ENTREPRENEURSHIP DEVELOPMENT

MODULE I

Entrepreneurship refers to all those activities which are to be carried out by a person to
establish and to run the business enterprises in accordance with the changing social, political
and economic environments.

Entrepreneurship includes activities relating to the anticipation of the consumers likes and
dislikes, feelings and behaviors, tastes and fashions and the introduction of business ventures
to meet out all these expectations of the consumers.

Entrepreneurship is considered as a ‘new product’ that would enable businessmen to develop

new form of business organization and new business activities catering to the changing needs
of the society. The liberalization of cultural rigidities are mainly due to this new product
‘entrepreneurship’.

Entrepreneurship is the ability of entrepreneurs to assess the risks and establish businesses
which are risky but at the same time suits perfectly to the changing scenarios of the economy.

“Entrepreneurship as the function of seeking investment and production opportunity,

organizing an enterprise to undertake a new production process, rising capital, hiring labour,
arranging the supply of materials, finding site, introducing new techniques and commodities,
discovering new sources of raw materials and selecting top managers of day to day operations
of the enterprise”.

An entrepreneur is one of the important segments of economic growth. Basically, an

entrepreneur is a person who is responsible for setting up a business or an enterprise. In fact,
he is one who has the initiative, skill for innovation and looks for high achievements. He is a
catalytic agent of change and works for the welfare of people.

The entrepreneur is a critical factor in the socio-economic change. He is the key man who
envisages new opportunities, new techniques, new lines of production, new products and
coordinates all other activities.

The term ‘entrepreneur’ is defined in different manners by different experts.

“Entrepreneur is one who innovates, raises money, assembles inputs, chooses managers and
sets the organization going with his ability to identify them and opportunities which others
are not able to identify and is able to fulfill such economic opportunities. Innovation occurs
through i) Introduction of a new quality in a product of ii) new product iii) discovery of fresh
demand and fresh sources of supply and iv) by change in the organization and management”.

Entrepreneur Vs Entrepreneurship

The major differences between these two terms are as follows.

Entrepreneurship is the function of seeking investment and production opportunity organizing
an enterprise to undertake a new production process, raising capital, arranging labour and raw
materials, finding a site introducing a new technique and commodities, discounting new

DR. J. SURESH KUMAR ASSO. PROFESSOR

sources for the enterprise. Entrepreneur is one who combines capital and labour for the
purpose of production.

Entrepreneur, Entrepreneurship and Enterprise

The word entrepreneur literally came from French language meaning someone who
undertakes an enterprise.

The word enterprise is attached to self-propelled, usually self-made businessmen who thinks
about a venture, dreams it, starts it, works on it and grow with it.

Entrepreneurship could be defined as ability of an individual or a group of individual to

introduce changes or innovate like introduction of a new product or service, opening of a new
market and carrying out a new organization. These are indeed the early American thoughts an
Entrepreneurship. Entrepreneur is a man who invests and risks time, money and effort to start
a business and make it successful.

Any undertaking / venture involving some economic activity which requires risk taking
ability, resources mobilization efforts, keen planning and organization and effective decision
making skill in all types of decision situations. It has got a separate entity and perpetual
successions. It consists of people who work together mainly for production and selling of
goods and services so as to make some economic gains. It may be of private or public, small
or large, domestic or international.

Thus Entrepreneur refers a person, entrepreneurship indicates the process adopted by him and
enterprise is the work place where in he adopts his entrepreneurial skilled.

Importance of Entrepreneurs

Entrepreneurs are frequently thought of as national assets to be cultivated, motivated and

remunerated to the greatest possible extent.

Entrepreneurs can change the way we live and work. If successful, their innovations may
improve our standard of living. In short, in addition to creating wealth from their
entrepreneurial ventures, they also create jobs and the conditions for a prosperous society.

The following are reasons why entrepreneurs are important to the economy.

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.

For example, a few IT companies founded the Indian IT industry in the 1990s as a backend
programmers' hub. Soon the industry gathered pace in its own programmers’ domain. But
more importantly, millions from other sectors benefited from it.)

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Businesses in associated industries, like call centre operations, network maintenance
companies and hardware providers, flourished. Education and training institutes nurtured a
new class of IT workers offering better, high-paying jobs. Infrastructure development
organizations and even real estate companies capitalized on this growth as workers migrated
to employment hubs seeking new improved lives.

Similarly, future development efforts in underdeveloped countries will require

robust logistics support, capital investment from buildings to paper clips and a qualified
workforce. From the highly qualified programmer to the construction worker, the
entrepreneur enables benefits across a broad spectrum of the economy.

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.

Additionally, the cascading effect of increased employment and higher earnings contribute to
better national income in form of higher tax revenue and higher government spending. This
revenue can be used by the government to invest in other, struggling sectors and human
capital.

Although it may make a few existing players redundant, the government can soften soften the
blow by redirecting surplus wealth to retrain workers.

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.

For example, the water supply in a water-scarce region will, at times, force people to stop
working to collect water. This will impact their business, productivity and income. Imagine
an innovative, automatic, low-cost, flow-based pump that can fill in people's home water
containers automatically. Such an installation will ensure people are able to focus on their
core jobs without worrying about a basic necessity like carrying water. More time to devote
to work means economic growth.

For a more contemporary example, smartphones and their smart apps have revolutionized
work and play across the globe. Smartphones are not exclusive to rich countries or rich
people either. As the growth of China's smartphone market and its smartphone industry show,
technological entrepreneurship will have profound, long lasting impacts on the entire human
race.

Moreover, the globalization of tech means entrepreneurs in lesser-developed countries have

access to the same tools as their counterparts in richer countries. They also have the
advantage of a lower cost of living, so a young individual entrepreneur from an

DR. J. SURESH KUMAR ASSO. PROFESSOR

underdeveloped country can take on the might of the multi-million dollar existing product
from a developed country.

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.

Some famous entrepreneurs, like Bill Gates, have used their money to finance good causes,
from education to public health. The qualities that make one an entrepreneur are the same
qualities that motivate entrepreneurs to pay it forward.

Ten Steps to Become an Entrepreneur

Bruce Cameron, in his book Getting Started, writes that businesses don’t just happen, and
that you should assess first whether you should venture out on your own, He recommends
that you follow these ten steps in trying to make it on your own:

Assess Yourself
Are you able to sacrifice enough, have you got self-responsibility and finances to commit?

Get Your Personal Finances in Order

Get rid of personal debt and protect yourself against the unexpected first, if you can’t, delay
starting your own business.

Identify Your Skills

Stick to what you know best. List all your skills and Interests and assess which you can use to
successfully run a business.

Research the Market

Is there a need for that type of business’ See if you can establish a need for your product or
service before committing yourself to it.

Draw up a Business Plan

Before you start your business, you need to be able to predict whether you’ll make a profit or
not, A business plan will help you do this.

What are Your Resources?

Check what are at your disposal and what you need to get. This Includes financial, skills,
equipment and raw materials.

Draw up a Financial Plan

In the early stages, you need cash to keep going, Otherwise you cut costs, reduce services and
thus lose sales. Make sure your financial plan can tide you over.

Business Ownership Structure

Choosing one of the four possible structures for owning your business has far--reaching
influences on your taxes and legal liability choose carefully.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Enterprise Choices
How should you start your business? From scratch, or buy an existing business? Or should
you buy into an existing business or a franchise?

Revisit Your Start-Up Plans

Everything you do in starting up your business, you need to measure up against your
predictions and expectations in your original business plan test all aspects and readjust your
plan if needed.

Factors influencing Entrepreneurial development in India

1. Economic Factors
Capital, labour, raw materials and market are the main economic factors.

(a) Capital:
Capital is one of the most important prerequisites to establish an enterprise. Availability of
capital helps an entrepreneur to bring together the land of one, machine of another and raw
material of yet another to combine them to produce goods. Therefore, capital is regarded as
lubricant to the production process. Basically, capital is the life blood of any activity. If
capital is available, people who have innovative ideas would like to put them into reality.
Without having any obstacles, if capital is available, it will act as a lifeline to entrepreneurs.
So, if capital is available, entrepreneurial activities will increase.

(b) Labour:
The quality and quantity of labour is another factor which influences the emergence of
entrepreneurship. Availability of labour makes entrepreneurship attractive. More than
abundantly available labour, the presence of skilled labour force is very important because
such a workforce is generally less mobile than other resources. If entrepreneurial activities
are initiated near areas where labour is available, then it is easy to carry out the business more
comfortably and profitably at low cost. This is why one finds textile units and machine tools
manufacturing industries concentrated in certain cities like Coimbatore, Tiruppur, Ludhiana,
Rajkot, Baroda, etc. just because of availability of skilled labour force required for such units.

(c) Raw Materials:

Raw materials are required for establishing any industrial activity and therefore has an
influence in the emergence of entrepreneurship. In the absence of raw materials, neither any
enterprise can be established nor an entrepreneur can emerge. In some cases technological
innovations can compensate for raw material inadequacies. The supply of raw materials is not
influenced by themselves but becomes influential depending upon other opportunity
conditions. The more favourable these conditions are, the more likely is the raw material to
have its influence on entrepreneurial emergence.

(d) Market :
It is not only the availability of capital, labour and raw materials but a readily available
market that attracts entrepreneurial activities. Ultimately, it is the market that fetches revenue
for any business. If sufficient market is not there, people will naturally hesitate to do business
in a sector where there is no market. In addition to market opportunities, it is equally

DR. J. SURESH KUMAR ASSO. PROFESSOR

important to ensure future market opportunities for the emergence of entrepreneurial
activities.

2. Social Factors :
Development of entrepreneurship in a society may take place not just because of better
economic factors but because of the presence of positive social factors. The following social
factors influence the development of entrepreneurship in a society.

(a) Social norms and values:

A society sets certain norms and values for the behaviour of people who are part of that
society. If people violate or overstep these norms and values, certain restrictions are likely to
be imposed on them. As a result, many people are forced to accept certain types of jobs and
tasks that reflect the social environment. If the society has an open and flexible approach
towards various types of jobs and works, then people will feel free to do whatever they like
and even go in for innovation and creativity. When there is more openness and flexibility,
entrepreneurship will not only emerge but also thrive.

(b) Role models:

Societies that celebrate entrepreneurship and felicitate successful entrepreneurs in a way
encourage many future generations to take up entrepreneurial activities. This is because
successful businessmen prove to be role models for the society at large. For instance, states
like Gujarat, Maharashtra and to some extent Tamil Nadu and Haryana have experienced
better industrial development as a result of higher concentration of entrepreneurs compared to
lesser industrialized states such as Orissa, Chhattisgarh, Madhya Pradesh and other
Northeastern states.

(c) Social pressure:

At times, entrepreneurship can emerge in a society due to social restriction too. If a society is
orthodox, close and imposes a lot of restrictions, then it is likely to backfire. People who are
at the receiving end are likely to react strongly and go in for change. In other words, because
of negative pressure, more number of people would like to become entrepreneurs as a means
of improving their status. It has been noticed that where people were marginalized, they
became entrepreneurs just to prove their abilities and establish an identity in the society.

(d) Respect and Status:

If societies accord recognition and respect to people who dare to do something different and
creative, it proves to be an encouragement for others to do something enterprising. Therein
lies the emergence of entrepreneurship. In the traditional societies, people were looked down
upon rather than encouraged for deviating from the set norms or regular occupation. This
means there was no respect for change. Thus, societies where there is respect and recognition
for people to do something different are more likely to see the development of entrepreneurial
activities.

(e) Security:
The view regarding role of social security in encouraging entrepreneurship development is
rather divided. One school of thought is of the view that people are more prone to take
entrepreneurial risks in secure social environments. On the other hand, there are others who

DR. J. SURESH KUMAR ASSO. PROFESSOR

argue that entrepreneurship will more likely emerge if there are turbulent conditions. In both
cases, there is scope for entrepreneurship development.

3. Psychological Factors

(a) Need Achievement:

According to David McClelland’s theory of need achievement, a constellation of personality
characteristics which are indicative of high need achievement is the major determinant of
entrepreneurship development. Therefore, if the average level of need achievement in a
society is relatively high, one would expect a relatively high amount of entrepreneurship
development in that society. McClelland gives the psychological concept of achievement
motivation to account for the differences in response to similar conditions. Referring to the
encouraging impact of achievement motivation training programmes organised by the Small
Industries Extension Training Institute (SIET), Hyderabad McClelland argues that the need
achievement can be developed through the intensive training programmes.

(b) Withdrawal of Status Respect:

E.E. Hagen attributed the withdrawal of status respect of a group to the genesis of
entrepreneurship. Giving a brief sketch of history of Japan, he concludes that it developed
sooner than other non-Western society except Russia due to two historical differences. First,
Japan had been free from ‘colonial disruption’ and secondly, the repeated long continued
withdrawal of expected status from important groups (Samurai) in its society drove them to
retreatism which caused them to emerge alienated from traditional values with increased
creativity. This very fact led them to the technological progress entrepreneurial roles.

4. Government Actions
The government by its actions or failure to act also does influence both the economic and
non-economic factors for entrepreneurship. Any interested Government in economic
development can help, through its clearly expressed industrial policy, promote
entrepreneurship in one way or other. By creating basic facilities, services and utilities and by
providing incentives and concessions, the Government can provide the prospective
entrepreneurs a facilitative socio-economic setting. Such conducive setting minimizes the
risks which the entrepreneurs are to face. Thus, the supportive actions of the Government
appear as the most conducive to the entrepreneurial growth. This is true of the Indian
entrepreneurs also.

Advantages and Disadvantages of Being an Entrepreneu r

Most people want to be their own boss, but you may not know the amount of effort and
energy it takes to become a successful entrepreneur and head your own company. Even
though there are a lot of down sides to starting up your own company it can be quite
rewarding as well. Who wouldn’t want to be their own boss? Many of the advantages and
disadvantages of being an entrepreneur tend to be one and the same.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Work Hours

Advantage: You are the boss so you can decide when you work and when you don’t work.
You can vacation whenever you want and have a “sick day” whenever you want.

Disadvantage: In order to run a successful business many entrepreneurs tend to work even
more hours than the average full time employee to get their company off the ground. Most
startups tend to not have many employees and entrepreneurs need to get their company
earning a profit as soon as possible.

Decisions

Advantage: You always get to make the call on how things are run and how you want to
proceed with the company. Every decision can be ran through you if you want them to be.

Disadvantage: The stress levels of having to make all the decisions can be overwhelming,
especially for someone just starting a company. Every decision you make can affect the
outlook of your company’s future. This stress may be unbearable at times and may become a
strain on your work life as well as your personal life.

Earnings

Advantage: You can make as much money as you want as long as your business is
prospering. You will no longer feel underpaid for the work you do for somebody else’s
company. If your company is very successful then this may easily be the top advantage to
being an entrepreneur.

Disadvantage: Especially when first starting up, you may not make any money. The lack of
pay early on may be too long for many entrepreneurs to last until their company starts to turn
a profit. Even after your company starts to earn more money there may still be the stress that
next week’s paycheck isn’t always guaranteed if it all depends on the success of your
business that week.

Entrepreneurship comes with its share of ups and downs.

The most obvious advantage is the opportunity to be your own boss. Being in charge and
making the important decisions regarding your business can be fulfilling, but it can also be
challenging.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Here are more thoughts on the pros and cons that come with being a small business owner:

PROS

 CONTROL. You choose the work you like to do and that makes the most of your
strengths and skills. The result can be more job satisfaction.
 EXCITEMENT. Entrepreneurship can be exciting and many entrepreneurs consider
their work highly enjoyable. Each day is filled with new opportunities to challenge
your abilities, skills, and determination.
 FLEXIBILITY. Entrepreneurs can schedule their work hours around other
commitments, including spending quality time with their families.
 FREEDOM. Freedom to work whenever they want, wherever they want, and
however they want draws many to entrepreneurship. Most entrepreneurs don’t
consider their work actual work because they are doing something they love.
 RATIONAL SALARY. As an entrepreneur, your income is directly related to your
efforts and the success of your business.

CONS

 ADMINISTRATION. While making all the decisions can be a benefit, it can also be
a burden. Being an entrepreneur comes with a lot of paperwork that can take up time
and energy.
 COMPETITION. Staying competitive is critical as a small business owner. You will
need to differentiate your business from others like yours in order to build a solid
customer base and be profitable.
 LONELINESS. It can be lonely and scary to be completely responsible for the
success or failure of your business.
 NO REGULAR SALARY. Being an entrepreneur often means giving up the security
of a regular paycheck. If business slows down, your personal income can be at risk.
 WORK SCHEDULE. The work schedule of an entrepreneur can be unpredictable. A
major disadvantage to being an entrepreneur is that it requires more work and longer
hours than being an employee.

Characteristics Of An Entrepreneur

Anybody can be an entrepreneur provided he has got a certain set of behavioural traits
and mental aptitude. His success depends more on hard work than good luck. He must be a
doer and not a dreamer. The success of an entrepreneur depends largely on his intelligence,
imagination, capacity to innovate and his ability to turn visions into realities.

There are certain characteristics features which make an entrepreneur successful in his
venture.
1. Hard work: A successful entrepreneur is one who is willing to work hard
from the very beginning of his enterprise. An entrepreneur with his tenacity
and hardwork and pervasive perseverance can revive his business even from
on the verge of collapse.
2. Business Sincerity: Business sincerity is most important for the success of an
enterprise. If a person is sincere about his venture, he will move heaven and
earth to make it a success.

DR. J. SURESH KUMAR ASSO. PROFESSOR

 3. Prudence: A successful entrepreneur must be prudent in all his dealings. He
should have the ability to work out the details of the venture from all angles,
assess the favourable factors and pitfalls and take suitable measures to
overcome the pitfalls.
4. Achievement Motivation: The achievement motivation is the most important
characteristics of an entrepreneur since all other characteristics emanate from
his motivation. He must have a strong desire to achieve high goals in
business. In fact, this achievement motivation helps him to surmount the
obstacles, suppress anxieties, repair misfortunes and devise plans for success.
5. Self-reliance and Independence: A successful entrepreneur wants to follow
his own routine policies and procedures and he does not like to be guided by
others. He is found to be self, reliant by acting as his own master and making
him responsible for all his decisions. He doesn’t like to work for others.
6. Highly Optimistic: Successful entrepreneur is always optimistic about his
future and he is never disturbed by the present problems. He always expects a
favourable situation for his business and hence he is able to run his business
successfully in the midst of temporary hurdles. He does not allow the past to
obsess him.
7. Keen foresight: An entrepreneur must have keen foresight to predict the
future business environment. He has the capacity to visualize the likely
changes to take place in the market, customer’s attitude, technological
developments, Government’s policy etc and take timely actions accordingly.
8. Planning and Organizing Ability: An entrepreneur is a firm believer in
planning and systematic work. Above all, he must have the ability to bring
together all scattered resources required for starting up a new venture.
9. Innovativeness: When all is said and done, innovation becomes a different
task. One should be always innovative to satisfy the varying demands of
customers. For this purpose, the entrepreneur should initiate research and
innovative activities to produce new goods and services. It is a never ending
process.
10. Risk Taking: An entrepreneur must be a risk taker, but he must go for
moderate risk situation, high enough to be exciting, but with a fairly
reasonable chance to win.
11. Maintenance of Public Relations: The extent of maintenance of public
relations or human relations has a vital role to play on the success or failure of
an entrepreneur. A successful entrepreneur must have cordial relations with
his customers to gain their continued patronage and support. He must also
maintain good relations with his employees with a view to motivating them to
higher levels of efficiency. Similarly, he must maintain good relations with
his suppliers, creditors and the community at large so that he may succeed in
his ventures.
12. Communication Skill: Communication skill is the secret of the success of
most entrepreneurs. Good communication skill enables them to put their
points across effectively and with clarity and thereby helps them to win
customers.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Competencies of Entrepreneur

Skills of an Entrepreneur - Every entrepreneur should have the following necessary skills to
run his/her business smoothly.

