at active listening and empathetic listening.

Personal Relations: Are you emotionally intelligent? The higher your EI, the easier it will be for you to work with others. The good news is that you can improve your emotional intelligence!

Negotiation: Are you a good negotiator? Not only do you need to negotiate keen prices, you also need to be able to resolve differences between people in a positive, mutually beneficial way.

Ethics: Do you deal with people based on respect, integrity, fairness, and truthfulness? Can you lead ethically? You'll find it hard to build a happy, committed team if you deal with people staff, customers or suppliers in a shabby way.
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Critical and Creative Thinking Skills As an entrepreneur, you also need to come up with fresh ideas, and make good decisions about opportunities and potential projects. Many people think that you're either born creative or you're not. However, creativity is a skill that you can develop if you invest the time and effort.

Creative Thinking: Are you able to see situations from a variety of perspectives and come up with original ideas? (There are many creativity tools that will help you do this.)

Problem Solving: How good are you at coming up with sound solutions to the problems you're facing? Tools such as Cause & Effect Analysis, the 5 Whys Technique, and CATWOE are just some of the problem-solving tools that you'll need to be familiar with.

Recognizing Opportunities: Do you recognize opportunities when they present themselves? Can you spot a trend? And are you able to create a plan to take advantage of the opportunities you identify?

Practical Skills You also need the practical skills and knowledge needed to produce goods or services effectively, and run a company.

Goal Setting: Do you regularly set goals, create a plan to achieve them, and then carry out that plan?

Planning and Organizing: Do you have the talents, skills, and abilities necessary to achieve your goals? Can you coordinate people to achieve these efficiently and effectively? (Here, effective project management skills are important, as are basic organization skills.) And do you know how to develop a coherent, well thought-through business plan, including developing and learning from appropriate financial forecasts?

Decision Making: How good are you at making decisions? Do you make them based on relevant information and by weighing the potential consequences? And are you confident in the
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decisions that you make?

Core decision-making tools include Decision Tree Analysis, Grid Analysis, and Six Thinking Hats.

You need knowledge in several areas when starting or running a business. For instance:
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Business knowledge: Do you have a good general knowledge of the main functional areas of a business (sales, marketing, finance, and operations), and are you able to operate or manage others in these areas with a reasonable degree of competence?

Entrepreneurial knowledge: Do you understand how entrepreneurs raise capital? And do you understand the sheer amount of experimentation and hard work that may be needed to find a business model that works for you?

Opportunity-specific knowledge: Do you understand the market you're attempting to enter, and do you know what you need to do to bring your product or service to market?

Venture-specific knowledge: Do you know what you need to do to make this type of business successful? And do you understand the specifics of the business that you want to start? (This is where it's often useful to work for a short time in a similar business.)

You can also learn from others who have worked on projects similar to the ones that you're contemplating, or find a mentor someone else who's been there before and is willing to coach you.

Unit III
Enterprise Launching & Resources : Government Programmes, Policies, Incentive and Institutional
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Networking for Enterprise setting, Steps of setting new Enterprise, Scanning Business Environment, Sensing Business opportunity & Identifying Product

Enterprise Launching & Resources

Credit Guarantee Fund Scheme for MICRO AND SMALL ENTERPRISES Introduction There are an estimated 26 million micro and small enterprises (MSEs) in the country providing employment to an estimated 60 million persons. The MSE sector contributes about 45% of the manufacturing sector output and 40 % of the nation's exports. Of all the problems faced by the MSEs, non-availability of timely and adequate credit at reasonable interest rate is one of the most important. One of the major causes for low availability of bank finance to this sector is the high risk perception of the banks in lending to MSEs and consequent insistence on collaterals which are not easily available with these enterprises. The problem is more serious for micro enterprises requiring small loans and the first generation entrepreneurs. The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the Government of India to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. The scheme was formally launched on August 30, 2000 and is operational with effect from 1st January 2000. The corpus of CGTMSE is being contributed by the Government and SIDBI in the ratio of 4:1 respectively and has contributed Rs.1906.55 crore to the corpus of the Trust up to March 31,2010. As announced in the Package for MSEs, the corpus is to be raised to Rs.2500 crore by the end of 11th Plan. Eligible Lending Institutions The institutions, which are eligible under the scheme, are scheduled commercial banks (Public Sector Banks/Private Sector Banks/Foreign Banks) and select Regional Rural Banks (which have been
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classified under 'Sustainable Viable' category by NABARD). National Small Industries Corporation Ltd. (NSIC), North Eastern Development Finance Corporation Ltd. (NEDFi) and SIDBI have also been made eligible institutions. As on March 31, 2010, there were 112 eligible Lending Institutions registered as (MLIs) of the Trust, comprising of 27 Public Sector Banks, 16 Private Sector Banks, 61 Regional Rural Banks, 2 Foreign Bank and 6 other Institutions viz., NSIC, NEDFI, SIDBI and The Tamil Nadu Industrial Investment Corporation(TNIIC). Eligible Credit Facility The credit facilities which are eligible to be covered under the scheme are both term loans and working capital facility up to Rs.100 lakh per borrowing unit, extended without any collateral security or third party guarantee, to a new or existing micro and small enterprise. For those units covered under the guarantee scheme, which may become sick owing to factors beyond the control of management, rehabilitation assistance extended by the lender could also be covered under the guarantee scheme. It is noteworthy that if the credit facility exceeds Rs.50 lakh, it may still be covered under the scheme but the guarantee cover will be extended for credit assistance of Rs.50 lakh only. Another important requirement under the scheme is that the credit facility should be availed by the borrowing unit from a single lending institution. However, the unit already assisted by the State Level Institution/NSIC/NEDFi can be covered under the scheme for the credit facility availed from member bank, subject to fulfillment of other eligibility criteria. Any credit facility in respect of which risks are additionally covered under a scheme, operated by Government or other agencies, will not be eligible for coverage under the scheme. Guarantee Cover The guarantee cover available under the scheme is to the extent of 75 per cent of the sanctioned amount of the credit facility. The extent of guarantee cover is 80 per cent for (i) micro enterprises for loans up to Rs.5 lakh; (ii) MSEs operated and/or owned by women; and (iii) all loans in the North-East Region. In case of default, Trust settles the claim up to 75% (or 80% wherever applicable) of the amount in default of the credit facility extended by the lending institution. For this purpose the amount in default is reckoned as the principal amount outstanding in the account of the borrower, in respect of term loan, and amount of outstanding working capital facilities, including interest, as on the date of the account turning Non-Performing Asset (NPA).
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Tenure of Guarantee The Guarantee cover under the scheme is for the agreed tenure of the term loan/composite credit. In case of working capital, the guarantee cover is of 5 years or block of 5 years. Fee for Guarantee The fee payable to the Trust under the scheme is one-time guarantee fee of 1.5% and annual service fee of 0.75% on the credit facilities sanctioned. For loans up to Rs.5 lakh, the one-time guarantee fee and annual service fee is 1% and 0.5% respectively. Further, for loans in the North-East Region, the onetime guarantee fee is only 0.75%. Website Operations of CGTMSE are conducted through Internet. The website of CGTMSE has been hosted at www.cgtsi.org.in. Scheme Awareness Programmes CGTMSE has adopted multi-channel approach for creating awareness about its guarantee scheme amongst banks, MSE associations, entrepreneurs, etc. through print and electronic media, by conducting workshops/seminars, attending meetings convened at various district/state/national fora, etc. As on March 31,2010, 1080 workshops and seminars were conducted on Credit Guarantee Scheme. Also, CGTMSE participated in 19 exhibitions and attended 304 SLBC/meetings convened by RBI/other Government offices. Posters and mailers have been circulated to banks, industry associations, and other stakeholders for promoting the scheme and creating its greater awareness. With a view to imparting training to MLIs through their training colleges, multimedia CD-ROM containing operational modalities of the scheme, was distributed to the staff training centers/colleges of the MLIs. The Trust has recently launched an advertisement campaign in 194 newspapers across the country through DAVP, which has created considerable awareness about the scheme among the target audience. Operational Highlights of CGTMSE Operational Highlights of CGTMSE 10. As on March 31, 2010, 3,00,105 proposals from micro and small enterprises have been approved for guarantee cover for aggregate credit of Rs.11550.61 crore,
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extended by 85 MLIs in 35 States/UTs. A year-wise growth position is indicated in the table below:

Period

Active MLIs

Number of Proposals Approved

Credit Approved Lakh) 606 2952 5867 11760 32677 46191 70453 105584 219940 687511

Amount (Rs. in

FY 2000-01 FY 2001-02 FY 2002-03 FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08* FY 2008-09* FY 2009-10*