Confidence to Delegate Tasks

An entrepreneur likely has a full plate and feels that he/she can take on any task. But in
reality, they keep adding to the already-full plate and eventually it is going to collapse and
create a mess.
An entrepreneur should be confident to delegate tasks to an experienced member of the
company, who has the ability to get tasks completed.

Effective Time Management

Proper time management is necessary to differentiate between the extremely urgent tasks and
those that can wait. An entrepreneur should use a notebook or whiteboard to prioritize tasks
by writing them down.
Mobile devices and tablets have calendars and notepads, but nothing is more effective than
actually making a “to-do” list. Concentrate on one task at a time and don’t let new “to-do’s”
disrupt your focus. Check them out one at a time.

Visualizing Aim and Success

Entrepreneurs need to visualize their goals and success in their mind first, if they wish to plan
on making it a reality. Not only do they need to visualize the end result, but also every step
that it is required to get there.

Proper Listening and Communicating Well

Entrepreneurs need to be good at listening and communicating. If they lack this quality then
this may result in miscommunication and wastage of time. Apart from this, extra work is
required to correct the miscommunication.
Time is something that all entrepreneurs would like more of. How often we wished there
were more hours in a day? Wasting priceless time repeating and redoing tasks due to poor
communication should be avoided.

Understanding the Importance of Time

It’s not possible to give everyone the time they want, as it would leave the entrepreneur with
little to no time to complete the things that is to be done.
If a sales representative has a question, they should discuss it with the sales manager. If a
customer has a question they should be speaking with the company’s customer care
representative.
While people might demand time, it doesn’t mean that it is a must to grant them the time.
Time is valuable, so it shouldn’t be wasted on disruptions that can be handled by other
members of the organization.

Seeking Help When Needed

We often let our adamant nature to prevent us from asking for help. There were times when
we were stumped and someone came along with the answer and we thought, “Why in the
world didn’t I think of that?”
Sometimes clear mind and a different viewpoint can quickly solve a problem or provide a
solution to a question. One should not be afraid to ask for help when needed, as it can also
help to strengthen the communication within the organization.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Giving Back
It is important to understand how blessed entrepreneurs are to do what they love to do. When
we are appreciative of what we have achieved, we should just take a step back to see what we
can do to give back, it gives a feeling like no other.
Nobody said being an entrepreneur is an easy task, and while these qualities will not
transform into automatic success, they sure can help in the journey to success.

PROBLEMS OF WOMEN ENTREPRENEURS

“For starting and running the unit women have to face various problems. These problems are
classified under two categories.

A. Gender Related

The biggest problem or difficulty of a women entrepreneur is that she is a women. Some
psycho-social factors impeding the growth of women entrepreneurship are given as problems
as women. They are:

a. Poor self-Image of Women

The present education, books, the media, films and all prevailing socio-cultural norms
conspire and combine to perpetuate the image of women as a weak, submissive, non-
aggressive daughter, an obedient, dutiful, dependent and faithful wife and a self-sacrificing
mother. Women themselves are so conditioned that they too unquestioningly accept this
image of themselves and denigrate other women who might choose to question or step out of
this traditional acceptable mold.

b. Discrimination
The perception of the state’s hierarchy based on the concept of men as ‘Superior’ and women
as inferior has made the women subservient. Women is denied not in terms of her relation to
man. Due to this social environment prevalent, they are unable to move freely as quickly as
an individual to distant places to mobilize their resources or markets. This is a hindrance to
their growth of business.

c. Faulty Socialization
Right from early childhood when the educational conditioning begins, the attitudes comments
and plans of their encouragement are different for each gender tasks to be performed, the
game to be played are different. This tends to inhibit, entrepreneurship quality in two
different ways. First an ideal of feminist has been set up, the values of which are contrary to
those qualities needed for entrepreneurship.

Women and young women in particular internalize those values and limit their aspirations
accordingly. Second whoever resist this socialization with the exception of a token few, are
punished for their feminity and independence. Because of this faulty socialization women are
not ready to enter into the business.

DR. J. SURESH KUMAR ASSO. PROFESSOR

d. Role Conflict
A women’s role refers to the way she is expected to behave in certain situations. In the Indian
context, women’s place is completely at the mercy of her male relatives, first by virtue of
birth and second by marriage. Indian women find it difficult to adjust themselves to the dual
role that they have to play as traditional housewives and compete with men in the field of
business and industry.
Entrepreneurship requires full devotion and dedication which is difficult if not impossible due
to the role overload and role conflict. Many entrepreneurs think that there is a need to
establish their business, but they do not wish to undertake the same business they have no
enough time to pay attention to these things, besides attending their domestic work.

e. Cultural Values

Women in our country has been worst victims of exploitation, perpetuated by an adjust socio-
economic system dominated by old feudal values. The problems that women faced in
entrepreneurship career are resistance, apathy, shyness, conservation, inhibition, poor
response which are products of cultural traditions, value systems and social sanctions.

B. Practical Problems The foremost difficulty of women entrepreneur is arranging finance

and capital. Money is the blood steam of any enterprise. One can borrow finance from banks
and other financial institutions. But the biggest catch is that of collateral security which is
required to get bank credit. Women may have some jewellery but even then they cannot give
it as security without the consent of the husbands of male members of their family. The male
members may even persuade women to part with their jewellery but not ready to invest
anything in the projects of women members. Procedures of obtaining bank loans and delay in
getting it deter many women from venturing. At the Government level the licensing
authorities, labour officers and sales tax inspector ask all sorts of humiliating questions like
what technical qualifications you have, how will you manage labourers, how will you
manage both house and business, does your husband approve etc. Locational disadvantages
are not uncommon for some entrepreneurs, because of their rural background and location.
They are not having access ability to good markets. As a result, they are unable to get enough
orders and market exposure. Common problems for all entrepreneurs are how to market the
product. They don’t know how to contact and whom to contact. Here the middlemen try to
exploit women entrepreneurs. If she decides to eliminate all the tasks, she has to perform all
the tasks. In these days, of strict competition, a lot of money is required for advertisement. If
the product happens to be consumer goods then it takes time to win people away from other
products and make this product popular. Because of these reasons, they could not achieve
significant growth in sales. Hence they are forced not to increase the production on any large
scale. The non-availability of raw material within their region is also a main problem to the
entrepreneurs. They do not know from where they can get it at cheap rate.

1. The paucity of liquid resources, i.e. working capital has been regarded as another
main problem in their day-to-day operation.
2. Non-availability of skilled labour is quite common and is serious problem for women.
They need women workers mainly due to the nature of the product which they are producing
like fabric painting, embroidery, crocket handicrafts, etc. By nature, workers could not like to
come down to entrepreneur’s place of work. As a result entrepreneurs are forced to go to
workers place and hand over the entire work to them. This lead to high cost of production.

DR. J. SURESH KUMAR ASSO. PROFESSOR

3. Those entrepreneurs, who are doing embroidery, garments, painting, etc., are facing
still price competition from the agencies sponsored by the government like Rural
Development Agencies. This restricts the market of their products.

Remedial Measures

To overcome all such problem efforts are being taken by all the agencies on the following
lines:

1. Promotional Help: To formulate project in a proper form and also in drafting project
report, getting concurrences from various authorities for different purposes.
2. Training: Achievement of motivation and training in the particular industry are also being
imparted.
3. Selection of Machinery and Technology: Suitable assistance in the choice of appropriate
machinery and equipment must be provided.
4. Finance: Banks and other institutions agencies are adopting special schemes for rendering
assistance women entrepreneurs. Concessions and preferences are also given to them.
5. Marketing Assistance: Providing information relating to the market condition, price level
competition and other things too, women entrepreneurs will greatly relieve them from too
much of torture.

Besides that, they too should possess certain qualities to become successful entrepreneurs by
overcoming the problem as women.

Types of Entrepreneurs
Entrepreneurs are classified as under different heads as given below. This helps the potential
entrepreneurs to choose his own nature and style of entrepreneurship.

According to the Type of Business

Entrepreneurs are found in various types of business occupations of varying size. We may
broadly classify them as follows:

DR. J. SURESH KUMAR ASSO. PROFESSOR

 TYPES OF
ENTREPRENEUR

ACCORDING TO
BUSINESS ACCORDING TO
STAGES OF
ENTREPRENEUR MOTIVATION
DEVELOPMENT

Business Entrepreneur
Business entrepreneurs are individuals who conceive an idea for a new product or service and
then create a business to materialize their idea into reality. They tap both production and
marketing resources in their search to develop a new business opportunity. They may set up a
big establishment or a small business unit. Trading entrepreneur is one who undertakes
trading activities and is not concerned with the manufacturing work. He identifies potential
markets, stimulates demand for his product line and creates a desire and interest among
buyers to go in for his product. He is engaged in both domestic and overseas trade.

Industrial Entrepreneur & Corporate Entrepreneur

Corporate entrepreneur is essentially a manufacturer who identifies the potential needs of
customers and tailors product or service to meet the marketing needs. He is a product oriented
man who starts in an industrial unit because of the possibility of making some new product.
Corporate entrepreneur is a person who demonstrates his innovative skill in organizing and
managing a corporate undertaking. A corporate undertaking is a form of business
organization which is registered under some statute or Act which gives it a separate legal
entity.

Agricultural Entrepreneur
Agricultural entrepreneurs are those entrepreneurs who undertake such agricultural activities
as raising and marketing of crops, fertilizers and other inputs of agriculture depending on the
usage of Technology.

Technical Entrepreneur
A technical entrepreneur is essentially an entrepreneur of “Craftsman type”. He develops a
new and improved quality of goods because of his craftsmanship. He concentrates more on
production than marketing. He does not care much to generate sales by applying various sales
promotional techniques. He demonstrates his innovative capabilities in matters of production
of goods and rendering services.

Non-technical Entrepreneur
Non-technical entrepreneurs are those who are not concerned with the technical aspects of the
product in which they deal. They are concerned only with developing alternative marketing
and distribution strategies to promote their business.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Professional Entrepreneur
Professional entrepreneur is a person who is interested in establishing a business but does not
have interest in managing or operating it once it is established.

According to Motivation
Motivation is the force that influences the efforts of the entrepreneur to achieve his
objectives. An entrepreneur is motivated to achieve or prove his excellence in job
performance. He is also motivated to influence others by demonstrating his power thus
satisfying his ego.

Pure Entrepreneur
A pure entrepreneur is an individual who is motivated by psychological and economic
rewards. He undertakes an entrepreneurial activity for his personal satisfaction in work, ego
or status.

Induced Entrepreneur
Induced entrepreneur is one who is being induced to take up an entrepreneurial task due to
the policy measures of the government that provides assistance, incentives, concessions and
necessary overhead facilities to start a venture. Most of the entrepreneurs are induced
entrepreneurs who enter business due to financial, technical and several other several other
provided to them by the state agencies to promote entrepreneurship.

Motivated Entrepreneur
New entrepreneurs are motivated by the desire for self-fulfillment. They come into being
because of the possibility of making and marketing some new product for the use of
consumers. If the product is developed to a saleable stage, the entrepreneur is further
motivated by reward in terms of profit and enlarged customer network.

Spontaneous Entrepreneur
These entrepreneurs start their business out of their natural talents and instinct. They are
persons with initiative, boldness and confidence in their ability which motivate them to
undertake entrepreneurial activity.

Growth Entrepreneur
Growth entrepreneurs are those who necessarily take up a high growth industry. These
entrepreneurs choose an industry which has substantial growth prospects.

Super-Growth Entrepreneur
Super-growth entrepreneur are those who have shown enormous growth of performance in
their venture. The growth performance is identified by the liquidity of funds, profitability and
gearing.

According to Stages of Development

First-Generation Entrepreneur
A first generation entrepreneur is one who starts an industrial unit by means of an innovative
skill. He is essentially an innovator, combining different technologies to produce a
marketable product or service.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Modern Entrepreneur
A modern entrepreneur is one who undertakes those ventures which go well along with the
changing demand in the market. They undertake those ventures which suit the current
marketing needs.

Classical Entrepreneur
A classical entrepreneur is one who is concerned with the customers and marketing needs
through the development of a self supporting venture. He is a stereotype entrepreneur whose
aim is to maximize his economic returns at a level consistent with the survival of the firm
with or without an element of growth.

Innovating Entrepreneurs
Innovating entrepreneurship is characterized by aggressive assemblage of information and
analysis of results, deriving from a novel combination of factors. Men/women in this group
are generally aggressive in experimentation who exhibit cleverness in putting attractive
possibilities into practice. One need not invent but convert even old established products or
services, by changing their utility, their value, their economic characteristics, into something
new, attractive and utilitarian. Therein lies the key to their phenomenal success. Such an
entrepreneur is one who sees the opportunity for introducing a new technique of production
process or a new commodity or a new market or a new service or even reorganization of an
existing enterprise.

Imitative Entrepreneurs: Imitative entrepreneurship is characterized by readiness to adopt

successful innovations by innovating entrepreneurs. They first imitate techniques and
technology innovated by others.

Drone Entrepreneurs
Entrepreneurs who are reluctant to introduce any changes in their production methods,
processes and follow their own traditional style of operations. Though they incur losses and
looses their market potential, will not take any effort to overcome the problem. Their
products and the firm will get natural death and knockout.

Forced Entrepreneurs
Sometimes, circumstances made many persons to become entrepreneurs. They do not have
any plan, forward looking and business aptitude. To mitigate the situational problem, they are
forced to plunge into entrepreneurial venture. Most of the may not be successful in this
category due to lack of training and exposure.

Entrepreneurship Innovation
Introduction

Entrepreneurial innovation deals with the introduction of new concept, a new way of doing
things, or a new approach. Innovation can also be in terms of new technology, new
techniques of production, new sources and types of raw materials, novel machinery, new
labour saving devices, new packaging techniques and packaging materials, new way of
advertising, product development, new application of existing product and even developing a
new market.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Innovation can be defined simply as a "new idea, device or method". However, innovation is often
also viewed as the application of better solutions that meet new requirements, unarticulated needs, or
existing market needs.

Innovation refers to the process of bringing new, problem solving ideas into use. The ideas
may be related to reorganizing, cutting costs, establishing new budgeting system, improving
communication etc., Comprehensively speaking, innovation involves generation, acceptance
and implementation of new ideas, processes, products or services. It embodies the capacity to
change or adapt. Innovations are new ways to achieve tasks. Innovations respond to the needs
and constraints and conditions. Inventors and researchers put effort in solving burning
problems; these efforts lead to innovations. For example, labour shortages led to mechanized
equipment, Drought conditions led to improved irrigation, Energy crises led to higher
efficiency cars, Farmers’ cooperatives were established during periods of excessive low farm
prices, Environmental regulations trigger cleaner technologies, A tax on carbon will lead to
improved stoves and power plants.

Innovation is the essential for entrepreneurial motivation. Innovation gives money.

Innovation must be knowledge based. Scientific knowledge is the base for innovation.
However, innovation is also due to the convergence of different kinds of innovation.
Sometimes, there is a need to combine the innovative works of similar other scientists.
Though their works were different in intent and content, by combing their works together,
there is a chance for developing new products.

An innovative entrepreneur becomes a market leader. His market share and profitability
increase till the competitors catch that innovation and imitate it by bringing out “me-too”
product in the market. The innovative entrepreneur hits the market with another innovation to
|retain his market leadership and high profit margin. The history of entrepreneurial
development itself is a reflection of the innovativeness of entrepreneurs.

Peter Drucker saying that innovation is an important tool of an entrepreneur, as he perceives

new opportunity; convert this opportunity into attractive projects and become market leader.
Innovation is the conversion of new knowledge into new products and services. Innovation is
about creating value and increasing productivity, and therefore, making your business grow.
Entrepreneurial strategy is neither hunch nor gamble. It is not service but judgment. “What
we need is an entrepreneurial society in which innovation and entrepreneurship are normal,
steady, and continuous. Just as management has become the specific organ of all
contemporary institutions, and the integrating agent of our society of organisation, so
innovation and entrepreneurship have to become an integral life-sustaining activity in our
organizations, our economy, our society.

Types of Innovation

Product Innovation
Product / service innovation is the result of bringing to life a new way to solve customer’s
problem – through a new product of service development – that benefits both the customer
and sponsoring company.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Process Innovation
Process innovation increases bottom line profitability, reduces costs, improves efficiency and
raises productivity, and increases employees’ job satisfaction. It also delivers enhanced value
of the product or service to customers. For manufacturing companies, process innovation
includes such things as integrating new production methods and technologies that lead to
improved efficiency, quality, or time-to-market and services that are sold with those products.
For service companies, process innovations enable them to introduce “front office” customer
service improvement and add on services.

Business Innovation
Business innovation involves a wide spectrum of original concepts, including development of
new business models, organizational innovation, business application of technology and
communications, new management techniques, environmental efficiency, new forms of
stakeholder participation, transport and finance.
These consist of new business models, new management models, new approaches to value
chain management, new approaches to information, idea and knowledge management, new
forms of strategic partnerships, new forms fo selling and customer service.

Organizational Innovation
More efficient innovation metric, associated with organizational innovation, reflects the
recognition that new ways of organizing work in areas such as work force management
through employee empowerment, new people partnership, or positive action to involve all
employees in order to make organization of work a collective resource for innovation,
knowledge management, value chain management, customer partnership, distribution,
finance, manufacturing can improve competitiveness. Organizational innovation also includes
business model innovation.

Technology Innovation
Technological innovation covers innovation derived from research and development of
technology, which is independent of product and service initiative.

Marketing Innovation
Innovative distribution and customer service methods are an inseparable part. It helps a
company to develop new value added services, enter new markets, and create new market
segments / categories, new distribution methods, and new forms of customer service and
customer partnership. Marketing Communication can also be more effective with Innovative
Strategies.

Strategy Innovation
It consists of reinvented strategy of the enterprise, innovative corporate growth strategies, and
improved competitive strategies. It is about challenging existing methods of industry of
creating value for customer in order to meet newly emerging customer needs, add additional
value, and create new markets and new customer groups for the sponsoring company.
Implementation of all these innovations can improves the utilization of human capital.

ROLE OF TECHNOLOGY IN CONTEMPORARY BUSINESS ENVIRONMENT

Starting a new career requires a lot of hard work and a lot of patience. When you choose to
pursue a career in IT, you know you are headed down a career path that will lead you
to endless opportunities. This is because of the important role IT plays in business survival.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Why is IT important for today’s businesses? In the fast-paced environment of business
operations today, technology makes processes quicker, more effective and easier to document
for future review. Read below to learn why technology is essential for businesses to not only
survive, but to thrive.

The Role of Technology in Business

In the last two decades, technology has changed the way we interact, the way we shop, the
way we do research, and the way businesses operate. Today, technology is central to the
success of most businesses. From marketing to security, most business operations start in the
digital world.

Since the role of IT is so prominent in businesses of all sizes, training for a career in the field
means training for a variety of opportunities. These are just a few of the ways the tech
industry has changed the face of modern businesses:

Communication
Technology simplifies communication, whether you are keeping in touch with an old friend
or catching up on the news. For businesses, IT is key for effective internal and external
communications.

 Internal communication means communication conducted within a business or different

parts of a business. For IT professionals, this means keeping up with the technology
used for email, internal newsletters, or company-wide digital project platforms.

 External communication includes a company’s communication with customers,

potential customers, investors, and the general public. For IT professionals, this means
keeping up with email, social media, online newsletters, and other platforms.

Marketing and Business Growth

In line with external communication mentioned above, much of a company’s marketing is
now done digitally. Digital marketing requires technology support teams to implement and
troubleshoot different kinds of software.

A capable IT team is imperative to the success of any digital marketing plan. Digital
marketing concepts like search engine optimization (SEO), blogging, website development,
and social media targeting all require experts with the knowledge to provide consults when
something goes awry.

Tracking success and opportunities is also simplified by using software designed to store
marketing metrics over time. This allows companies to plan, adapt, and grow.

Decision Making
Technology streamlines the decision making process within a business. There are many ways
to keep track of financial resources, market conditions, and customer satisfaction. With a
good IT plan, you can see this data easily. This makes it easier for companies to see what
steps they should take to make improvements and reach goals.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Digital data collection eliminates some of the fact-checking businesses must do to combat
typical human error, again allowing decision makers to act quickly and confidently. Over
time, this can help a business advance monumentally.

IT Employees are Essential for Everyday Business Practices

MAKE IN INDIA
A type of Swadeshi movement covering 25 sectors of the economy,[1] was launched by
the Government of India on 25 September 2014 to encourage companies to manufacture their
products in India and also increase their investment. As per the current policy, 100% Foreign
Direct Investment (FDI) is permitted in all 25 sectors, except for space (74%), defence (49%)
and news media(26%). Japan and India had also announced a US$12 billion "Japan-India
Make-in-India Special Finance Facility" fund to push investment.[4]
After the launch, India received investment commitments worth ₹16.40 lakh
crores (US$230 billion) and investment inquiries worth ₹1.5 lakh crores (US$21 billion)
between September 2014 to February 2016. As a result, India emerged as the top destination
globally in 2015 for foreign direct investment (FDI), surpassing the USA and China, with
US$60.1 billion FDI. Several states launched their own Make in India initiatives, such
as Vibrant Gujarat, "Happening Haryana" and "Magnetic Maharashtra". India received US
$60 billion FDI in FY 2016-17.
Combined with other initiatives by the end of 2017, India rose 42 places on Ease of doing
business index, 32 places World Economic Forum’s Global Competitiveness Index, and 19
notches in the Logistics Performance Index.
This initiative converges, synergises and enables other important Government of India
schemes, such as Bharatmala, Sagarmala, Dedicated Freight Corridors, Industrial
corridors, UDAN-RCS, Bharat Broadband Network, Digital India.

The "Make In India" initiative

Make in India was launched on 25 September 2014 with the objective of job creation and
skill enhancement in 25 sectors of the economy, and "to transform India into a global design
and manufacturing hub".

Ease of Doing Business

India jumped to 100th place out of 190 countries in the World Bank's 2017 Ease of Doing
Business Index, from 130th in 2016. In February 2017, the government appointed the United
Nations Development Programme (UNDP) and the National Productivity Council "to
sensitize actual users and get their feedback on various reform measures". As a result, now
there is competition among the states of India to improve their current ranking on the ease of
doing business index based on the completion percentage scores on 98-point action plan for
business reform under make in India
initiative. Currently Telangana, Haryana, Odisha, Chhattisgarh and West Bengal (44.35%)
are top five states (c. Feb 2018).

DR. J. SURESH KUMAR ASSO. PROFESSOR

Ongoing global campaign
The campaign was designed by Wieden+Kennedy with the launch of a web portal and release
of brochures on the 25 sectors, after foreign equity caps, norms and procedures in various
sectors were relaxed, including application of manufacturing application made available
online and the validity of licenses was increased to three years.
"Zero Defect Zero Effect" slogan was coined by Prime Minister of India, Narendra Modi,
to emphasize on the production mechanism that produces products with no defects with no
adverse environmental and ecological effects.
"Make in India Week" multi-sectoral industrial event at the MMRDA from 13 February 2016
was attended by 2500+ international and 8000+ domestic, foreign government delegations
from 68 countries and business teams from 72 countries and 17 Indian states also held expos.
Event received over ₹15.2 lakh crores (US$210 billion) worth of investment commitments
and investment inquiries worth ₹1.5 lakh crores (US$21 billion), where Maharashtra led
with ₹8 lakh crores (US$110 billion) of investments. Previously between September 2014
and November 2015, the government received ₹1.20 lakh crores (US$17 billion) worth of
proposals from companies interested in manufacturing electronics in India.
START-UP-INDIA

Startup India is an initiative of the Government of India.

The campaign was first announced by Indian Prime Minister, Narendra Modi during his 15
August 2015 address from the Red Fort, in New Delhi. The action plan of this initiative, is
based on the following three pillars:

1. Simplification and Handholding.

2. Funding Support and Incentives.
3. Industry-Academia Partnership and Incubation.
An additional area of focused relating to this initiative, is to discard restrictive States
Government policies within this domain, such as License Raj, Land Permissions, Foreign
Investment Proposals, and Environmental Clearances. It was organized by The Department of
Industrial Policy and Promotion (DIPP). A startup defined as an entity that is headquartered
in India, which was opened less than seven years ago, and has an annual turnover less
than ₹25 crores (US$3.5 million). Under this initiative, the government has already launched
the I-MADE program, to help Indian entrepreneurs build 1 million mobile app start-ups, and
the MUDRA Banks scheme (Pradhan Mantri Mudra Yojana), an initiative which aims to
provide micro-finance, low-interest rate loans to entrepreneurs from low socioeconomic
backgrounds. Initial capital of ₹200 billion (US$2.8 billion) has been allocated for this
scheme.

Key points

 10,000 crores startup funding pool.

 Reduction in patent registration fees.
 Improved Bankruptcy Code, to ensure a 90-day exit window.
 Freedom from mystifying inspections for first 3 years of operation.
 Freedom from Capital Gain Tax for first 3 years of operation.
 Freedom from tax for first 3 years of operation.
 Self-certification compliance.

DR. J. SURESH KUMAR ASSO. PROFESSOR

 Create an Innovation hub, under the Atal Innovation Mission.
 To target 500k schools, and involve 1m children in innovation related programmes.
 New schemes to provide IPR protection to startup firms.
 Encourage entrepreneurship within the country.
 Promote India across the world as a start-up hub.

Launch
The event was inaugurated on 16 January 2016 by finance minister Arun Jaitley. Among the
attendees were CEOs, startup founders and venture capitalists.

Government's role
The Ministry of Human Resource Development and the Department of Science and
Technology have agreed to partner in an initiative to set up over 75 such startup support hubs
in the National Institutes of Technology (NITs), the Indian Institutes of Information
Technology (IIITs), the Indian Institutes of Science Education and Research (IISERs)
and National Institutes of Pharmaceutical Education and Research (NIPERs).
The Reserve Bank of India said it will take steps to help improve the ‘ease of doing
businesses in the country and contribute to an ecosystem that is conducive for the growth of
start-up businesses.

Investments
Soft Bank, which is headquartered in Japan, has invested US$2 billion into Indian startups.
The Japanese firm has pledged to investment US$10 billion. Google declared to launch a
startup, based on the highest votes in which the top three startups will be allowed to join the
next Google Launchpad Week, and the final winner could win an amount of US$100,000 in
Google cloud credits. Oracle on 12 February 2016 announced that it will establish nine
incubation centres in
Bengaluru, Chennai, Gurgaon, Hyderabad, Mumbai, Noida, Pune, Trivandrum and Vijayawa
da.

State initiatives
Kerala has initiated a government startup policy called "Kerala IT Mission" which focuses on
fetching ₹50 billion (US$700 million) in investments for the state's startup ecosystem. It also
founded India's first telecom incubator Startup village in 2012. The state also matches the
funding raised by its incubator from Central government with 1:1. Telangana has launched
the largest incubation centre in India as "T-Hub". Andhra Pradesh has allocated a 17,000-
[Link]. Technological Research and Innovation Park as a Research and Development
laboratory. It has also created a fund called "Initial Innovation Fund" of ₹100
crores (US$14 million) for entrepreneurs. The government of Madhya Pradesh has
collaborated with the Small Industries Development Bank of India (SIDBI) to create a fund
of ₹200 crores (US$28 million). Rajasthan has also launched a "Start-up Oasis" scheme. In
order to promote start-ups in Odisha, the state government organized a two-day Start-up
Conclave in Bhubaneswar on November 28, 2016.

Higher education alliances

As per the "Industry-Academia Partnership and Incubation" focus of the Startup India
initiative, the Union Ministry of Human Resource Development has announced plans for the

DR. J. SURESH KUMAR ASSO. PROFESSOR

development of "Research Parks" to be created in partnership with higher education providers
across India. An initial investment of Rs.100 crores, has been set aside for the program,
which aims to provide students with access to funds and mentorship for startups.
The Innovation in Mobile App Development Ecosystem (I-MADE) program was also rolled-
out in February 2016. An initiative developed in partnership with The Department Of
Telecommunications (Govt of India), Telecom Centres of Excellence (TCOE), EVC
Ventures, and Unifyed, it aims to help Indian entrepreneurs create mobile app startups. The
program is scheduled to last for 5 years, and has collaborated with 11 Indian universities.

MUDRA BANK
Mudra Bank was set up in order to benefit small entrepreneurs and will also act as a
regulator for 'Micro-Finance Institutions (MFIs).

The roles envisaged for MUDRA include laying down policy guidelines for micro enterprise
financing business and registration of MFI entities as well as their accreditation and rating.

Here are 11 things you must know about Mudra Bank and how it will benefit you:

What does it stand for?

Mudra Bank stands for Micro Units Development Refinance Agency (MUDRA). Also,
Mudra, in Hindi, means currency.

Setting up

Mudra Bank is being set up through a statutory enactment and will be responsible for
developing and refinancing through a Pradhan Mantri MUDRA Yojana.

Last mile financiers

Since small entrepreneurs are businesses are often cut off from banking system because of
limited branch presence, Mudra Bank will partner with local coordinators and provide
finance to "Last Mile Financiers" of small/micro businesses.

Targets

The Finance Ministry said measures to be taken up by MUDRA are targeted towards
mainstreaming young, educated or skilled workers and entrepreneurs including women
entrepreneurs.

5.77 crores

The bank will cater to 5.77 croress small business units that are spread all across India who
currently find it difficult to access credit from the regular banking system.

Recovery method

Mudra Bank will ensure clients are properly protected and will lay down principles and

DR. J. SURESH KUMAR ASSO. PROFESSOR

methods of loan recovery in case of a default. The Bank will also rigidly follow "responsible
financing practices" so deter borrowers from indebtedness.

Corpus

The Bank will be set up with a corpus of Rs 20,000 crores and a credit guarantee fund of Rs
3,000 crores.

Shishu/Kishor/Tarun

The Bank will nurture small businesses through different stages of growth and development
of businesses termed as Shishu, Kishor and Tarun.

Shishu

This will be the first step when the business is just starting up. The loan cover in this stage
will be upto Rs 50,000.

Kishor

In this stage, the entreprenuer will be eligible for a loan ranging from Rs 50,000 to Rs 5 lakh.

Tarun

This last and final category will provide loans for upto Rs 10 lakh.

What is micro finance?

Microfinance is a developmental tool that aims to make low income individuals/groups

financially self-sufficient by providing them access to cheap credit to help them improve their
living condition.

Microfinance services include providing credit, saving instruments, insurance, money

transfers, financial counseling, etc.

They act as last mile lenders for poor people as banks may not find catering to them
economically feasible.

Size of the micro finance sector

According to the Indian Credit Rating Agency (ICRA), the size of micro finance sector in
India stood at ₹1.1 lakh crores as on 30 September 2015

Financing the unfinanced

According to the National Sample Survey Organization (NSSO) 2013 survey, India has 57.7
million small business units, majority of which are owned by Scheduled Castes(SCs),
Scheduled Tribes(STs) and Other Backward Castes(OBCs) people.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Only a paltry 4% of these units get institutional finance, leaving others to borrow money at
usurious rates from money lenders.

Providing cheap finance can turn them into a potent economic force.

₹20,000 crores fund for MUDRA

The FM during his 2015 budget speech had announced a ₹20,000 crores corpus fund for
MUDRA (Micro Units Development Refinance Agency) over a period of 4 years along with
a ₹3000 crores credit guarantee fund to provide insurance to the extent of 50% against default
of MUDRA loans

Products based on business size

Shishu loans support very small businesses such as vegetable vendors, beauty parlour, hair
saloons, etc. Kishor and Tarun support slightly bigger businesses such as production of paper
cups, dairy products, pickle units, etc.

MUDRA Ltd. converted in MUDRA SIDBI Bank

Government had converted MUDRA Ltd. into MUDRA Small Industries Development Bank
of India (SIDBI) bank to have greater availability of money for Small and Micro Enterprises
(SMEs).

MUDRA SIDBI bank will operate as a fully owned subsidiary of SIDBI.

The bank will not only provide refinancing to MFIs but also provide them support services
such as portal management, data analysis, etc.

MUDRA bank not to regulate MFIs

Government has said that the MUDRA (Micro Unit Development and Refinance Agency)
Bank will not act as regulator for Micro Finance Institutions (MFIs)

RBI will continue to regulate them as NBFCs (Non-Banking Finance Companies) as it was
doing earlier.

The clarification comes as Finance Ministry had proposed last year on 1 March 2015 that
MUDRA apart from refinancing may also regulate MFIs.

ATAL INNOVATION MISSION(AIM)

The Central Government of India has setup the Atal Innovation Mission (AIM) at NITI
Aayog. The Atal Innovation Mission along with the Self-Employment and Talent Utilization
(SETU) are the leading ventures to promote a culture of innovation in India. AIM and SETU
were given government approvals in February 2016. AIM and AIM Directorate was
established which would provide help in implementation of mission activities in a focused
manner. Its headquarters are established in New Delhi.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Its aim is to serve as a platform for promotion of world-class Innovation Hubs, Grand
Challenges, Start-up businesses and other self-employment activities. Some of its functions
includes:

 Develop new programmes and policies for fostering innovation in different sectors
of economy especially the backwards and not well established sector.
 Provide collaboration opportunities for different stakeholders.
 Create umbrella structure to oversee the ecosystem of innovation in the country.
 Entrepreneurship promotion through Self-Employment and Talent Utilization,
wherein innovators would be encouraged and mentored to become successful
entrepreneurs.
 Innovation promotion to provide a platform where innovative ideas are generated.
It serves as a platform where young minds could be allowed to go beyond the
conventional methods and try out things in a different or a unique way.
 This scheme aims to improvise the vision of a student which can enhance their
creativity and transform them into innovators of the new technology. It also aims to
provide them with equal opportunities to reach up to their goals and aspirations.

There are 3 sub schemes that has been initiated under this mission.

 Atal Tinkering Labs (ATLS): Atal Tinkering Labs is a significant step towards
modern and a progressive India. They are workspaces fitted with technologies like
3D printers, robotics, sensor technology kits, Internet of things (IoT) and
miniaturized electronics. The purpose of this scheme is to inculcate skills such as
design mindset, computational thinking, adaptive learning, physical computing etc.
These labs have been installed in schools managed by government or private trust.
Children of age group 7-18 are eligible to use these labs provided an adult
surveillance. It provides a platform where young minds are shaped by catering to
their curiosity, imagination, and creativity by allowing them to experiment and
understand the concepts of STEM (Science, Technology, Engineering and Math). It
provides a self-learning environment and an amazing venture to strengthen and
endorsed adaptive learning. AIM will enhance the coverage of ATL to over 98
percent smart cities and 93 percent districts.
 Atal Incubation Centres (AIC): These centres are established to nurture
innovative start-up businesses in their pursuit to become scalable and successful
enterprises. AIC will promote startups in various subject areas like manufacturing,
transport, energy, health, education, agriculture, water and sanitation etc. it would
provide them with essential infrastructural facilities and other value-added services.
It would provide them with experts in the particular sectors for mentoring their
newly established businesses, providing with the planning support, access to seed
capital, industry partners, trainings and other relevant components required for
innovative start-ups. AIM gives a grant-in-aid of ₹ 10 crores to each AIC for a
maximum period of five years to cover the capital and operational cost.
 Atal Grand Challenge Awards or Atal Vikas Challenges: It has the objective of
developing novel disruptive technologies that are ultra-low cost, low maintenance,
durable and customized according to the local conditions in India. Atal Grand
Challenge will be awarding prizes to any citizen who provides desired solution as
per the challenge specific criteria, in a timely manner. These awards can be
reaching up to ₹ 1 crores. These solutions should be effective and innovative so that

DR. J. SURESH KUMAR ASSO. PROFESSOR

 change can be seen easily. NITI Aayog has called on the national and the
international community to join the initiative and in finding solutions to the most
intractable problems. There are many factors like clean water facility, well built
housing, access to basic healthcare and medication facilities, quality education, lack
of farm mechanization and many other with are the reasons behind India being a
developing country instead of developed. Through this scheme solutions will be
obtained by people and also result in economic transformation of the bottom 70%
and beyond of the population and elimination of poverty. This will bring
advancement along with it.
This mission has a major objective which is to change the current scenario of India and
improve the quality of services and education provided to the children to make them
competitive and extraordinary. The AIM has made a great progress and everyday it is
covering more and more schools and other areas to provide them with upcoming technology.
Till date, AIM has selected 2441 schools across India to establish ATLs, covering 93% of
total districts in India and 98% of upcoming smart cities representing all states and 5 out of 7
Union Territories. This will boost their understanding of the mission and cultivate one million
children in India as the innovators of tomorrow.

Under the Atal New India Challenge which is in collaboration with five ministries, AIM
will invite prospective innovators to design market-ready products, using advance
technologies across 17 identified focus areas such as Smart Mobility, Predictive Maintenance
of Rolling Stock and Waste Management and others. The person who wins this challenge will
be awarded with ₹ 1 crores. These would improve their financial condition and work as a
financial aid.

STEP FOR WOMEN

The STEP(Support to Training and Employment Programme) is a 100% Central Sector
Scheme. Under this scheme, Training is provided to poor and marginalized women in
traditional trades which are largely in the informal sector. The Programme of STEP advocates
the objective of extending training for up-gradation of skills and employment for women
through a variety of action-oriented projects.
STEP Program has been introduced to address occupational aspirations of poor women who
do not have the opportunity of formal skill training.
This scheme emphasis on Skill Development for self or wage employment because Skills and
knowledge are the driving forces of economic growth and social development of a country.

Objective
The objectives of this scheme are as below:

 To provide skills that give employability to women.

 To provide competencies and skills that enable women to become self-
employed/entrepreneurs.
 To upgrade the skills of poor and marginalized women.
 To provide employment to them on a sustainable basis.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Eligibility
All Women who are in the age group of 16 years and above.

Beneficiaries
Women who are in the age group of 16 years and above.

Benefits
Under this scheme, Assistance is given in any sector i.e Agriculture, Horticulture, Food
Processing, Handlooms, Tailoring, Stitching, Embroidery, Zari etc Handicrafts, Computer &
IT enabled services along with soft skills and skills for the workplace such as spoken English,
Gems & Jewellery, Travel & Tourism and Hospitality. for imparting skills related to
employability and entrepreneurship.
Provision of for support services (Health, Childcare, Education, sanitation etc.), access to
credit and imparting nutrition education

How To Apply
Contact to any of the followings:

1. District Collector Or
2. Chief Medical Officer Or
3. Superintendent of Police Or
4. District Social Welfare Officer/Women and Child Development Officer Or
5. Representative of District Legal Services Authority Or
6. Representative of the Municipal Corporations/Panchayati Raj Institutions Or
7. Other eminent persons of the district at the discretion of District Collector

Sponsored By
Central Government of India

Ministry
Ministry of Women and Child Development, Government of India.

Date of Launch
1986-87

Status
Active

Sector
Women Empowerment

DR. J. SURESH KUMAR ASSO. PROFESSOR

DIGITAL INDIA
It is a campaign launched by the Government of India to ensure the Government's services
are made available to citizens electronically by improved online infrastructure and by
increasing Internet connectivity or by making the country digitally empowered in the field of
technology. The initiative includes plans to connect rural areas with high-speed
internet networks. Digital India consists of three core components, (a) development of secure
and stable digital infrastructure, (b) delivering government services digitally, and (c)
universal digital literacy.
Launched on 1 July 2015 by Prime Minister Narendra Modi, it is both enabler and
beneficiary of other key Government of India schemes, such as BharatNet, Make in
India, Startup India and Standup India, industrial corridors, Bharatmala, Sagarmala, dedicated
freight corridors and UDAN-RCS.