9 16 22 29 32 36 40 47 57 85

951 2296 4955 6603 9516 16284 27457 30825 53708 151387

Scheme of Micro Finance Programme The Government has launched a Scheme of Micro Finance Programme in 2003-04.The Scheme has been tied up with the existing programme of SIDBI by way of contributing towards security deposits required from the MFIs/NGOs to get loan from SIDBI.The scheme is being operated in underserved
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States and underserved pockets/districts of other states. The Government of India provide funds for Micro-Finnance Programme to SIDBI, which is called 'Portfolio Risk Fund'(PRF).At present SIDBI takes fixed deposit equal to 10% of the loan amount.The share of MFIs/NGOs is 2.5% of the loan amount (i.e. 25% of security deposit) and balance 7.5%(i.e. 7.5% of security deposite) is adjusted from the funds provided by the Government of India. As on 31st March 2010, the Government has released an amount of Rs.80.00 crore towards 'Portfolio Risk Fund'(PRF).An amount of Rs .6.00 crore has been released during 2009-10. As on 31st march 2010,cumulative loan amount of Rs.1299.68 crore has been provided to MFIs/NGOs under the Scheme benefiting approximately 20.21 lakh persons. Of this,more than 80% are estimated to be women beneficiaries.

Steps of setting new enterprise

There are three main stages in setting up an enterprise. IDENTIFICATION OF OPPORTUNITY CONSOLIDATION OF RESOURCES IMPLEMENTATION OF PROJECT Identification of Opportunities When the entrepreneur scans the environment and looks for technology, market demand and then selects the project idea. Consolidation of Resources The entrepreneur consolidates resources like finance, land, building, machineries, raw materials, skill, and makes a business plan accordingly. Implementation of the Project The entrepreneur sets the business venture, manages the enterprise, involving manufacturing, finance
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management, personnel management, etc. creates and looks for success and growth. BUSINESS PLANNING One of the important things in an enterprise is the Business Plan. Put simply, the business plan means a detailed analysis of the business in which all factors needed for business success are considered. Starting from selection of the product idea, finding how to make it, looking at the market and deciding what part of the market will be focused on, down to managing the production, cash flow, employees and quality are analysed and a plan of action is set down in a Business Plan. A Business Plan also plans for the future, in terms of deciding how the business will function in the coming years, how it should grow, and in what directions. A Business Plan is not something that is prepared once and then followed. As the environment in which the enterprise exists keep changing, the enterprise also has to respond to these changes. Some of these may have been taken care of in preparing the Plan, but not others. As such, the Business Plan must be reviewed regularly, to check if what actually happens agrees with what was planned. Periodic changes to Business Plan are needed to keep abreast of the changes in the market and other environment. An enterprise starts with a business idea. The entrepreneur scans the environment, for a project idea from among the various opportunities available, and select one project idea. The entrepreneur does an initial market survey and checks if the project idea is worth taking up and also checks if appropriate technology is available. In the first Business Plan therefore, the entrepreneur must think and put down how she would do these things, and what action she plans to take in this regard. The different aspects of an enterprise, which the entrepreneur must understand and know well, and practice fully, are covered in the chapters following. These also are factors, which need to be covered in the Business Plan. Therefore, it is suggested that in the following chapters, the entrepreneur must start writing her Business Plan step by step, so that by the time she goes through all the stages of learning about entrepreneurship, she also has a Business Plan ready, which may need only minor modification later. Key Elements of Business Planning _ PRODUCT IDEA
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_ TECHNOLOGY _ MARKETING _ MANUFACTURING _ MONEY _ EMPLOYEES _ START UP /LAUNCH _ SUCCESS AND GROWTH The various elements which go into a business plan are : Idea, entrepreneur, market match An entrepreneur and enterprise / business idea as also the market need to match . A assessment of the attitude and aptitude as also socio economic consideration of an entrepreneur matter most in creating an enterprise. The fit needs to be assessed objectively. For example an entrepreneur may not go into silk reeling activity, for she saw that the silk worms get killed before the silk yarn is removed from the cocoons. The very idea was repulsive to her. This match between the idea, entrepreneur and market has to be done after the initial market survey. For instance, checking if there is a market for the product idea selected, what kind of market and will the entrepreneur be able to penetrate such a market will help decision making. If it is challenge, is the entrepreneur capable of taking such a challenge or is their an alternate option. If so entrepreneur can go ahead, if not she has to start with a new idea. The enterprise must also be within the resource reach of the entrepreneur. _ Initially, market survey, market segmentation and demand measurement needs to be carried out and strategies to be adopted in penetrating the market niche needs to be carried out subsequently.