History
Digital India was launched by the Prime Minister of India Narendra Modi on 1 July 2015
with an objective of connecting rural areas with high-speed Internet networks and improving
digital literacy. The vision of Digital India programme is inclusive growth in areas of
electronic services, products, manufacturing and job opportunities etc. and it is centred on
three key areas – Digital Infrastructure as a Utility to Every Citizen, Governance & Services
on Demand and Digital Empowerment of Citizens.

Digital India Initiative

The Government of India entity Bharat Broadband Network Limited (BBNL) which executes
the BharatNet project is the custodian of Digital India (DI) project. BharatNet will connect
all the 625,000 villages of India by December 2018.
Implementation
New digital services
Some of the facilities which will be provided through this initiative are Bharat net, Digital
Locker, e-education, e-health, e-sign, e-shopping and national scholarship portal. As the part
of Digital India, Indian Government planned to launch Botnet cleaning centres.

 National e-Governance Plan aimed at bringing all the front-end government services
online.
 [Link] is a platform to share inputs and ideas on matters of policy and
governance. It is a platform for citizen engagement in governance, through a
"Discuss", "Do" and "Disseminate" approach.
 UMANG (Unified Mobile Application for New-age Governance) is a Government of
India all-in-one single unified secure multi-channel multi-platform multi-lingual
multi-service freeware mobile app for accessing over 1,200 central and state
government services in multiple Indian
languages over Android, iOS, Windows and USSD (feature phone) devices,
including services such as AADHAR, DigiLocker, Bharat Bill Payment
System, PAN, EPFO services, PMKVY services, AICTE, CBSE, tax and fee or
utilities bills payments, education, job search, tax, business, health, agriculture,
travel, Indian railway tickets bookings, birth certificates, e-District, e-Panchayat,

DR. J. SURESH KUMAR ASSO. PROFESSOR

 police clearance, passport, other utility services from private companies and much
more.
 eSign framework allows citizens to digitally sign a document online using Aadhaar
authentication.
 Swachh Bharat Mission (SBM) Mobile app is being used by people and Government
organisations for achieving the goals of Swachh Bharat Mission.
 eHospital application provides important services such as online registration,
payment of fees and appointment, online diagnostic reports, enquiring availability of
blood online etc.
 Digital attendance: The "[Link]" is a website, launched by PM Narendra
Modi on 1 July 2015 to keep a record of the attendance of Government employees on
a real-time basis. This initiative started with implementation of a common Biometric
Attendance System (BAS) in the central government offices located in Delhi.

 Back-end digitisation
 Black money eradication: The 2016 Union budget of India announced 11
technology initiatives including the use of data analytics to nab tax evaders, creating
a substantial opportunity for IT companies to build out the systems that will be
required. Digital Literacy mission will cover six crores rural households.[14] It is
planned to connect 550 farmer markets in the country through the use of technology.

 Facilities to digitally empower citizens

 Digital Locker facility will help citizens to digitally store their important documents
like PAN card, passport, mark sheets and degree certificates. Digital Locker will
provide secure access to Government issued documents. It uses authenticity services
provided by Aadhaar. It is aimed at eliminating the use of physical documents and
enables the sharing of verified electronic documents across government agencies.
Three key stakeholders of DigiLocker are Citizen, Issuer and requester.
 BPO and job growth: The government is planning to create 28,000 seats of BPOs in
various states and set up at least one Common Service Centre in each of the gram
panchayats in the state.
 e-Sampark Vernacular email service: Out of 10% English speaking Indians, only 2%
reside in rural areas. Rest everyone depends on their vernacular language for all
living their lives. However, as of now, email addresses can only be created in English
language. To connect rural India with the Digital India, the Government of India
impelled email services provider giants including Gmail, office and Rediff to provide
the email address in regional languages. The email provider companies have shown
positive sign and is working in the same process. An Indian-based company, Data
Xgen Technologies Pvt Ltd, has launched world’s first free linguistic email address
under the name ‘DATAMAIL’ which allows creating email ids in 8 Indian languages,
English; and 3 foreign languages – Arabic, Russian and Chinese. Over the period of
time the email service in 22 languages will be offered by Data XGen Technologies.
Training

DR. J. SURESH KUMAR ASSO. PROFESSOR

PMGDisha logo
Pradhan Mantri Gramin Digital Saksharta Abhiyan is being executed by PMGDisha with
an outlay of Rs 2,351.38 crores with the objective of making 6 crores rural households
digitally literate by March 2019. Pradhan Mantri Gramin Digital Saksharta Abhiyan
(abbreviated as PMGDisha) is an initiative under Digital India program, approved by The
Union Cabinet chaired by the PM Narendra Modi. The main objective of the Pradhan Mantri
Gramin Digital Saksharta Abhiyanvis to make 6 Crores people in rural areas, across India,
digitally literate, reaching to around 40% of rural households by covering one member from
every eligible household.
Ongoing awareness campaign
Annual Digital India Summit & Awards are held.

Outcome
Reception
The programme has been favoured by multiple countries including the US, Japan, South
Korea, the UK, Canada, Australia, Malaysia, Singapore, Uzbekistan and Vietnam.
At the launch ceremony of Digital India Week by Prime Minister Narendra Modi in Delhi on
1 July 2015,[33] top CEOs from India and abroad committed to invest ₹224.5 lakh
crores(US$3.1 trillion) towards this initiative. The CEOs said the investments would be
utilized towards making smartphones and internet devices at an affordable price in India
which would help generate jobs in India as well as reduce the cost of importing them from
abroad.
Criticism
Several academic scholars have critiqued ICTs in development. Some take issue with
technological determinism, the notion that ICTs are a sure-fire antidote to the world's
problems. Instead, governments must adjust solutions to the specific political and social
context of their nation. Others note that technology amplifies underlying institutional forces,
so technology must be accompanied by significant changes in policy and institutions in order
to have meaningful impact.
It is being thought that there needs to be more research on the actual worth of these
multimillion-dollar government and ICT for development projects. For the most part, the
technological revolution in India has benefited the already privileged sectors of Indians. It is
also difficult to scale up initiatives to affect all Indians, and fundamental attitudinal and
institutional change is still an issue. While much ICT research has been conducted in Kerala,
Andhra Pradesh, and Gujarat, poorer states such as Bihar and Orissa are rarely mentioned.
Impact
Internet subscribers had increased to 500 million in India as of April 2017. On 28 December
2015, Panchkula district of Haryana was awarded for being the best as well as top performing
district in the state under the Digital India campaign.[

DR. J. SURESH KUMAR ASSO. PROFESSOR

 Stand up India
The Stand up India scheme aims at promoting entrepreneurship among women and scheduled
castes and tribes. The scheme is anchored by Department of Financial Services (DFS),
Ministry of Finance, Government of India.

Stand-Up India Scheme facilitates bank loans between Rs 10 lakh and Rs 1 Crores to at least
one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman
borrower per bank branch for setting up a greenfield enterprise. This enterprise may be in
manufacturing, services or the trading sector. In case of non-individual enterprises at least
51% of the shareholding and controlling stake should be held by either an SC/ST or woman
entrepreneur.

Eligibility

 SC/ST and/or woman entrepreneurs, above 18 years of age.

 Loans under the scheme are available for only green field project. Green field signifies, in
this context, the first time venture of the beneficiary in the manufacturing or services or
trading sector.
 In case of non-individual enterprises, 51% of the shareholding and controlling stake should
be held by either SC/ST and/or Women Entrepreneur.
 Borrower should not be in default to any bank/financial institution.

Loan details

 Nature of Loan - Composite loan (inclusive of term loan and working capital) between 10
lakh and upto 100 lakh.
 Purpose of Loan - For setting up a new enterprise in manufacturing, trading or services
sector by SC/ST/Women entrepreneur.
 Size of Loan - Composite loan of 75% of the project cost inclusive of term loan and working
capital. The stipulation of the loan being expected to cover 75% of the project cost would not

DR. J. SURESH KUMAR ASSO. PROFESSOR

 apply if the borrower’s contribution along with convergence support from any other schemes
exceeds 25% of the project cost.
 Interest Rate - The rate of interest would be lowest applicable rate of the bank for that
category (rating category) not to exceed (base rate (MCLR) + 3%+ tenor premium).
 Security - Besides primary security, the loan may be secured by collateral security or
guarantee of Credit Guarantee Fund Scheme for Stand-Up India Loans (CGFSIL) as decided
by the banks.
 Repayment - The loan is repayable in 7 years with a maximum moratorium period of 18
months.
 Working Capital - For drawal of Working capital upto 10 lakh, the same may be sanctioned
by way of overdraft. Rupay debit card to be issued for convenience of the borrower. Working
capital limit above 10 lakh to be sanctioned by way of Cash Credit limit.
 Margin Money - The Scheme envisages 25% margin money which can be provided in
convergence with eligible Central / State schemes. While such schemes can be drawn upon
for availing admissible subsidies or for meeting margin money requirements, in all cases, the
borrower shall be required to bring in minimum of 10% of the project cost as own
contribution.

How to apply for loans

The scheme, which covers all branches of Scheduled Commercial Banks, will be accessed in
three potential ways.
 Directly at the branch or
 Through Stand-Up India portal ([Link]) or
 Through the Lead District Manager ((LDM)

Checklist - Stand- Up India loan Application

 Proof of Identity : Voter’s ID Card / Passport / Driving License / PAN Card / Signature
identification from present bankers of proprietor, partner of director ( if a company)
 Proof of residence: Recent telephone bills, electricity bill, property tax receipt /Passport /
voter’s ID Card of Proprietor, partner of Director (if a company)
 Proof of business Address
 Applicant should not be defaulter in any Bank/F.I.
 Memorandum and articles of association of the Company / Partnership Deed of partners etc.
 Assets and liabilities statement of promoters and guarantors along with latest income tax
returns.
 Rent Agreement (if business premises on rent) and clearance from pollution control board if
applicable.
 SSI / MSME registration if applicable.

DR. J. SURESH KUMAR ASSO. PROFESSOR

 Projected balance sheets for the next two years in case of working capital limits and for the
period of the loan in case of term loan
 Photocopies of lease deeds/ title deeds of all the properties being offered as primary and
collateral securities.
 Documents to establish whether the applicant belongs to SC/ST Category, wherever
applicable.
 Certificate of incorporation from ROC to establish whether majority stake holding in the
company is in the hands of a person who belongs to SC/ST/Woman category.
 For Cases With Exposure above ₹ 25 Lakhs
 Profile of the unit (includes names of promoters, other directors in the company, the activity
being undertaken addresses of all offices and plants, shareholding pattern etc.
 Last three years balance sheets of the Associate / Group Companies (if any).
 Project report (for the proposed project if term funding is required) containing details of the
machinery to be acquired, from whom to be acquired, price, names of suppliers, financial
details like capacity of machines, capacity of utilization assumed, production, sales, projected
profit and loss and balance sheets for the tenor of the loan, the details of labour, staff to be
hired, basis of assumption of such financial details etc.
 Manufacturing process if applicable, major profile of executives in the company, any tie-ups,
details about raw material used and their suppliers, details about the buyers, details about
major-competitors and the company’s strength and weaknesses as compared to their
competitors etc.
The check list is only indicative and not exhaustive and depending upon the local
requirements at different places addition could be made as per (necessity).

Process for submission of loan applications

1. Information on certain parameters/ metrics of the borrower (obtained through a set of about
8-10 questions listed below) is collected through the initial registration process in the portal.
Based on the information provided, feedback is provided to borrowers.
2. The approach of the Stand-Up India portal, for handholding is based on obtaining answers to
a set of relevant questions at the initial stage. These would be typically be:
i. Location of the borrower
ii. Category – SC/ ST/ Woman
iii. Nature of business planned
iv. Availability of place to operate the business.
v. Assistance needed for preparing a project plan
vi. Requirement of skills/training (technical and financial).
vii. Details of present bank account.
Viii. Amount of own investment into the project

DR. J. SURESH KUMAR ASSO. PROFESSOR

 viii. Whether help is needed to raise margin money
ix. Any previous experience in business

Based on the response, the borrowers are categorised as a ready borrower or a trainee
borrower.
 Ready Borrower - In case the borrower requires no handholding support, then the
process of application for the loan at the selected bank can be done through the Stand-Up
India portal ([Link]) . At this stage an application number will be generated
and information about the borrower shared with the bank concerned, the LDM (posted in
each district) and the relevant linked office of NABARD/ SIDBI. The offices of SIDBI and
NABARD shall be designated Stand-Up Connect Centres (SUCC). The loan application will
now be generated and tracked through the portal.

 Trainee Borrower
In cases where the borrower indicates a need for handholding, then registration as a Trainee
Borrower on the Stand-Up India portal ([Link] will link the borrower to the
LDM of the concerned district and the relevant office of SIDBI/ NABARD. This process
which would be electronic could be done at the borrower’s home by himself/ herself.
 SIDBI and NABARD as Stand-Up India Connect centres will then arrange for
support for such trainee borrowers as requested in one or more of the following ways:
[Link] financial training – at the Financial Literacy Centres (FLCs)
[Link] skilling – at skilling centres ( Vocational Training Centres - VTPs/ Other Centres -OCs)
[Link] EDPs – at MSME DIs/ District Industries Centres (DICs)/ Rural Self Employment
Training Institutes (RSETIs)
[Link] work shed – DICs
[Link] margin money – offices related to margin money support schemes e.g. State SC Finance
Corporation, Women’s Development Corporation, State Khadi & Village Industries Board
(KVIB), MSME-DIs etc.
[Link] mentoring support from established entrepreneurs – DICCI, Women Entrepreneur
Associations, Trade bodies. Credible, well established NGOs can also be used for extending
hand holding support.
[Link] utility connections – Offices of utility providers
[Link] DPRs – Project profiles available with SIDBI/ NABARD/ DICs
At any time, even after the loan has been sanctioned, any borrower may access the services of
the Stand-Up Connect Centres.

DR. J. SURESH KUMAR ASSO. PROFESSOR

 The LDM will monitor the process and work with local offices of SIDBI and NABARD for
problem solving and easing bottlenecks. Based on the progress being achieved in each case
and prima facie viability, the LDM will sensitize the concerned bank branch on potential
cases likely to come up. Once this is done, SIDBI/ NABARD will meet concerned bank
officials for further follow up. These organizations will also work with other organizations
who are stakeholders such as the Dalit Indian Chambers of Commerce and Industry (DICCI),
Women’s Entrepreneur Associations etc.
 Once hand holding requirements are adequately met to the satisfaction of the LDM and the
trainee borrower, then a loan application will be generated through the portal.

MODULE II

Developing Business Ideas and Opportunities

Essentially, entrepreneurs need ideas to start and grow their entrepreneurial ventures.
Generating ideas is an innovative and creative process. Sometimes, the most difficult aspect
of starting a business is coming up with a business idea. Even if you have a general business
idea in mind, it usually needs to go through fine-tuning processes. Fruitful ideas often occur
at points where your skill set, your hobbies and interests, and your social networks intersect.
In other words, the best ideas for a new business are likely to come from activities and people
that you already know well.

By the end of this topic, you should be able to:

1. Identify the various sources to generate potential business ideas
for new ventures;
2. Discuss methods available for generating new ideas;
3. Utilise the existing need to turn an idea into an opportunity;
4. Describe the concept of idea assessment; and
5. Prepare an opportunity analysis plan.

DEVELOPING IDEAS AND BUSINESS OPPORTUNITIES

SOURCE OF NEW IDEAS

According to Timmons and Spinelli, (2007), finding a good idea is the first step in the
process of converting an entrepreneurs creativity into an opportunity. Therefore, we might
have these
questions in mind:

A Good Business Idea

Any good business ideas could be an invention, a new product or service, or an original idea
or solution to an everyday problems. A good business idea does not necessarily have to be a
unique products or services. Majority of the entrepreneurs credited their accomplishment to
the exceptional execution of ordinary ideas. The chances of success therefore will be far

DR. J. SURESH KUMAR ASSO. PROFESSOR

greater if you can market a product that is similar to existing offerings, while providing
greater value to customers.

Here are a few ways to build upon the already existing material and would still provide a
profit-driven concept:
(a) Develop ideas as an extension of an existing product (i.e. adding camera
and song features to a mobile phone).
(b) Create an improved service (fast delivery services).
(c) Market a product at a lower price (via e-commerce e.g. [Link]).
(d) Add value to an existing product or service (i.e. reputable brand name or
delivery service).
(e) Altering their quality or quantity.
(f) Introducing automation, simplification, convenience (i.e. smart product).
(g) Personal interests or hobbies 􀄃 many people find ways to turn their hobbies
into successful businesses.
(h) Work experiences, skills, abilities 􀄃 a business, related to the work you do.
(i) A familiar or unfamiliar product or service.
(j) Spot the latest trends.
(k) Changing the delivery method, packaging, unit size or shape.
(l) Increasing mobility, access, portability or disposability.
(m) Simplifying repair, maintenance, replacement or cleaning.
(n) Changing their colour, material or shape.

A survey of entrepreneurs found that most new start-up companies are involved in industries
where they had significant work experience. The personal contacts and domain expertise
developed on the job have proven to be valuable to many individuals who contemplated
launching a business of their own. Anybody who intends to start a business in a new industry
are therefore encouraged to firstly become an "apprentice" for a suitable period of time. By
doing that, you could avoid costly mistakes and at the same time be able to assess whether
you enjoy
the work before making a serious financial commitment. List three ways to build upon the
existing material that will boost profit and provide examples of each ideas that you suggested.
(Hints: You may search from the internet to look up for some extra information)
SELF-CHECK 4.1

TECHNIQUES FOR GENERATING IDEAS

In general, entrepreneurs identify more ideas than opportunities because many ideas are
typically generated to find the best way to capitalise on an opportunity. Several techniques
can be used to stimulate and facilitate the generation of new ideas for products, services and
businesses.

Techniques used to stimulate and facilitate the generation of new ideas for products, services
and businesses

(a) Brainstorming
This is a process in which a small group of people interact with very little structure, with the
goal of producing a large quantity of novel and imaginative ideas. The goal is to create an
open, uninhibited atmosphere that allows members of the group to „freewheel‰ ideas.
Normally, the

DR. J. SURESH KUMAR ASSO. PROFESSOR

leader of the group asks the participants to share their ideas. As group members interact, each
idea sparks the thinking of others, and the spawning of ideas becomes contagious.

(b) Focus Groups

These are group of individuals who provide information using a structured format. Normally,
a moderator will lead a group of people through an open, in depth discussion. The group
members will form comments in open-end in-depth discussion for a new product area that
can result in
market penetration. This technique is an excellent source for screening ideas and concept.

(c) Observation
A method that can be used to describe a person or group of peoples
behaviour by probing:
(i) What do people/organisations buy?
(ii) What do they want and cannot buy?
(iii) What do they buy and don't like?
(iv) Where do they buy, when and how?
(v) Why do they buy?
(vi) What are they buying more of?
(vii) What else might they need but cannot get?

(d) Surveys
This method is proposed by Zikmund (1994). This process involves the gathering of data
based on communication with a representative sample of individuals. This research technique
requires asking people who are called respondents for information either verbally or by using
written questions. Questionnaires or interviews are utilised to collect data on the telephone or
face-to-face interview.

(e) Emerging Trends

The example is based on the population within your area may be getting older and creating
demand for new products and services.

(f) Research and Development

Research is a planned activity aimed at discovering new knowledge, with the hope of
developing new or improved products and services. Researching new methods, skills and
techniques enable entrepreneurs to enhance their performance and ability to deliver better
products and services.

(g) Tradeshows and association meetings

This can be an excellent way to examine the products of many potential competitors, uncover
product trends and identify potential products.

(h) Other Technique

This can be achieved by reading relevant trade magazines and browsing through trade
directories. These may include local, national and foreign publications.