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_ Infrastructure requirements and planning, like land, building, water electricity etc., their costs needs to be assessed and proper estimates have to prepared. _ Determining the technology, machinery /equipments requirements and obtaining the details of the their costs is one of the key steps. _ List of all costs involved in running the enterprise and its projection _ Profit projection consists of Cash flow statement, repayment of loan, means of finance, equity or owner's contribution etc. Break even point, the point where there is no profit or no loss. Return on investment and other ratios _ By equity or owner's contribution it is meant that the entrepreneur brings in some own resources into the enterprise which is entrepreneurs contribution. There are special schemes of the Governments for various disadvantaged people and regions or areas which provides for special funds or 100% loan, grant plus loan. Depending on the size of enterprise it is called micro and small enterprise. This is need to be explored. MICRO AND SMALL ENTERPRISE ( MSE) The definitions of small or micro enterprises vary from country to country. In most countries, there is some form of assistance or benefits provided to enterprises that are defined as micro and small enterprises. Most developing countries take into account investment or project cost as the basis for such a definition. The project cost, as defined by United Nations Development Program (UNDP), is fixed capital + net Initial capital. This could be taken as a basis for all the countries in calculating their project cost. Based on the individual Government policy, it could be classified whether it is in micro An entrepreneur is a person with a dream, originality and daring, who acts as the boss, who decides as to how the commercial organization shall run, who co-ordinates all activities or other factors of production, who anticipates the future trend of demand and prices of products. An entrepreneur is one of the important segments of economic growth. Basically he is a person responsible for setting up a business or an enterprise. In fact, he is one who has the initiative, skill for
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innovation and who looks for high achievements. He is a catalytic agent of change and works for the good of people. He puts up new green-field projects that create wealth, open up many employment opportunities and leads to the growth of other sectors. The entrepreneur displays courage to take risk of putting his money into an idea, courage to face the competition and courage to take a leap into unknown future and create new enterprises/ business. This creative process is the life blood of the strong enterprise that leads to the growth and contributes to the national development. The entrepreneur will always work towards the creation and enhancement of entrepreneurial society.

Unit IV
Business Plan Preparation Procedure & Steps, Market Survey & Demand Analysis, Growth, Modernization & Expansion of Enterprise

Business Plan Preaparation

A business plan is a written description of your business's future, a document that tells what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you've written a plan, or at least the germ of a plan. Procedure & Steps of Preparing Business Plan 1. Research: Get as much information on your proposed business as possible. Talk to those already in
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business, visit the library, learn all you can from trade associations and trade publications, conduct research on-line and find out what help is available from local and federal government agencies. 2. Make your projections: The more you know about your business, the more accurately you can make intelligent projections of sales and potential profits for the first few years. This knowledge is invaluable. 3. Capital: Money. Accept the fact that it always requires more money than youve anticipated to start, or improve your business. Have enough working capital on hand and back-up resources just in case the new business does not prosper as you had anticipated. 4. Competition: Know thy enemy. Study your competition carefully; theyve been in the trenches and have already experienced what you are abut to discover. Read their literature. There is a reason your competitor is in business, and youd better find out what it is and how you can turn their customers into your customers. 5. Location: Location. Location. If you cant go to your customer, your customer must come to you so make it easy. Pick a prime location or invest in targeted advertising.

6. Image: What kind of public image do you want to create with your service, merchandise, quality, dcor, packaging, personnel vehicles, advertising and pricing? How does that image correspond with the customer you are trying to attract? 7. Keep Records: Complete, accurate records are needed to file taxes, to properly manage your bank accounts and most importantly, to give you guidance. Always know where your business stands financially. 8. Professional Help: In addition to professional and confidential SCORE counseling, rely on a competent lawyer, accountant, banker and insurance broker to fulfill your business needs. A marketing professional in you corner may also be needed. 9. Purchasing: Knowing what, when and where to buy and how to gauge inventory can make or break you. It allows you to conserve working capital, reduce obsolescence and meet and beat the competition. Know what sells.
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10. Profits: This is the bottom line for which you are going into business. Make sure that all expenses are accounted for, including your own living costs, possible losses, shrinkage, unseen costs such as fringe benefits and taxes. Then add a legitimate profit to your risk. If the profit does not come out right, perhaps you should rethink your idea. Make sure you consult a SCORE counselor for guidance.

Market Survey and Demand Analysis

Traditional marketing strategy consists of three components, known as the three Cs:

Company: Know the strengths and weakness of your firm. Competition: Know the same about your competitors. Customer: Know who they are and what they want.