IDEA ASSESSMENT
You may already have a good idea for your business. What is rare, on the other hand, is the
ability to execute an idea and turn it into a profitable business. The ability to take action is far
more important than the idea itself. Is there something that has been overly done? Or has it

DR. J. SURESH KUMAR ASSO. PROFESSOR

been executed poorly in the past? Once your idea has been developed, you will need to start
dedicating a substantial time for assessment, research, development planning and
implementation.

Tasks in Developing Business Ideas

For a start, you could pursue the following tasks:
(a) Identify the value proposition of your business idea

This is to identify and briefly describe the unique value that you may be
able to bring to your customers that your competitors cannot.

(b) Discuss products/services with prospective customers

Would they buy from you, at what price, with what frequency etc.?
Why would they prefer your products to the competitors?
Find out what they really think 􀄃 there is a danger that people will tell you what they
think you would like to hear.
Listen carefully to what is being said; watch
carefully for qualifications, hesitations etc. and don't brow beat respondents
with your ideas 􀄃 you are looking for their views.

From the eight methods mentioned in this section, which one do you think values most for
small medium enterprise? Explain why do you think so.
ACTIVITY 4.1
(c) Assess the market using in-depth market research

(i) How is the market segmented (by price, location, quality, channel etc.)?
(ii) What segments are you targeting?
(iii) How large are these segments (in terms of volume) and how are they changing?
(iv) What are the price make up/structures?
(v) What market share might be available to you bearing in mind your likely prices, location,
breath of distribution, levels of promotion etc.?

(d) Analyse your competitor

(i) Who are they and how do they operate?

(ii) Are they successful and why?
(iii) How would they react to your arrival?
(iv) What makes you think that you could beat the competition?
(v) At whose expense will you gain sales?

(e) Consider possible start-up strategies

(i) Will you be able to work from home or part-time?

(ii) Will you seek a franchise or set up an in-store concession?
(iii) Will you start by buying in finished products for resale as a precursor
to manufacturing?
(iv) Will you contract out manufacturing?
(v) Will you buy an existing business or form an alliance?
(vi) Could you lease or hire equipment, premises etc. rather than buy?

DR. J. SURESH KUMAR ASSO. PROFESSOR

(vii) How will you stimulate sales?

(f) Set approximate targets and prepare first-cut financial projections

Estimate possible sales and costs to get a feel for orders of magnitude and key components
and to establish a rough break-even point (that is when your sales might start covering all
your costs).

(g) Prepare a simple action plan

Cover the first year of operations to highlight the critical tasks and likely funding needed
before the business starts generating a positive cash flow.

This is critical especially if you have to undertake significant product or

market development or need to give credit to customers.
(h) Critically examine ideas from all angles
(i) Can I raise enough money?
(ii) Can I get a premises/staff etc.?
(iii) Will the product work?
(iv) How will I promote and sell?

Capital Consideration: Financing and Revising Your Business Idea

The financial elements have to be taken into consideration to help you to start up this new
idea.
• How much capital/investment money is needed? Where will you go for this kind of
financial support?
• How long will you be able to handle the initial losses using your own resources?
• What other resources can contribute to extend your involvement so that you can turn your
initial losses into profit?
• How long it might take to develop and execute the business plan so that it will be
profitable?
• What kind of profit margin will the business generate?
• How will you market the realistic but optimistic loss or profit business proposal to investors
so that they will want to get involved with your business?

You must remember that whether you generate an idea by yourself or in connection with
someone in a shared context environment, the questions you answer should still follow the
above suggestions to assist you in assessing your financing capabilities and requirement to
support your business plan.

Assessing the Information

Once you have developed your idea, you can move on to assessing the information that will
help you in convincing potential investors or bankers.

Where to look for information? Below are some of the common sources of information on
potential markets that can help your business development.
Contact well-known entrepreneur to get advice. Internet Visit the website of companies with
new products or technologies.
Library Use libraries to access references and specialized bibliographies.

DR. J. SURESH KUMAR ASSO. PROFESSOR

No matter how long you want to stick with your business, you need to formulate a plan and a
schedule. It will be helpful to analyse the potential of your business idea through an
opportunity analysis.
SELF-CHECK 4.2

OPPORTUNITY ANALYSIS PLAN

By now, you may have two or three new business ideas to consider more carefully.
Successful entrepreneurs know that a good idea is not necessarily a good opportunity.
Barringer and Ireland (2006) defines an opportunity is a favourable set of circumstances that
creates a need for a new product, service or business.. They argued that an opportunity has
four essential qualities: it is attractive, durable, timely and anchored in a product, service or
business that creates or add value for its buyer or end user..

In most of entrepreneurial ventures, writing a well-developed business plan is essential.

Before writing a business plan for a new business venture, an assessment must be made
through the opportunity analysis plan. Why? The opportunity analysis will identify which
business ideas have real commercial potential. The role of well-prepared business plan is to
explore this potential in a systematic way. This is one of the challenges that an entrepreneur
will face. The
purpose of the opportunity analysis is to make sure that the entrepreneur is on the right track.
Two basic questions need to be answered:

1. Preparing Opportunity Analysis

The opportunity analysis consists of five different stages.

Phases in opportunity analysis

(a) Phase 1: Seize the Opportunities

In this phase, we need to know what the underlying factors that create opportunities are. The
main factors that may create business opportunities and shows where ideas for opportunity
originate.

Where do ideas for opportunity originate?

(b) Phase 2: Investigate the Need through Market Research

It is necessary to identify, measure and document the need for the product or service. This
process will identify the steps and questions you will need to customize your personal
research and derive certain assumptions on the possible success rate in launching this product
or service into the market.

(i) Preliminary questions

• Will this product be serving customers real needs?
• Competition - What is the difference about the product or service that will cause the
customer to choose it over the competitors products or services?
• Proprietary questions - Can the product be patented or copyrighted?

DR. J. SURESH KUMAR ASSO. PROFESSOR

• Advertisement and packaging - What type of advertising and promotional plan will be used
to market the product?
• Costs - How much will materials and labour cost? What is the rate of increase in costs for
future expansion?
• Sales - What distributions and sales methods will be used?

(ii) Prepare data collection

Having established the variables for data collection, your next step is to design the questions.
Data collection can come from various sources such as collecting primary data through
surveys and observations or using secondary data available from statistical departments,
publications, newspapers etc. The data will be more reliable if your sample size is adequate
for the investigation you are undertaking.

(iii) Execute a study to get answer

To support the preliminary research and to execute your findings, you must look into
secondary data. At this step, you can use your personal source to create questions. Then
choose a small number of relevant companies who specializes in this industry that will be
selected as representation of the whole population. You can pose your questions to the
experts of this group. Then you will need to facilitate the participants to answer the questions
in a similar manner to establish a consistent trend for analytical purposes.

(iv) Analyze and interpret the results

At this stage you already have your primary data. This is the time where you have to do the
interpretation based on your findings. Many entrepreneurs do their research with limited
funds. You can cut costs with the following recommendations:

• Use search engines, web pages, online database;

• Use the telephone instead of mail surveys and door-to-door interviewing; and
• Avoid collecting unnecessary data.

(c) Phase 3: Develop the Plan

Once an opportunity has been identified, you should develop a business plan. Your business
plan is an outline or blueprint of how you will create your business. Implementing the plan is
a much more difficult task. Many prospective businesses experience problems or failure due
to the improper implementation of their business plan. Implementation requires commitment
and dedication. As unforeseen problems will emerge, your persistence and perseverance are
critical.

Implementing your business plan will include:

• Providing guidance in planning and organizing the activities and goal;
• Determining the viability of the business and application in selected market;
• Raising equity and securing financing; and
• Hiring management and staff.

(d) Phase 4: Determine the Resources Needed

For a start-up venture that uses new technology for product or service, the financial and
resource requirements can be quite substantial. You may not have the capabilities to provide
for these using your own resources. Therefore, to ascertain what are the capabilities and
resources required, answering the following questions can serve as a guide:

DR. J. SURESH KUMAR ASSO. PROFESSOR

(i) Do you have business and financial support?
Can the business operate in a cost-effective manner? How about management capabilities and
knowledge of financial gaps?
(ii) Are you prepared for personal contacts and networking?
Who will make contacts with the right companies/business partners? How should the network
be set up?
(iii) Have you considered financing requirement?
Where will you go for the financial support? Can this business sustain over possibly a year or
two?
(iv) Do you have the right set of technical skills?
Do you have the technical skills and experience to do this business?

(e) Phase 5: Manage the Distinguishing Features of the Business

You have invested your time, money, experiences and energy in setting up the new venture.
This is the final step where you need to run your business, applying your management
structure and style in handling questions and solving difficult operational issues. Now is the
time to follow a path blazed by most successful businesses. How?

(i) Keep planning

Planning should account for and accommodate changes in designing, testing and marketing to
prepare for business opportunity. You can model after the process used by most successful
entrepreneurs which among others including the following:

• Test the business concept;

• Determine the improvement needed;
• Define problem and anticipate barriers;
• Align strategic partners for the process;
• Able to prepare a pricing strategy and anticipate future changes; and
• Be competitive at all times.

(ii) Deliver a Total Solution

Nowadays, all companies regardless of whether they are small or big and operating in the
same market, try to offer the entire range of products or services to customers. They are
trying their best to deliver a total solution to satisfy customer and investor needs.

(iii) Cultivate Advanced Resources

The layoffs of highly skilled workers from major corporations are actually creating an
important opportunity for your company. These trained and effective personnel are potential
candidates craving for an opportunity to apply their business skills and experience to launch a
new business. They can provide information about the competitors, market and customers.

Environmental Scanning - Internal & External Analysis of Environment

Organizational environment consists of both external and internal factors. Environment must
be scanned so as to determine development and forecasts of factors that will influence
organizational success. Environmental scanning refers to possession and utilization of
information about occasions, patterns, trends, and relationships within an
organization’s internal and external environment. It helps the managers to decide the

DR. J. SURESH KUMAR ASSO. PROFESSOR

future path of the organization. Scanning must identify the threats and opportunities existing
in the environment. While strategy formulation, an organization must take advantage of the
opportunities and minimize the threats. A threat for one organization may be an opportunity
for another.

Internal analysis of the environment is the first step of environment scanning.

Organizations should observe the internal organizational environment. This includes
employee interaction with other employees, employee interaction with management, manager
interaction with other managers, and management interaction with shareholders, access to
natural resources, brand awareness, organizational structure, main staff, operational potential,
etc. Also, discussions, interviews, and surveys can be used to assess the internal environment.
Analysis of internal environment helps in identifying strengths and weaknesses of an
organization.

As business becomes more competitive, and there are rapid changes in the external
environment, information from external environment adds crucial elements to the
effectiveness of long-term plans. As environment is dynamic, it becomes essential to identify
competitors’ moves and actions. Organizations have also to update the core competencies and
internal environment as per external environment. Environmental factors are infinite, hence,
organization should be agile and vigile to accept and adjust to the environmental changes. For
instance - Monitoring might indicate that an original forecast of the prices of the raw
materials that are involved in the product are no more credible, which could imply the
requirement for more focused scanning, forecasting and analysis to create a more trustworthy
prediction about the input costs. In a similar manner, there can be changes in factors such as
competitor’s activities, technology, market tastes and preferences.

While in external analysis, three correlated environment should be studied and analyzed —

 immediate / industry environment

 national environment
 broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the
organization’s industry, including the competitive position of a particular organization and
it’s main rivals. Also, an assessment of the nature, stage, dynamics and history of the industry
is essential. It also implies evaluating the effect of globalization on competition within the
industry. Analyzing the national environment needs an appraisal of whether the national
framework helps in achieving competitive advantage in the globalized environment. Analysis
of macro-environment includes exploring macro-economic, social, government, legal,
technological and international factors that may influence the environment. The analysis of
organization’s external environment reveals opportunities and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their
industry but also be able to predict its future positions.

Evaluating Opportunities
You have brainstormed half a dozen ideas for a new business and narrowed it down to a
couple that seems promising. How do you know if any of these opportunities is worth
pursuing?
A complete opportunity analysis is beyond the scope of this discussion, but you

DR. J. SURESH KUMAR ASSO. PROFESSOR

can start by asking yourself these questions:
(a) What are the indicators that lead to this idea and opportunity?
(b) What are the conditions that permit the opportunity to occur?
(c) How will the future of this new product or service change the idea?
(d) How great is the window of opportunity? Window of opportunity is a time
horizon during which opportunity exists before something else happens to eliminate them.
(e) For the next subtopic is a guide tabulated in a matrix format on the framework for
evaluating an opportunity. By using the matrix guide, you will be able to assess whether your
opportunity is worth pursuing as a business activity that will earn you profitable gains.

Framework for Evaluating an Opportunity

This framework covers market analysis, financial and harvest issues, competitive advantage
issues and finally management team and risk issues. There are several criteria identified but
these are not exhaustive. You may want to add or change the criteria basing on your tentative
business venture you wish to undertake. However as a rule of thumb, if most of your criteria
fall into the weaker opportunity category, it may be an indication that the opportunity may
not be a good idea to develop into a business activity.

1. Market Analysis
2. Financial and Harvest Issues
3. Competitive Advantage Issues
4. Management Team and Risk Issues

The above strategic process in evaluating a business idea or an opportunity will

lead to one of the following conclusions:
• It is a bad idea;
• It is a good idea; or
• It can be recycled into something else.

As an entrepreneur, try your hand in this process when you want to evaluate the market
potential of a new product or service idea. It evinces you how to use your talents, creativity,
and resources to identify, research and develop a small business idea through a strategic
thinking process. Although the outlined process cannot guarantee success, it is designed to
assist entrepreneur a certain degree of discipline in learning about his business, his
competitors, his customers and most importantly the chances of survival in a competitive and
hostile business environment.

1. What are the factors that need to be considered in evaluating a business idea?
2. What is the difference between a business idea and an opportunity?
3. Why is opportunity analysis important for a new venture? Discuss.
SELF-CHECK 4.3
• The various techniques for generating potential business ideas for new ventures such as
brainstorming, focus group, observation, surveys, merging trends, research and development,
attending tradeshows and association meetings.

• How to evaluate an idea and the ability to execute this idea into a successful business
venture. There are various tasks to be undertaken in the process, which includes identifying
the value proposition of the business idea, doing market survey, implementation plan and
financing requirements.

DR. J. SURESH KUMAR ASSO. PROFESSOR

• It is important to understand the difference between a business idea and an opportunity.
While a business idea is the initial momentum to venture into business activity, an
opportunity is a favourable set of circumstances that creates a need for a new product or
service that can fuel that business activity.

• The discussion continued with a process model called the Opportunity Process Plan to assist
entrepreneur in evaluating a business idea or opportunity using a structured and disciplined
approach.
1. Based on your personal, family or friends experiences, what do you think the best possible
sources of business financing. Why? Discuss this in MyLMS forum.
2. Work in group and conduct a brainstorming session on a new business opportunity analysis
plan. Conduct an opportunity analysis plan and present it in class.
ACTIVITY 4.2
Brainstorming
Business idea
Focus group
Idea assessment
Observation
Opportunities origination
Opportunity analysis plan
Strategic thinking process

Business Model
Model can be defined as “An abstract of reality”. There are various model available for
various subjects. As an entrepreneur, it is important to develop our own business model. A
business model may vary from business to business and from an entrepreneur to entrepreneur.
We will discuss below how to develop an ideal business model.

How to Develop an Ideal Business Model

Size your product’s value in the market
You should match your prices with those of the competitor products. If your product is priced
too high, the sales will dip and if too low, the margins will not be high enough for long-term
sustainability.

Acquire high-value customers

High-value customers are those customers from whom you gain maximum value while
keeping your costs as low as possible. They help you achieve your business targets. You can
reach these customers with minimal marketing expenses.

Ensure sufficiently high margins

Keeping manufacturing costs low by either outsourcing the manufacturing or having an
improved process helps in keeping higher margins. Your product can have features that
provide enhanced value to the customer and thus allow you to charge a premium for it. You

DR. J. SURESH KUMAR ASSO. PROFESSOR

can even opt for a low-touch model to reduce manpower costs. There are various ways to
make sure that the margins are high enough to sustain the business in the long run.

See if your product is the best solution available

The prototype phase already takes care of how most of the stakeholders feel about your
product. You have to see that the pain point you are trying to address is solved by your
solution and it is the best at what it does. A lackluster product cannot be saved even by the
best business model.

Ensure customer satisfaction

Acquiring a new customer is far more expensive than keeping an existing customer satisfied.
A satisfied customer is also a promoter of the brand. Quality after-sales customer service is
one of the ways to ensure customer satisfaction but the associated costs are high and do not
bring in any revenue for the company. These costs cannot be avoided but should ideally be
either restricted or transferred to a third party.

Decide on the channel and distribution strategy

A great product will not be great if the distribution or marketing is poor. Test all the elements
of your channel strategy in detail. An efficient distribution channel keeps margins high.

Maintain market position

A good business model will include plans to make the business sustainable and improve its
market position. So it will have to take into account all the growth opportunities and external
threats, and incorporate a long-term product roadmap. You do not want to rely on just a few
customers for most of your product. You also would not want almost the entire distribution to
be controlled by your competition or your competitors to be better funded than you.
Technology is rapidly evolving making new product development risky but you would not
want to be left behind too. You have to consider all such factors and decide how you plan to
maintain and then continuously improve your

Formulate funding strategy

Your long-term sustainability depends on funding your business. By funding, we are not
referring to only funding by investors. Your company can be bootstrapped yet it will require a
constant flow of funds to sustain itself. Personnel costs, operating capital and various other
overheads are required to be borne by any business, not just a start-up. Start-ups require even
more funding as most of them have to spend significantly more on customer acquisition and
retention than established businesses. You would want your revenues to take care of all of
these. Ideally, your initial funding rounds should allow you to multiply your sales manifold
so that external funding is no longer required.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Execute a pilot rollout

A pilot limited rollout is a great opportunity for you to test everything associated with your
product, from costs to quality to pricing. It is a low-risk, high-speed way for fine-tuning
pricing and channel strategy before the final launch.

Steps involved in starting a business venture

Location

There are many things to consider when choosing a location for your business venture,
whether setting up an office or a shop for the first time, or looking to expand into new areas.
The key factors a business needs to consider when selecting a new location.

1. Accessibility

Does your business rely on frequent deliveries? If so, it’s important to consider local
transport links, particularly main roads and motorways. Property rental and purchase prices
are often steeper in higher density, more commercialised areas, so there are certainly cost
benefits to seeking a more out of town location, providing your daily business operations
won’t be hampered by poor transport links. Equally, if you rely on high customer footfall,
then ensuring your location is accessible by car, bus and even train will all be important
considerations. Don’t forget your employees too, as a good location is often a critical factor
in recruiting the right people into your business, particularly if they have been offered several
jobs and need to evaluate the pros and cons of each.

2. Security

Believe it or not, your location can increase your odds of being affected by crime, which in
turn can influence your insurance premiums, as well as the additional security measures you
made need to take to keep your premises safe. It’s fair to say that in business, we all make
decisions based on information, intuition and probability mixed in with a little luck. But
knowing the chances of crime in the areas you are considering is an important part of the
decision making process. Knowing the risks of potential criminal activity can help you better
prepare and take adequate precautions.

3. Competition

Your proximity to other competing businesses could be crucial to your success. Could they
provide a benefit to your business or cause a hindrance? Establishing which competitors are
in your area and their offering could help guarantee you choose the right location for your
business. If there is too much competition then it may be a warning sign to expand your
horizons to a new location. There are exceptions to this such as car dealerships who want to
be near each other as customers compare and choose the best car deal, hence their close
proximity. Likewise, if you have an element of your offering that is unique or offers some
kind of new innovation, then choosing an area that already has a ripe market could be the

DR. J. SURESH KUMAR ASSO. PROFESSOR

 ideal way to pick up customers very quickly and establish a presence in a new area in a
relatively short time frame.