Analyze the Competition Of the three Cs, the competitor analysis may give you the toughest time, especially if you are new to the marketplace. First, you should look at your direct competitors. Take, for example, a McDonalds restaurant in a busy downtown area. Its direct competitors would be any nearby Burger King or Wendys restaurants. Its indirect competitors would be other restaurants in the same downtown area, even upscale ones. Customers eat lunch just once a day, and all these restaurants are fighting for this finite group of customers. Examine any substitutes. Instead of going out for lunch, some people may opt to bring lunch from home, or skip lunch entirely. These are both factors McDonalds would need to examine when analyzing a locations competitive position. Assess the Marketplace Once youve identified your direct and indirect rivals, as well as substitute competitors, youll want to gauge your potential fit in the marketplace. Some issues to consider:
o o

Competitor strengths and weaknesses Whether new competitors are entering the marketplace, or existing ones are leaving
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o o

The product or products that your competitors rely on for most of their revenue Ways to overcome the threat of substitute goods Develop a Marketing Program After you have addressed the three Cs, you can move on to developing a marketing program, which involves analyzing the four Ps, collectively known as the marketing mix:

Product: What you are selling Price: How much you will charge Place: Where you will sell your product Promotion: Special incentives you will use to get people to try your product Craft a Market Development Plan Youre now ready for the final phase of your marketing analysis crafting a market development plan. The information you provide here likely wont come into play until youve established your company and have been running for a few years, but investors will find it helpful to see how you envision your company evolving. Your market development plan should address such questions as:

Does recent data show the market for your product is growing? Do you have a plan to offer new products or line extensions in the first few years?

Are there other ways to position your company more competitively in the marketplace?

Does your marketing plan offer ways to grow overall demand within your industry sector?

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These marketing and competitive analyses are vital parts of your business plan and will likely be the most extensive portion of it. Take the time to do thorough research on your competitors and how the market has behaved in recent years. A disorganized marketing strategy can ruin even the best of products, simply because your target customers will never hear of them. Modernisation & Expansion of Enterprise Modernization is distinguished by a high degree of effectiveness. If the production capacities of operating enterprises are increased by the introduction of advanced production methods or by the modernization and replacement of obsolete and worn-out equipment, it is possible, as a rule, to increase product output without expanding the production area and in a shorter time and with fewer expenditures than are required for the construction of new facilities. For example, between 1965 and 1974 the modernization of enterprises in the building materials industry of the Ukrainian SSR required three to four times less in expenditures than would have been required to build new enterprises of the same capacity. Enterprises are modernized in conformity with a plan for a number of purposes, including raising the technological level of production by replacing obsolete and worn-out equipment. (In such instances, the assortment and volume of product output remain the same.) In addition, modernization may be aimed at raising the organizational and technological level of an enterprise, thereby increasing the volume of output by eliminating bottlenecks, systematizing production, and improving management. Modernization may be intended to change the production structure of the enterprise (through specialization, for example) or to improve product quality by converting to a new production method or by improving the comprehensiveness of the use of raw materials. (As a rule, this type of modernization necessitates the rebuilding of enterprises.) Social results may also be among the purposes of modernization (for example, ecological measures such as the establishment of purification facilities, or measures related to industrial aesthetics). In terms of the volume of work it involves, modernization is classified as minor, moderate (or average), or complete, with replacement factors for fixed capital stock of less than 0.2, 0. 20.4, and 0.4, respectively. The replacement factor for the active portion of the capital (machinery and equipment) may even equal 1, but for the passive portion (buildings and installations) the replacement factor will not exceed 0.40.5. (See Table 1.)
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Table 1. Proportion of the total volume of centralized capital investments used for the modernization, expansion, and technical reequipping of operating enterprises (in percent) 1970 Total for industrial projects ................... Electric power ........................... Ferrous metallurgy ........................ Chemical and petrochemical industries ........... Machine building and metalworking.............. Lumber, wood products, and pulp and paper industries . . Light industry............................ Food processing.......................... 58 20 60 45 63 57 40 66 1973 65 25 72 49 70 63 48 60

The decision to modernize is made by the leadership of an enterprise (association) or by the relevant ministry (department). Modernization measures are financed from the state budget (in conformity with the plan for centralized capital investments) and from the production development fund of the enterprise. When an enterprise is modernized, the necessity of maintaining the skills of the workers is taken into account, as is the possibility of retraining them, if there are to be changes in the specialization of the production units that are being modernized. At the same time, modernization plans often envisage significant capital investments to demolish old production buildings and installations, auxiliary facilities, and administrative buildings and build new ones. Such plans are associated with a decline in economic efficiency indicators.
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Developed socialist society pursues a policy of intensive economic development chiefly by means of the modernization of sectors of the national economy. This entails an increase in the proportion of expenditures for modernization in the total volume of centralized capital investments for industry, as well as for many other sectors. The modernization of enterprises and of sectors of the national economy is also a major policy in other socialist countries, especially the German Democratic Republic, the Czechoslovak Socialist Republic, and the Polish Peoples Republic.

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