4. Business Rates

Cash is king! Cash flow is critical as it determines the viable ability for a business to survive
and pay its bills. Therefore, it is important to research the average Business Rates including
rent, utility bills and taxes in the area to ensure you can afford the premises. Simple hidden
costs such as deposits and whether you need to pay to park need to be snuffed out before
committing to a location. Estimating the living cost of the location will prevent a
commitment outside your means.

5. Skill base in the area

Find out the skill base in the area - can it fulfill your needs? Take into account employment
rates as well. If you rely on skilled workers it is best to go to where there is a healthy bank of
talent. Employees are often a business’s biggest asset thus choosing a location that’s lacking
in required talent may be the start of your business’s downfall. Some recruitment agencies
will happily send you CVs on spec to gauge the market, only charging if you subsequently
decide to interview and hire someone. Alternatively, posting a free job via an online jobsite
will quickly show you the calibre of employees in a particular area.

6. Potential for growth

Will the premises be able to accommodate business growth or a spike in demand? Moving
premises is a big upheaval and can be time consuming and costly. A decision needs to be
made as to whether the premise you are choosing is a short-term location or if you would like
to stay there for the long haul. Consequently, a location’s flexibility could be a very
important factor regarding the premises’ suitability for your business needs.

Whilst a perfect business location is different for every business, covering these crucial areas
will certainly give you the best chance of beating the odds and keeping your business on track
for future success.

Permissions/Clearances Required
Obtaining Clearances
An entrepreneur has to obtain several clearances or permission depending upon the nature of
his unit and products manufactured.

Regulatory Or Taxation Clearances

 Registration under Sales Tax Act - Commercial Tax officer of area concerned
 Registration under Central Excise Act - Collector of Central Excise or his nominee for area
 Payment of Income Tax - ITO of the area concerned
 Registration of Partnership deed - Inspector General of area concerned
 Calibration of weights & measures - Weights and Measures Inspector of State

DR. J. SURESH KUMAR ASSO. PROFESSOR

 Power Connection - Designated Officer of State Electricity Board
 Employee strength exceeding 10 with power connection or 20 without power - Chief
Inspector of Factories

Environment And Pollution Related Clearances

 Pollution Control - State Pollution Control Board. A No Objection Certificate (NOC)

should be obtained from the State Pollution Control Board before commencement of
construction activity. In case the industry is of the highly polluting category, a full-fledged or
rapid Environmental Impact Assessment(EIA) study has to be carried out and submitted to
the State Pollution Control Board for approval, after which the construction can commence.
 Industries Requiring Water and Affecting Effluent Disposal - State Pollution Control
Board No Objection Certificate (NOC) should be obtained from the State Pollution Control
Board before commencement of construction activity.
 For units functioning outside Industrial Area - Permission from Municipal Corporation/
Municipality/ Panchyat. In case private agricultural land is purchased for the project, the land
would have to be rezoned as industrial zone. Permission to convert such agricultural land to
industrial area would have to be obtained before the actual start of the construction from the
local office of the Directorate of Town & Country Planning.
 Registration and Licensing of a Boiler - Chief Inspector of Boiler. The safety clearance of
the Chief Electrical Inspector and the Chief Inspector of Boilers are required before
commencing operations with electrical and pressure vessels(boilers) respectively.
 For registration as a 100% export oriented unit (EOU) which can enjoy many
additional concessions, the clearance of the Development Commissioner of the Export
Processing Zone (EPZ) would be required. If the company wishes to offer equity shares
to the public, the clearance of the Stock Exchange Board of India (SEBI) has to be
taken.

Product Specific Clearances

 Establishing a Printing Press - District Magistrate

 License for Cold Storage Construction - Designated Official in State
 Pesticides - Central/State Agricultural Department - Ministry of Agriculture
 Drugs and Pharmaceuticals - Drug license from State Drug Controller
 Safety Matches/ Fireworks - License under Explosives Act from Directorate of Explosives,
Nagpur
 Household Electrical Appliances - License from Bureau of Indian Standards
 Wood Working Industry within 8 km from forest - District Forest Officer
 Milk Processing & Milk products manufacturing units - Approval under Milk and Milk
Products Order from State Agricultural/ Food Processing Industries Department above a
designated capacity.

Licenses and Registration Required for Hotel Business

A number of licenses and registrations are required for starting and operating a hotel business
in India. Many of the licenses and registrations must be obtained prior to starting the hotel
and renewed while the hotel is operational. Further, most licenses require the hotel to meet
certain rules or criteria’s for maintaining validity. Therefore, it is important for
Entrepreneurs in the hotel industry to be aware of these licenses and registrations – to operate
a hotel business smoothly.

DR. J. SURESH KUMAR ASSO. PROFESSOR

A lot of the license requirements depend on the type of hotel, star rating, amenities and the
location of the hotel. Further, the rules and regulations to obtain license for hotel industry
differs according to the states.

Building Permit
The National Building Code of India was prepared by the Bureau of Indian Standards to
unify the building regulations throughout the country. The National Building Code is
adopted by all Government Departments, Municipal Bodies and other Construction Agencies.
As per the National Building Code, no person shall carry out any development, erect, re-erect
or make alterations or demolish any building or cause the same to be done without first
obtaining a separate permit for each such development/building from the Authority.
Therefore, all hotels must have a proper building permit as per the relevant Town Planning
Act or Development Act or Municipal Act or any other applicable statutes for layout,
building plans, water supply, sewerage, drainage, electrification, etc,.

Fire Safety Permit

A fire safety certificate or permit is required for the Fire Department is a must for operating a
hotel business. Fire safety certificate is usually provided if the building has incorporated
proper fire prevention and fire safety measures as required under the relevant fire safety rules
and regulations.

Police License for Hotel

Hotels are public places that are monitored closely by the Police Department. Therefore, all
hotels must maintain proper log of all Guests who have stayed at the hotel, follow relevant
regulations and maintain a valid permit from the Police Department. Police license for hotels
usually falls under the power of licensing of Places of Public Entertainment held by
Commissioner or Additional Commissioner of Police.

Health Trade License or Trade License

A health trade license is usually required from the local Health Department for restaurants
and hotels. Health trade licenses are usually issued by the Municipal Corporation. The health
trade license is required for businesses that have a direct impact on public health. Compliance
with the relevant hygiene and safety norms, which are important for public health is a
prerequisite for issuance of a health trade license.

Business Registration
It is recommended that a hotel be setup under an artificial legal entity like company or LLP.
By operating a company under an artificial legal entity, the liability of the promoters with
respect to the business can be limited and the business as a going concern would be easily
transferable to another person.

DR. J. SURESH KUMAR ASSO. PROFESSOR

ESI Registration
ESI is an autonomous corporation under Ministry of Labour and Employment, Government
of India. Employee’s State Insurance (ESI) registration is mandatory in India for Businesses
that employ 10 or more employees. To maintain compliance with the ESI Regulations, the
employer must contribute 4.75% of the wages for all employees earning Rs.15,000 or less
toward ESI employer dues. The employee is required to contribute 1.75% of his/her wages as
ESI dues.

PF Registration
A Employee Provident Fund (PF) Registration is required for any establishment that employs
more than 20 persons in India. The PF Board administers a contributory provident fund,
pension scheme and an insurance scheme for the workforce engaged in the organized sector
in India.

Bar License
If the hotel operates a bar or serves alcohol in the restaurants, a Bar license will be required
from the relevant authorities. Bar license is usually provided by departments operating under
the State Government. Hence, the requirement for bar license varies from state to state.

FSSAI Food Business License

A FSSAI food business license under the Food Safety and Standard Act is required for
operating a restaurant in India. The FSSAI food business license is usually provided for one
year and is renewal at the end of each year. FSSAI license for restaurants are managed by the
local FSSAI office. FSSAI license for restaurants does not fall under the purview of the
Central Government.

Service Tax Registration

Service tax is applicable on the accommodation services provided by the hotel and food
services provided by a restaurant in the hotel. Therefore, hotels must obtain and
maintain service tax registration. Hotels having room Tariff of Rs. 1000/- and above have to
pay the service tax on 60% of room tariff at 14% (the net rate of Service Tax comes to 8.4%).
For restaurants, the service tax is applicable on 40% of the Food and Beverages bill @ 14%
(the net rate of service tax comes to 5.6%). Further, the use of banquet hall where substantial
food is served attracts service tax @ 14% with abatement of 30%(the net rate of service tax
comes to 9.8%).

GST Registration
Value Added Tax (VAT) is applicable on the food served by a restaurant in a hotel.
Therefore, hotels must obtain GST registration to comply with GST regulations. Since, GST
fall under the purview of the State Governments, VAT regulations and procedure for
registration changes from state to state. It is best to therefore consult with the local Sales Tax
Department.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Venture capital (VC) is a type of private equity, a form of financing that is provided by
firms or funds to small, early-stage, emerging firms that are deemed to have high growth
potential, or which have demonstrated high growth (in terms of number of employees, annual
revenue, or both). Venture capital firms or funds invest in these early-stage companies in
exchange for equity, or an ownership stake, in the companies they invest in. Venture
capitalists take on the risk of financing risky start-ups in the hopes that some of the firms they
support will become successful. Because startups face high uncertainty[2], VC investment do
have high rates of failure. The start-ups are usually based on an innovative
technology or business model and they are usually from the high technology industries, such
as information technology (IT), clean technology or biotechnology.
The typical venture capital investment occurs after an initial "seed funding" round. The first
round of institutional venture capital to fund growth is called the Series A round. Venture
capitalists provide this financing in the interest of generating a return through an eventual
"exit" event, such as the company selling shares to the public for the first time in an initial
public offering (IPO) or doing a merger and acquisition (also known as a "trade sale") of the
company.
In addition to Angel investing, equity crowd funding and other seed funding options, venture
capital is attractive for new companies with limited operating history that are too small to
raise capital in the public markets and have not reached the point where they are able to
secure a bank loan or complete a debt offering. In exchange for the high risk that venture
capitalists assume by investing in smaller and early-stage companies, venture capitalists
usually get significant control over company decisions, in addition to a significant portion of
the companies' ownership (and consequently value). Start-ups
like Uber, Airbnb, Flipkart, Xiaomi & Didi Chuxing are highly valued startups, where
venture capitalists contribute more than financing to these early-stage firms; they also often
provide strategic advice to the firm's executives on its business model and marketing
strategies.

MODULE III
BUSINESS PLAN

What is the Business Plan?

A Business Plan is a document which encapsulates the long-term objectives, medium term
goals and short term forecasts of the business. It will include reference to past history and
current operations; nevertheless it remains essentially a blueprint for the future. Although
some degree of standardisation is desirable, in practice business plans will vary in content
since each reflects the philosophy and the special circumstances and requirements of the
particular business. It will refer to all aspects of the business, so the reader and those involved
are clear as to the main objectives and how they are to be reached.

Some points to bear in mind are:

 It should describe the company and project concisely and accurately.

 It should normally not be more than 15 pages long with a clear structured layout.
Supplementary information and other supporting material should be included as
appendices.

DR. J. SURESH KUMAR ASSO. PROFESSOR

  The business plan will normally cover a three-year period and include detailed
financial forecasts for this period. A longer forecast period (generally five years) will
usually be necessary where equity finance is to be raised.

 Always include an Executive Summary – it will allow the reader to obtain an

overview of the project immediately. The complete business plan (excluding
appendices) should be readable in half an hour.

 Whilst the primary purpose of preparing the business plan is frequently to assist in the
raising of finance, the business plan is also an important management tool to be used
by the board of directors to set objectives, and to monitor progress against those
objectives on an on-going basis.

As stated above, there is no standard form of business plan, however this ensures that all
aspects of the business are addressed, a clear and concise presentation is made

The Objectives of the Business Plan

A business plan will have the following objectives, in most if not all businesses:-
 To show money lenders/investors/grant funders that the business is viable and those
they are likely to be repaid, either financially or in success, where a grant has been
awarded.

 To use as a planned course & to alert when estimates do not go according to plan.

 To instil stakeholder confidence in the abilities of the management to run the

business.

 To introduce the main income, expenditure and balance sheet items.

 To identify the resources required.

 To monitor performance against targets.

To achieve these objectives, the business must present what is unique about the business and
why it should succeed. Information should be presented to reinforce these opinions.

The Business Plan will show:

Where you are.

Where you are going.

How you propose to get there.

What resources will be required.

DR. J. SURESH KUMAR ASSO. PROFESSOR

 How much money will be mad
The Contents of the Business Plan
1.0 Executive Summary
The executive summary is normally completed last, as it sums up the range of issues covered
in the plan. It is essential to any business plan and should be included at the beginning. It is
normally not more than one page long, but two is acceptable. The executive summary should
be written as a piece of prose, but should contain the following:

Main reason for business plan e.g. raising of finance

 A brief description of the project (e.g. establishment or expansion of the business)

 A summary of the benefits of the project to the community, region and economy

 A table of financial highlights

I.e. the turnover and pre-tax profits forecast for each year, and the actual results for the
previous three years if applicable.
Total cost of the project, including working capital

Funding sought

Case for grants (where applicable)

2.0 Company Information

Company details
Name
Company Registration Number
Date of incorporation
Registered office address
Head office address (if different)
Telephone, fax and e-mail
Website address

Introduction

Mission statement (one or two short sentences will suffice)

History
An overview of how the business evolved and is there clear evidence of transfer of
knowledge from your educational background

Current stake in the business (full owner or shared amongst a group)

Group structure (if applicable)

Key personnel (names and job titles only at this stage)

DR. J. SURESH KUMAR ASSO. PROFESSOR

 Premises (current/proposed).

What is the size of the building and outside areas? Are they leased or owned? If leased, who
are the landlords and what are the terms of the lease?

Description of current operations, including current turnover, key customers, locations and
staff numbers at each location.

Background to project (i.e. why it is necessary)

SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)

Environmental Sustainability

4.0 Products and Services

Clearly explain what it is the organisation is to do or provide. If it is a particularly

complicated product or service, please explain as if the reader has no prior knowledge.

Product/Service Description

What products/services will be provided? Explain clearly what it is. Use diagrams if
appropriate
Unique features

What makes the product/service special, or better than that offered by competitors?
Product lifecycle

What is the estimated life span of your product/service?

Research and development

Will there be future (new) product/service development? Describe the mechanisms for
innovation and continuous improvement of a service as well as technological R&D activity
Intellectual Property Rights

What IPR (patents, trademarks, registered designs) does the company have rights to, who
owns those rights, and under what terms are the rights exercised (e.g. royalty agreement,
license, etc)

Production methods

Describe briefly how the product/service is manufactured/delivered

Health and Safety issues
What are the major risks inherent in the production process? What steps does/will the
company take to ensure the health and safety of its workforce and compliance with
legislation?

Costs of production

DR. J. SURESH KUMAR ASSO. PROFESSOR

Per unit of product (raw materials and conversion costs, including direct labour) or the direct
costs of delivering the service. Include estimated cost of wastage, pilferage, etc.

Suppliers
List the principal suppliers of raw materials, components and/or goods for resale. (Consider
terms and availability of supply). How quickly can they deliver from the time of placing the
order?

Capacity
What is the production capacity within the constraints of physical space, machinery and
personnel? Is it sufficient to meet peak demand?

Stock holding policy

What is the optimum level of each type of raw material stock in terms of day’s production?
What is the shelf life of the stock? How much finished goods stock will be needed to meet
demand? How much storage will be required at times of peak demand? Is a JIT policy in
force?

Quality
What standards apply? How will quality of raw materials and/or of finished goods/services be
assured? What are historical levels of returns, complaints, etc.?

Environmental considerations
What environmental legislation or EU directives apply to the product, manufacturing process
and/or disposal of waste? What is the overall cost of compliance? What additional equipment
is required to ensure compliance? What use is made of recycled materials? Can the materials
in the product itself be recycled at the end of its useful life?
After sales service, including details of warranties given or to be given

Distribution
How will the product or service be delivered to the customer? Will third party carriers be
used or will the company operate its own delivery fleet? What will be the average delivery
cost per units.

Markets and Marketing

Evidence of understanding the market is essential in any business plan, and a clear, costed
strategy must be established for reaching the intended customers. This section will show you
know the market; will back up your arguments and show that you have done the necessary
research. For existing businesses not expanding into new markets it is probably sufficient to
provide evidence of levels of turnover, customer lists and any other supporting information.

General description
What market(s) are you in? Who are you intending to target? Where are the markets located
geographically? How price sensitive is the market? Describe any seasonal changes.

Overall market size

Back this information up with evidence of original or third party research.

Market trends

DR. J. SURESH KUMAR ASSO. PROFESSOR

Is the market expanding or declining? What external factors are likely to affect your
business? Are there any likely developments in the market in the near or long term? Consider
using a PESTLE analysis (Political Economic, Social, Technological, Legal,
Environmental)

Market position
What is your current / anticipated market share? (The latter assertion should be backed up by
original market research) Include a summary of the results of the market research, but add the
main details/questionnaires as an appendix.

Major/Potential customers
Who are they? How much income will you receive from them per year? (Include any letters
of support as appendices)

Major competitors
Who are they? What are their relative strengths and weaknesses?

Competitive advantages
I.e. how do you intend to overcome the competition? What is the Unique Selling Point (USP)
of your product/service?

Marketing strategy
Describe how the company will reach its target market. What resources are required to carry
this out? How much will it cost?

Marketing structure
Who will be involved in the marketing effort? Where will the sales force be located? How
will they be incentivised and controlled? (Include diagrams and tables if required)

Advertising & promotion

How and where will you advertise? What other promotional activity will be carried out (e.g.
Selling methods
E.g. retail, cold calling, e-commerce, party plan, telesales mail order,online. Give details as
appropriate.

Pricing strategy
E.g. below competitors, market skimming, cost-plus pricing. Tabulate the actual/forecast unit
prices for each main product or service.

Sales volumes (current/forecast)

Tabulate current sales volumes for main products/services.
Forecast forward how many you expect to sell of each type each month over the next year
(consider seasonal fluctuations and be prudent). Estimate sales growth in later years.
Summarise and tabulate this information. Include further detail in appendix if required.

6.0 Management, team and Personnel

The people in any business are its most important asset, and good management is vital.
Venture capitalists and banks will look at the experience, qualifications and personal

DR. J. SURESH KUMAR ASSO. PROFESSOR

attributes of the directors and senior managers and base their investment decision on their
judgement of the quality of the management team above any other single factor. It is
important therefore that a clear description of each individual manager’s career background
and responsibilities is given, and that the management structure is properly explained
(probably by means of a diagram)

7.0 Future Developments

This section deals with the long range strategic direction of the company, and includes
aspects beyond the horizon of the financial projections.
Long range plans – outline the company’s strategic plan, including:

Growth strategy

How does the company intend to expand within Wales, the UK, Europe and worldwide (if
applicable), e.g. by extending or moving premises, opening new factories or sales outlets,
regional offices or alternatively by establishing strategic partnerships or agencies in other
countries. Other growth strategies could include franchising or acquisition.

Has consideration been given for the potential to collaborate or enter into joint venture
with other organizations?

Plans to develop new products or services

Contingency plan

For each significant threat listed under the SWOT analysis there should be a plan of how to
counteract it. For instance if the company is heavily reliant on its IT systems, what would be
done in the event of a total systems failure?

Finance

Historic results
Tabulate trading results and balance sheets for the previous three years (if applicable) .State
whether figures are from final/audited accounts, or from management accounts. Include a
brief commentary on trends and any unusual items.

Financial forecasts
Summarize and tabulate forecast profit and loss accounts, cash flow forecasts and projected
balance sheets for each year. Provide a brief commentary on each if required. What is the
peak funding requirement?

Fixed assets
Tabulate and describe existing and proposed new fixed assets (classes and/or major items
only). Outline depreciation policy. State if any significant disposals are planned. State terms
of any insurance policies in force / proposed.

Proposed funding
Tabulate the components of the new funding proposed. Identify clearly any personal input
from the directors. State whether any other finance has already been secured.

DR. J. SURESH KUMAR ASSO. PROFESSOR

 Exit plan (equity finance only)
How will the new shareholders realise their investment in the medium term? (Generally one
of the following: trade sale, floatation, redemption at premium, guaranteed buy-back)

Tax implications for business and investors (equity finance only)

Exchange risks (where significant overseas trading or operations planned)

Mistakes of Business Plan
The importance of business planning is widely documented; however, guidance as to what
constitutes good business planning is less clearly defined. This article aims to redress that
imbalance by describing 10 of the most common mistakes that occur in business plans.
While the business-planning process is in itself a very worthwhile pursuit, most business
plans are produced for a specific purpose. The plan is used as a means to convey an idea with
a view to achieving a specific goal, e.g. securing funding. Hence the plan needs to be tailored
with the audience in mind, and good knowledge of their requirements will help shape a
winning plan.
For example, the requirements a Venture Capitalist will have in assessing a plan seeking to
secure a million-pound investment will differ considerably from those of a local bank
manager who needs a plan to support a small-loan application. While the former will be
primarily looking for capital growth, the latter will be more concerned with security.
Regardless of the specific purpose of the plan, these following business plan lessons will
apply.

1. Incredible financial projections

One of the key areas business plan readers will focus on will be ‘the numbers’. Specifically,
they will concentrate on the projected Income Statement or Profit & Loss. The fact that
numbers are projected does not mean that those figures can be included without due rigour or
process. They need to be credible, defensible and consistent. Of course forecasting is not an
exact science, and the use of proxies can help the author ensure that the figures included are
plausible and consistent with the story being told in the other areas of the business plan. The
figures must also show an ability of the company to generate free cash flows so that the
business can be run profitably while satisfactorily servicing their debts at the same time.
All costs should be recorded including salaries to owner managers who run the company. It is
not credible to generate P&L projections where expenses such as salaries are omitted to
demonstrate managerial commitment or to artificially reduce losses, etc. By the same token,
no investor will be prepared to fund a business where the projected salary payments are
excessive. While dealing with finances is not everyone’s strong point, there has to be
someone on the management team who is cognizant with the maths. A business plan will
need to include everything from break-even projections to proposed return on investments
to cash flow forecasts, and one of the key players will have to converse on these subjects in a
convincing manner. They will also need to justify the numbers.

2. Lack of a viable opportunity

A business plan needs to not only describe an opportunity, it must also detail how the
opportunity can be exploited profitably and demonstrate the company’s ability to deliver
what is required. In recent years there has been a significant increase in plans that are
inaccessible to the average reader because they are couched in technical jargon and

DR. J. SURESH KUMAR ASSO. PROFESSOR

unfamiliar terms. If the reader of the plan cannot fully grasp who the prospective customer is,
how that customer will be targeted, and the prospective benefits from the proposed solution,
the reader will not invest. In an increasingly time-pressed world, people crave simplicity.
Many business plan recipients will only scrutinize the Executive Summary and the financials,
using these as the decision points as to whether to read further or not. Hence it is of
paramount importance that both the executive summary and the wider plan describes the
opportunity in readily understood terms, such as:

 What is the issue or pain point?

 What is the proposed solution?
 What are the benefits of the solution?
 Why are these benefits compelling?
 Who will benefit the most from these?
Once these are detailed, there will be greater transparency regarding the viability, or
otherwise, of the proposed opportunity in terms of the company’s ability to profitably serve
the target market.
3. No clear route to market
All opportunities are only prospective ones without evidence that the target market can be
accessed profitably. Many entrepreneurs are inherently product focused, concentrating their
energies on ‘the idea’ to the exclusion of many other important elements such as how they
intend to access their customer base. The growth in popularity of the Internet has certainly
helped niche producers find geographically dispersed customers, making many more ideas
commercially viable. However, it does not come without its challenges, as creating awareness
online is both costly and intensely competitive. The business plan must include a
comprehensive and credible analysis of how the company intends to secure access to their
target market in a cost-effective manner. The low cost and barriers to entry for websites have
resulted in the creation of hundreds of thousands of sites. Ensuring that a site stands out from
the crowd is easier said than done. Knowledge of who the customer is and how they buy is
very important, but identifying them and accessing them on an individual basis is much more
challenging and costly.

4. Overestimation of revenues
Another key element of the plan will relate to the size and value of the opportunity. Does the
business plan describe a small local business-to-business opportunity with limited scalability/
return or is it a concept with widespread or even potentially global consumer appeal? While
the description of the market opportunity will undoubtedly be couched in positive terms, an
obvious danger relates to the innate optimism of entrepreneurs and their tendency to
exaggerate every business opportunity. Hence the general interpretation of sales forecasts is
that they will be optimistic but not excessively optimistic. Admittedly what
constitutes ‘excessive’ is subjective, but the numbers will need to be justified and if it
emerges that the figures are mere fantasy, the author will lose all credibility and it will
significantly undermine any confidence the potential investor might have in the plan.

It is important to guard against this by use of proxies and conservatism when it comes to sales
projections. Placing some rigor around the process of deriving credible revenue figures also
serves the entrepreneur well by enhancing their awareness of some of the key drivers for
revenue growth in their business. It will also help them to produce a more plausible business
plan and will ensure that the author is confidently able to answer questions regarding the

DR. J. SURESH KUMAR ASSO. PROFESSOR

market opportunity – questions that will top the list of any prospective investor or bank
manager. Statements like “the Market is worth £10 billion and growing and we are focusing
on capturing just 1% of it” set off alarm bells in the minds of prospective investors.

A more appropriate method is to calculate the number of customers the business intends to
capture and their average revenues. These two inputs are easier to calculate and also to justify
in a wider discussion. For example, a restaurant can easily use comparable from other
restaurants as reference points to calculate average spend per person. Hence the focus turns to
predicting the number of covers likely per week which can then be scaled up to obtain
projected monthly revenue figures.
5. Lack of appreciation of the importance of good cash flow management
A critical subtlety of any new business is the ability of the entrepreneur to understand the
differences between cash and profits and to accept the fact that insolvency is probably the
most significant threat to a business. Many businesses fail, not because they are unprofitable,
but because they ultimately become insolvent (i.e., are unable to pay their debts as they fall
due).
Good cash flow management is vital when businesses pursue investment opportunities where
there are significant cash flows out, in advance of the cash flows coming in. The start-up
phase of a business is an obvious time when cash flow is under stress with uncertain income
streams sitting alongside a raft of certain and often overdue bills. This tension is exacerbated
if there are delays to the income streams, e.g. if a restaurant fails to open on time.
Once up and running a company can bank the income immediately if they are a ‘cash-only’
business; however, if they sell on credit, they receive the cash in the future and hence may
need to pay some of their own expenses before that income hits their account. This will put a
further strain on the company’s solvency. A well-structured business plan needs to reflect
reality with likely losses in the first months of trading being expected and with financing
provisions, e.g. overdraft limits, being put in place in advance of the predictable cash
squeeze. A contingency figure should also be added as it is important to leave breathing space
for the unexpected costs and overspends that always occur when least expected.
6. No clear objective
What is the main purpose of the plan? If it is to seek investment in the business, it is
important to clearly describe the investment opportunity. As mentioned previously there is a
tendency amongst entrepreneurs to focus myopically on ‘the product‘ or ‘the idea‘. This is
where they expend most energy but alas that is only one part of the process. While the plan
describes the concept in detail, it must also address the purpose of the plan. If it is to secure
investment, one needs to recognize that investing is the investor’s area of expertise and they
will be seeking an appropriate risk/ return for their investment. Their primary interest will
quickly shift from the product once they ‘get it‘ and ‘like it‘ to assessing the ability of the
company (including management) to generate free cash flows to enable the business to grow
while also returning cash to them. They will also seek to understand:
 Why they would be better off investing in this business rather than leaving money in
other asset classes?
 When will they recoup their initial investment?
 What is their expected return on investment?
 Is the investment merely cash or do they need to bring additional things to the table?

DR. J. SURESH KUMAR ASSO. PROFESSOR

Once the primary objective of the plan is clear, the author will be able to ensure that the key
requirements of the reader are met.

7. No evidence of real demand

Another main area of interest when planning (linked to Point 4) is justifying the sales
forecast or demand levels for the product or service. There are two main elements to
forecasting – the use of facts and the use of subjective assessment/ judgment. However, no
matter how unique a concept is, if the market is defined widely enough, it is likely that
figures from alternative offerings (facts) can be used to help assess likely demand levels
(judgment). The aim of sales forecasting is to come up with some revenue figures that can be
considered to be credible in the wider context. While earlier we countenanced against
excessively optimistic estimates, here we are delving deeper to ensure there is, in fact, real
demand for the offering. Prospective investors will not want to invest at the very start where
the risk is highest. Is there poof of concept in the guise of sales or firm orders? Have some
sales occurred already? If not, why not?
Unless there is verifiable demand for the idea, the risks grow out of all proportion,
particularly if the initial start-up or investment costs are high. Is it possible to test the idea in
real time, either by identifying comparable in other geographic areas or analyzing Google
search logs or selling via eBay? Again the business plan has to convincingly address the issue
of demand rather than concentrate in isolation on ‘the idea’. For some investors, firm orders
or evidence of sales will be the level of proof required and allusions to proxies or comparable
will not be sufficient. Conversely if there are already strong sales volumes of the product and
the company is facing financing or resource constraints which have forced them to seek
investment, then the power shifts from the investor to the plan author.
5. Business plan inconsistencies
A business plan needs to be consistent throughout as all the various strands are brought
together into one single entity – the plan. If there are multiple authors of the plan the risks
increase that certain inconsistencies will emerge. Similarly any presenters of the plan must be
fully cognizant of all facts and stay ‘on script’ so as to ensure that a cohesive story is being
told. The numbers must also be consistent with the broader content so that there are no
contradictions between them.
6. Playing down the competition
There is always competition. Yet the number of times the phrase “there are no main
competitors” appears in plans is considerable. No matter how unique the proposition, there
will also be some other business competing for the same scarce resource, i.e., people’s
money. While competitors may not always be obvious in product terms, competitors emerge
upon assessment of the key needs the product 64ncilla. By broadening the definition of the
market, substitute products emerge as ultimately all products and services serve to satiate a
defined set of needs, be they physical or emotional. If competitors can not be identified then
the search has simply not been diligent enough. Finally it is also important to consider the
threat of entry. What will the competitive landscape look like in a few years? Are there
significant barriers to entry, or is it likely that a successful entry will be followed by better-
placed competitors with greater resources, etc. What will emerge as the bases for competition
and will the company be well placed to compete on these bases?

DR. J. SURESH KUMAR ASSO. PROFESSOR

10. Rushing the output
The plan needs to be right the first time and the content needs to be accurate, clear and also
without spelling or grammatical mistakes. More often than not business plans need to be
completed by a certain date and hence the final stages can be rushed. Consequently, in many
instances the final output does not do justice to the plan. Attention to detail at the end is vital,
so it is important to ensure the following:
 The plan is printed on good quality paper and bound where appropriate.
 Tables and Charts have been edited to ensure they are formatted correctly.
 Content of the plan has been edited down to a digestible size (Addendum can be provided
on request).
 Someone removed from the process has independently proofed the plan.
 If a presentation is part of the process, it should reflect the Executive Summary.

Financial Assistance
The various central government agencies for support of SSI are SSI board, KVIC, SIDO,
NSIC, NSTEDB, NPC, NISIET etc. The state government agencies are DI, DIC, SFC, SIDC,
SIIC, SSIDC etc. NSIC provides information services, 65ncilla raw material requirements of
SSIs, meets credit needs and provides marketing assistance. SIDO is a nodal agency for
identifying needs of SSI units, coordinating and monitoring the policies and programmes for
promotion of small industries. The activities of SIDO are divided into coordination activities,
industrial development activities and management activities.

SISI serve as interface between central and state government, render technical support
services, conduct entrepreneurship development programme and initiate promotional
programmes. SSIB has constituted to facilitate coordination and to act as inter-institutional
linkage. SSIDCs were setup in 1956 under companies act. The important function of SSIDC
are procuring and distributing scarce raw material, supplying machinery on hire purchase
system, providing marketing assistance and to construct industrial sheds. The district
industries centres were started in 1958 to provide integrated administrative framework at the
district level for promotion of small scale industries in rural areas. The main functions of
DIC are preparing and keeping model project profiles, prepare action plans, carrying out
industrial potential survey to identify feasible ventures, providing assistance for land/shed,
equipment etc.

TECSOK is leading investor-friendly professional consultancy organization in Karnataka. Its

various activities are investment advice, procedural guidance, management consulting,
merger and acquisition etc. KIADB is in the business of apportioning land for industries and
gearing up facilities to carry out operations. KSFC was established in 1956 for extending
financial assistance to tiny, small and medium industries. It extends lease financial assistance,
hire purchase assistance for acquisition of machinery/equipment/transport vehicles. KSFC
has evolved more than thirty loans schemes.

DR. J. SURESH KUMAR ASSO. PROFESSOR

NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)

The National Small Industries Corporation (NSIC), an enterprise under the union ministry of
industries was set up in 1955 in New Delhi to promote aid and facilitate the growth of small
scale industries in the country. NSIC offers a package of assistance for the benefit of small–
scale enterprises.

1. Single point registration: Registration under this scheme for participating in government
and public sector undertaking tenders.
2. Information service: NSIC continuously gets updated with the latest specific information
on business leads, technology and policy issues.
3. Raw material assistance: NSIC fulfils raw material requirements of small-scale industries
and provides raw material on convenient and flexible terms.
4. Meeting credit needs of SSI: NSIC facilitate sanctions of term loan and working capital
credit limit of small enterprise from banks.
5. Performance and credit rating: NSIC gives credit rating by international agencies
subsidized for small enterprises up to 75% to get better credit terms from banks and export
orders from foreign buyers.
6. Marketing assistance programme: NSIC participates in government tenders on behalf of
small enterprises to procure orders for them.

SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO)

SIDO is created for development of various small scale units in different areas. SIDO is a
subordinate office of department of SSI and ARI. It is a nodal agency for identifying the
needs of SSI units coordinating and monitoring the policies and programmes for promotion
of the small industries. It undertakes various programmes of training, consultancy, evaluation
for needs of SSI and development of industrial estates. All these functions are taken care with
27 offices, 31 SISI (Small Industries Service Institute) 31 extension centres of SISI and 7
centres related to production and process development.

The activities of SIDO are divided into three categories as follows:

(a) Coordination activities of SIDO:

(1) To coordinate various programmes and policies of various state governments pertaining to
small industries.
(2) To maintain relation with central industry ministry, planning commission, state level
industries ministry and financial institutions.
(3) Implement and coordinate in the development of industrial estates.

(b) Industrial development activities of SIDO:

(1) Develop import substitutions for components and products based on the data available for
various volumes-wise and value-wise imports.
(2) To give essential support and guidance for the development of ancillary units.
(3) To provide guidance to SSI units in terms of costing market competition and to encourage
them to participate in the government stores and purchase tenders.
(4) To recommend the central government for reserving certain items to produce at SSI level
only.

DR. J. SURESH KUMAR ASSO. PROFESSOR

I Management activities of SIDO:
(1) To provide training, development and consultancy services to SSI to develop their
competitive strength.
(2) To provide marketing assistance to various SSI units.
(3) To assist SSI units in selection of plant and machinery, location, layout design and
appropriate process.
(4) To help them get updated in various information related to the small-scale industries
activities.

SMALL INDUSTRIES SERVICE INSTITUTES (SISI)

The small industries service institutes have been set up in state capitals and other places all
over the country to provide consultancy and training to small entrepreneurs both existing and
prospective.

The main functions of SISI include:

(1) To serve as interface between central and state government.
(2) To render technical support services.
(3) To conduct entrepreneurship development programmes.
(4) To initiate promotional programmes.

The SISIs also render assistance in the following areas:

(1) Economic consultancy/information/EDP consultancy.
(2) Trade and market information.
(3) Project profiles.
(4) State industrial potential surveys.
(5) District industrial potential surveys.
(6) Modernization and in plant studies.
(7) Workshop facilities.
(8) Training in various trade/activities.

SMALL SCALE INDUSTRIES BOARD (SSIB)

The government of India constituted a board, namely, Small Scale Industries Board (SSIB) in
1954 to advice on development of small scale industries in the country. The SSIB is also
known as central small industries board. The range of development work in small scale
industries involves several departments /ministries and several organs of the central/state
governments. Hence, to facilitate co-ordination and inter-institutional linkages, the small
scale industries board has been constituted. It is an apex advisory body constituted to render
advice to the government on all issues pertaining to the development of small-scale
industries.

The industries minister of the government of India is the chairman of the SSIB. The SSIB
comprises of 50 members including state industry minister, some members of parliament, and
secretaries of various departments of government of India, financial institutions, public sector
undertakings, industry associations and eminent experts in the field.

DR. J. SURESH KUMAR ASSO. PROFESSOR

STATE SMALL INDUSTRIES DEVELOPMENT CORPORATIONS (SSIDC)
(Karnataka State Small Industries Development Authority KSSIDC in Karnataka State)

The State Small Industries Development Corporations (SSIDC) were sets up in various states
under the companies’ act 1956, as state government undertakings to cater to the primary
developmental needs of the small tiny and village industries in the state/union territories
under their jurisdiction. Incorporation under the companies act has provided SSIDCs with
greater operational flexibility and wider scope for undertaking a variety of activities for the
benefit of the small sector.

The important functions performed by the SSIDCs include:

●To procure and distribute scarce raw materials.
●To supply machinery on hire purchase system.
●To provide assistance for marketing of the products of small-scale industries.
●To construct industrial estates/sheds, providing allied infrastructure facilities and their
maintenance.
●To extend seed capital assistance on behalf of the state government concerned provide
management assistance to production units.

DISTRICT INDUSTRIES CENTRES (DIC)

The District Industries Centres (DIC’s) programme was started in 1978 with a view to
provide integrated administrative framework at the district level for promotion of small scale
industries in rural areas. The DIC’s are envisaged as a single window interacting agency at
the district level providing service and support to small entrepreneurs under a single roof.
DIC’s are the implementing arm of the central and state governments of the various schemes
and programmes. Registration of small industries is done at the district industries centre and
PMRY (Pradhan Mantri Rojgar Yojana) is also implemented by DIC. The organizational
structure of DICS consists of General Manager, Functional Managers and Project Managers
to provide technical services in the areas relevant to the needs of the district concerned.
Management of DIC is done by the state government.

The main functions of DIC are:

(1) To prepare and keep model project profiles for reference of the entrepreneurs.
(2) To prepare action plan to implement the schemes effectively already identified.
(3) To undertake industrial potential survey and to identify the types of feasible ventures
which can be taken up in ISB sector, i.e., industrial sector, service sector and business sector.
(4) To guide entrepreneurs in matters relating to selecting the most appropriate machinery
and equipment, sources of it supply and procedure for importing machineries.
(5) To provide guidance for appropriate loan amount and documentation.
(6) To assist entrepreneurs for availing land and shed equipment and tools, furniture and
fixtures.
(7) To appraise the worthness of the project-proposals received from entrepreneurs.
(8) To help the entrepreneurs in obtaining required licenses/permits/clearance.
(9) To assist the entrepreneurs in marketing their products and assess the possibilities of
68ncillarisation.
(10) To conduct product development work appropriate to small industry.
(11) To help the entrepreneurs in clarifying their doubts about the matters of operation of
bank accounts, submission of monthly, quarterly and annual returns to government
departments.

DR. J. SURESH KUMAR ASSO. PROFESSOR

(12) To conduct artisan training programme.
(13) To act as the nodal agency for the district for implementing PMRY (Prime Minister
Rojgar Yojana).
(14) To function as the technical consultant of DRDA in administering IRDP and TRYSEM
programme.
(15) To help the specialized training organizations to conduct Entrepreneur development
programmes.

In fine DIC’s function as the torch-bearer to the beneficiaries/entrepreneurs in setting up and

running the business enterprise right from the concept to commissioning. So the role of
DIC’s in enterprise building and developing small scale sector is of much significance.

TECHNICAL CONSULTANCY SERVICES ORGANIZATION OF KARNATAKA

(TECSOK).
TECSOK is a professional industrial technical and management consultancy organization
promoted by the government of Karnataka and other state level development institutions way
back in 1976. It is a leading investor-friendly professional consultancy organization in
Karnataka. Its various activities are investment advice, procedural guidance, management
consulting, mergers and acquisition, process reengineering studies, valuation of assets for
takeovers, impact assessment of socio-economic schemes,
critical infrastructure balancing; IT related studies, detailed feasibility studies and reports.

TECSOK with its pool of expertise in varied areas can work with new entrepreneur to
identify a product or project. In addition to this TECSOK sharpens the project ideas through
feasibility studies, project reports, market surveys, and sources of finance, selection of
machinery, technology, costing and also providing turnkey assistance. To help entrepreneurs
to face the global competition TECSOK facilitates global exposures, updated technology,
market strategies, financial restructuring and growth to improve
profitability of an industry.

TECSOK can identify sickness in existing industry and facilitate its turn around.
TECSOK has expertise in rehabilitation of sick industries by availing rehabilitation packages
offered by the government and financial institutions. In addition it offers expert professional
services to various institutions and departments of the state and central government.

TECSOK undertake the assignment in the field of

● Technical and market appraisal of projects.

● Industrial potential surveys.
● Fact-finding and opinion reports.
● Corporate planning.
● Collection and collation of information.
● Impact assessment.
● Evaluation of schemes and programmes.
● Asset evaluation.
● Infrastructure development project proposal.
● Event management and publicity campaigns, and
● Organizing seminar and workshops.

DR. J. SURESH KUMAR ASSO. PROFESSOR

TECSOK has over 25 well-experienced engineers in different disciplines, MBAs economists
and finance professionals. It has business partnerships with reputed national and
multinational consultants and out sources expertise for professional synergy. TECSOK has
an exclusive women’s cell which conducts training and education programmes, exhibitions
for promotion of products and services provided by women entrepreneurs and offers escort
services to women entrepreneur. TECSOK has many publications. “Kaigarika Varthe” a
monthly is published by TECSOK. In addition it publishes “Guide to Entrepreneurs”
“Directory of Industries” on a regular basis.

Focused Consultancy Areas of TECSOK

Promotion of agro based industries: TECSOK is recognized nodal agency by the Ministry
of Food Processing Industries, Government of India, for project proposal to avail grant and
loan assistance under the special schemes.

Energy management and audit: Thrust is given to use non-conventional energy sources for
which both state and central governments are offering incentives. TECSOK has been
recognized as a body to undertake energy audit and suggest energy conservation measures.
TECSOK undertakes studies and project proposal for availing assistance from the Indian
Renewable Energy Development Authority (IREDA).

Environment and ecology: TECSOK undertakes assignments relating to environment

education, environment impact assessment, environment management plan and pollution
control measures. TECSOK has joined hands with Karnataka cleaner production centre
(KCPC) to provide total consultancy support in the area of environment.

Human Resource Development: TECSOK designs and organizes business development

programmes, management development workshops, skill development programmes and in-
house training packages. It undertakes programmes of empowerment of women
entrepreneurs, organization of self-help groups. In order to encourage local entrepreneurs,
TECKSOK organizes awareness campaigns and motivation programmes in taluks and
districts throughout Karnataka.

Other TECSOK activities:

●Guidance in product selection and project identification.
●Market survey and market development advice.
●Consultancy for agro-based industries of a nodal agency of the government of
India.
●Diagnostic studies and rehabilitation of sick industries.
●Environment impact assessment studies environment management plans and
propagation of cleaner production techniques.
●Energy management and audit.
●Valuation of assets for mergers and takeovers.
●Infrastructure development project reports.
●Port tariff study and related areas.
●System study and software development.
●Management studies, company formation, corporate plan, enterprise
restructuring etc.
●Designing and organizing training programme.

DR. J. SURESH KUMAR ASSO. PROFESSOR

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)

For ensuring larger flow of financial and non-financial assistance to the small scale sector,
the government of India set up the Small Industries Development Bank of India (SIDBI)
under Special Act of Parliament in 1989 as a wholly owned subsidiary of the IDBI. The
SIDBI has taken over the outstanding portfolio of the IDBI relating to the small scale sector.
The important functions of IDBI are as follows:

(1) To initiate steps for technological upgradation and modernization of existing units.
(2) To expand the channels for marketing the products of SSI sector in domestic and
international markets.
(3) To promote employment oriented industries especially in semi-urban areas to create more
employment opportunities and thereby checking migration of people to urban areas. The
SIDBIs financial assistance to SSIs is channelled through existing credit delivery system
comprising state financial corporations, state industrial development corporations,
commercial banks and regional rural banks. In 1992-93 it has introduced two new schemes.
The first is equipment finance scheme for providing direct finance to existing well-run small-
scale units taking up technology upgradation/modernization and refinance for resettlement of
voluntarily retired workers of NTC. The other new scheme was venture capital fund
exclusively for small-scale units, with an initial corpus of Rs 10 crores. SIDBI also provides
financial support to national small industries corporation (NSIC) for providing leasing, hire-
purchase and marketing support to the industrial units in the small scale sector.

KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD (KIADB)

The Karnataka industrial areas development board is statutory board constituted under the
Karnataka industrial area development act of 1996. Since then it is in the business of
apportioning land for industries and gearing up facilities to carryout operations. The KIADB
now acquires and provides developed land suited for industrialization, by drawing up well
laid-out plots of varying sizes to suit different industries with requisite infrastructure
facilities. The facilities include roads, drainage, water supply etc. The amenities such as
banks, post offices, fire stations, police outposts, ESI dispensaries etc. are also provided. It
also plans to initiate the provision of common effluent treatment plants wherever necessary.

KIADB has acquired a land of 39,297 acres out of which 21,987 acres had been developed
till March 1996. Developed industrial plots had been allotted to 7882 units. Application
forms for the allotment of land may be obtained from the executive member, KIADB
Bangalore or general manager DIC of concerned district or from the Zonal office of KIADB
located at Mysore, Mangalore, Dharwad, Gulbarga, Bidar, Hassan and Belgaum.
Applications duly filled must be accompanied by:

(a) A brief project report.

(b) Details of constitution of the company
I Provisional registration certificate
(d) EMD of Rs 500/- per acre, subject to a maximum of Rs 10,000/- along with
20%, 15% and 5% of the land cost for various districts.

DR. J. SURESH KUMAR ASSO. PROFESSOR

On receipt of applications for all districts other than Bangalore, a discussion with the
promoters regarding the project will be held in the concerned district headquarters. The
district level allotment committee will take a decision on allotment of land to the SSI units.

In case of Bangalore, the screening committee comprising of executive member KIADB,

director of SISI, chief advisor TECSOK with discuss the project and make necessary
recommendation to a sub-committee. The sub-committee will in turn allot the land. Once
land is allotted the remaining payment should be made within six months of the date of issue
of allotment letter.

The industry should be started after obtaining the necessary license/clearance/approval from
the concerned authorities. Plans for the proposed factory/ building or other structure to be
erected on the allotted sites are executed only after prior approval of the board. On being
satisfied that the land is not being put to the prescribed use, the board reserves the right to re-
enter and take procession of the whole or any part of the land. If necessary the leasehold
rights on the allotted land may be offered as security in order to obtain financial assistance
from the government or corporate bodies. However, prior permission of the board has to be
obtained for creating second and subsequent charges of the land.

KARNATAKA STATE FINANCIAL CORPORATION (KSFC)

The KSFC was established by the government of Karnataka in 1956 under the state financial
corporation act 1951 for extending financial assistance to set up tiny, small and medium scale
industrial units in Karnataka. Since 1956 it is working as a regional industrial development
bank of Karnataka. KSFC has a branch office in each district; some districts have more than
one branch. KSFC extends lease financial assistance and hire purchase assistance for
acquisition of machinery/equipment/transport vehicles. KSFC has merchant banking
department which takes up the management of public issues underwriting at shores, project
report preparation, deferred payment guarantee, and syndication of loans, bill discounting and
similar tasks.

KSFC give preference to the projects which are

7. Promoted by technician entrepreneur.

(ii) In the small-scale sector.
(iii) Located in growth centres and developing areas of the state;
(iv) Promoted by entrepreneurs belonging to scheduled castes and scheduled tribes, backward
classes and other weaker sections of society.
(v) Characterized by high employment potential.
(vi) Capable of utilizing local resources; and
(vii) In tune with the declared national priorities.

The eligible industrial concerns for financial assistance from KSFC are those engaged/to be
engaged in manufacture, preservation, processing of goods, mining, power generation
transport, industrial estate, hotels, R & D of any product or process of industrial concern,
weigh bridge facilities, power laundries, photocopying, hiring of heavy material handling
equipment, cranes and other earth moving equipment, hospitals, nursing homes, medical
stores, computers, tourism related activities, construction of roads, tissue and horticulture
software development, software parks, block board vehicles, office construction, go down

DR. J. SURESH KUMAR ASSO. PROFESSOR

and warehouse construction, mobile canteens, commercial complexes, training institutes,
office automation and so on.

Loan Schemes of KSFC

KSFC has evolved loan schemes for extending financial assistance to industrial concerns
promoted by rural artisans, weaker sections of society, disabled entrepreneurs, ex-
servicemen, women entrepreneurs and others.

The various loan schemes of KSFC are given below:

(1) Composite loan scheme

(2) Disabled entrepreneurs loan scheme.
(3) Scheduled cast and scheduled tribe’s loan scheme.
(4) Ex-service men loan scheme.
(5) National equity fund scheme.
(6) Mahila Udyama nidhi loan scheme.
(7) Single window loan scheme.
(8) Transport loan scheme.
(9) Computer loan scheme.
(10) Modernization loan scheme.
(11) Diesel generator loan scheme.
(12) Equipment finance loan scheme.
(13) Tourism related activities loan scheme.
(14) Hospital/nursing / medical store loan scheme.
(15) Electro-medical equipment loan scheme.
(16) Assistance for acquiring indigenous or imported second-hand machinery.
(17) Qualified professionals loan scheme.
(18) Scheme of assistance for acquisition of ISO 9000 series of certification.
(19) Hotel /mobile canteen loan scheme.
(20) Industrial estate loan scheme.
(21) Loan scheme for office automation.
(22) Loan scheme for training institution.
(23) Loan scheme for private software technology parks.
(24) Loan scheme for commercial complexes.
(25) Industrial estate loan scheme.
(26) Loan scheme for ready-built office/construction of new office building.
(27) Loan scheme for acquisition of land/building/commercial space.
(28) Loan schemes for marketing related activities.

Non-traditional Financial Assistance

Venture Capital
Venture capital is also a way in which the private and public sectors can construct an
institution that systematically creates business networks for the new firms and industries, so
that they can progress and develop. This institution helps identify promising new firms and
provide them with finance, technical expertise, mentoring, marketing “know-how”,
and business models. Once integrated into the business network, these firms are more likely
to succeed, as they become “nodes” in the search networks for designing and building
products in their domain. However, venture capitalists’ decisions are often biased, exhibiting

DR. J. SURESH KUMAR ASSO. PROFESSOR

for instance overconfidence and illusion of control, much like entrepreneurial decisions in
general.

Definition:

A venture capitalist is a person who invests in a business venture, providing capital for start-
up or expansion. However, individual venture capitalists are a rarity; the majority of venture
capital (VC) comes from professionally-managed public or private firms. Their business is to
pool investment funds (from pension funds, large corporations, university endowment funds
etc.) and find and invest in businesses that are going to provide their investors high rates of
return.

Because these venture capital firms want higher return rates than other investments such as
the stock market provide, they typically invest in promising startup or young businesses that
have a high potential for growth but are also high risk. Venture capital firms typically invest
in business sectors such as IT, bio-pharmaceuticals, clean technologies, semiconductors, etc.

Why Businesses Look for Venture Capitalists

An investment from a venture capitalist is a form of equity financing – the VC investor

supplies funding in exchange for taking an equity position in the company. Equity financing
is normally used by non-established businesses that are unable to secure business loans from
financial institutions (debt financing) due to insufficient cash flow, lack of collateral, or a
high risk profile.

A company may also solicit the participation of venture capitalists due to the need for
additional business expertise.

For example, in 1981 Bill Gates decided that Microsoft needed strategic thinking and sound
advice from an experienced business person and he was able to convince venture capitalist
Dave Marquardt to invest in Microsoft and join the board of directors, even though Microsoft
was not in need of investment capital at the time.

As it turned out, Dave Marquardt was the only venture capitalist ever to invest in Microsoft
and he remained on Microsoft’s board for over 30 years.

How Venture Capitalist Firms Work

Venture capitalist investments in businesses are typically long-term (the average is from five
to eight years). This is normally how long it takes for a young business to mature to the point
where its equity shares have value and the company goes public or is bought out. VC firms
expect returns on investment of 25% or greater given the risk profile of the companies they
invest in.

Venture capital firms obtain investment capital by pooling money from pension funds,
insurance companies, and wealthy investors. The firm makes the decisions about which
businesses to invest in and receives management fees and a percentage of the profits as
compensation.

DR. J. SURESH KUMAR ASSO. PROFESSOR

VC firms range in size from small (capital pools of a few million dollars, typically investing
in only a few new businesses each year) to huge (billions of dollars in assets and invested in
hundreds of companies). For example, Accel Partners, a VC investor in Facebook, Etsy, and
Dropbox, manages over $6 billion in pooled funds.

Who Has Control of the Company When a VC Investor Is Involved?

Venture capitalist financing is a poor choice for entrepreneurs who wish to retain control of
their business.

In exchange for providing funding most VC firms obtain majority voting rights by having the
majority of the shares (or a preferred class of shares that are senior to common shares), as
well as special veto rights. And venture capitalist investments are often structured so that in
the case of a share sale the VC investors have priority rights in terms of compensation.

To additionally safeguard their investments, VC firms take an active role in the businesses
they invest in, typically supplying a board member and involving themselves in all important
management decisions, including exercising veto rights over issues such as the sale of the
company, additional financing, major business expenditures, etc.

How Hard Is It to Get Venture Capital Funding for a Business?

The vast majority of businesses do not qualify for venture capital funding.

VC firms are very choosy about the businesses they invest in – according to the U.S. Small
Business Administration less than .1% of businesses are funded by venture capital. Of the
few that are able to obtain VC funding, almost all are firms that are past the startup stage and
can demonstrate a viable product or service. Venture capitalists are generally not interested in
small retail businesses; they’re looking for businesses that they can ultimately take public and
get big returns from. The vast majority of new business seed money still comes from the
business owner themselves (see 8 Sources of Business Start Up Money) or from angel
investors.

Angel investor

An angel investor (also known as a business angel, informal investor, angel funder, private
investor, or seed investor) is an affluent individual who provides capital for a business start-
up, usually in exchange for convertible debt or ownership equity. A small but increasing
number of angel investors invest online through equity crowd funding or organize themselves
into angel groups or angel networks to share research and pool their investment capital, as
well as to provide advice to their portfolio companies.

Source & extent of fund

Angels typically invest their own funds, unlike venture capitalists who manage the pooled
money of others in a professionally managed fund. Although typically reflecting the
investment judgment of an individual, the actual entity that provides the funding may be
a trust, business, limited liability company, investment fund, or other vehicle. A Harvard
report by William R. Kerr, Josh Lerner, and Antoinette Scholar provides evidence that angel-
funded startups are more likely to succeed than companies that rely on other forms of initial

DR. J. SURESH KUMAR ASSO. PROFESSOR

financing. The paper by Kerr et al., found “that angel funding is positively correlated with
higher survival, additional fundraising outside the angel group, and faster growth measured
through growth in web site traffic”.

Angel capital fills the gap in seed funding between “friends and family” and more robust
start-up financing through formal venture capital. Although it is usually difficult to raise more
than a few hundred thousand dollars from friends and family, most traditional venture capital
funds are usually not able to make or evaluate small investments under US$1–2
million. Thus, angel investment is a common second round of financing for high-growth
start-ups, and accounts in total for almost as much money invested annually as all venture
capital funds combined, but into more than 60 times as many companies (US$20.1 billion vs.
$23.26 billion in the US in 2010, into 61,900 companies vs. 1,012 companies).
There is no “set amount” for angel investors, and the range can go anywhere from a few
thousand to a few million dollars. In a large shift from 2009, in 2010 healthcare/medical
accounted for the largest share of angel investments, with 30% of total angel investments (vs.
17% in 2009), followed by software (16% vs. 19% in 2007), biotech (15% vs. 8% in 2009),
industrial/energy (8% vs. 17% in 2009), retail (5% vs. 8% in 2009) and IT services
(5%). While more readily available than venture financing, angel investment is still
extremely difficult to raise. However some new models are developing that are trying to
make this easier.
Much like other forms of private equity, the investment decision-making has been shown to
suffer from cognitive biases such as illusion of control and overconfidence.

Private equity

Private equity typically refers to investment funds organized as limited partnerships that are
not publicly traded and whose investors are typically large institutional investors, university
endowments, or wealthy individuals. Private equity firms are known for their extensive use of
debt financing to purchase companies, which they restructure and attempt to resell for a
higher value. Debt financing reduces corporate taxation burdens and is one of the principal
ways in which private equity firms make business more profitable for investors. Because
innovations tend to be produced by outsiders and founders in startups, rather than existing
organizations, private equity target startups to create value by overcoming agency costs and
better aligning the incentives of corporate managers with those of their shareholders.
Private equity is, strictly speaking, a type of equity and one of the asset classes consisting
of equity securities and debt in operating companies that are not publicly traded on a stock
exchange. However the term has come to be used to describe the business of taking a
company into private ownership in order to reform it before selling it again at a hoped-for
profit.
A private equity investment will generally be made by a private equity firm, a venture
capital firm or an angel investor. Each of these categories of investors has its own set of
goals, preferences and investment strategies; however, all provide working capital to a target
company to nurture expansion, new-product development, or restructuring of the company’s
operations, management, or ownership.

DR. J. SURESH KUMAR ASSO. PROFESSOR

Meaning and Definition of Industrial Estates
Industrial estate is one, which consists of well-constructed factories that are offered to
entrepreneur for establishing an enterprise. It is normally established in the industrially
backward areas so as to minimize the regional imbalances. It provides all infrastructural
facilities such as power, transport, water and lighting at a reasonable cost.
The main objective of establishing Industrial estates is to attract industries to industrially
backward areas, which will make the country a regionally well-balanced one.

Objectives of Industrial Estates

The principal objectives as pointed out by Prof P.C. Alexander are:

1. To minimize congestion of industries in the cities.

2. To dispense industries in different regions in order to eliminate regional imbalances.
3. To encourage small entrepreneurs to establish their industries in specified areas by offering
various incentives and other facilities.
4. To create a favorable atmosphere for the healthy growth of SSI.
5. To accelerate employment opportunities.

Types of Industrial Estates

Traditionally, there are 2 types of industrial estates namely,

1. Functional Estate, and

2. Ancillary Estate.

Functional estate is one where a particular industrial activity is concentrated. On the other
hand, ancillary estates are those, which are engaged in the manufacture of ancillary items
required by large industrial units.
But in India, 4 types of industrial estates have been established, the basis of which are:

1. Type of industrial activity.

2. Sponsorship.
3. Location.
4. Co-operative industrial estates.
On the basis of location, industrial estates can be classified into three categories namely,

1. Urban Estates,
2. Semi-Urban Estates, and
3. Rural industrial Estates.
On the basis of sponsorship, industrial estates can be classified into four types viz.,

1. Government.
2. Co-operative.
3. Municipal.
4. Private Estates.
-------------------

DR. J. SURESH KUMAR ASSO. PROFESSOR