Technological Innovation

Management And
Entrepreneurship
Course Code - 21EC61

Module 5

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 Business plans

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Introduction
• Roadmap & blueprint of the project.
• It is a written document that describes in detail how a business is going
to achieve its goals.
• The document explains business opportunity, identifies the market to be
served, details about how the entrepreneurial organization plans to
pursue it.
• It describes the unique qualifications that the management team brings
to the effort, explains the resources required for success & provides a
forecast of results over a reasonable time horizon.
• It is based on estimates.

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Purpose of Business plan
• Entrepreneurs reap benefits from the planning activity itself.
• A business plan is used to get finance from banks or to get equity
funding from angel investors or venture capitalists.
• It can also be used to attract business partners & key employees or to
make business alliances.
• If the business plan is prepared within a large organization, then it
enables the board of directors to make capital investment decisions.
• The act of writing the plan will force the entrepreneur & his team to
think through all the key elements of the business.
• The plan provides a basis for measuring actual performance against
expected performance.
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• The plan’s financial projections can be used as a budget. Actual
results that fall short of planned results will prompt the entrepreneur
to investigate & take corrective action.
• The plan acts as a vehicle for communicating to others what the
business is trying to accomplish.

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 Contents of a Business plan
• Cover page & table of contents – The cover page presents the first
impression of business plan to readers. The cover page should have a
clean & professional appearance & should contain the following info:
Name of the business project
Company’s name, logo, address, telephone & fax no., website address,
email address
The name & designation of the contact person
• Executive summary – It is a standalone document two or three pages long
& is probably the most important section of the business plan. It is a
concise presentation of the main points of the business plan & gives a
brief overview of the business venture.
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The executive summary is a formal statement & should include the
following info:
A brief description of the industry & market environment in which the
business opportunity will develop & flourish.
The uniqueness of the business opportunity & the key strategies for
success.
Profiles of the company’s management team.
Financial requirements & budget allocation.
The anticipated risk & reward of the business
• Business concept – This summary gives the history of business, basic
nature, purpose of business. It states the business objectives & opportunity
& key factors that that will drive its success like market penetration &
product
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• Business strategy – The SWOT analysis of the firm & analysis of the
business environment. It provides information on the nature of industry,
competition within industry, customers within the market. The industry
background helps to understand shape, size, trends, key features & how
company’s product/service will fit into the industry.
• Management summary – The success of the business depends on the
quality of the management team.
What is the profile of the founders, the team’s management philosophy, &
their reputation in the business community?
Who are the current owners, & what percentages do they control?
How is ownership evidenced- for eg. In terms of common & preferred
stock?
Have any options, warrants, or convertible bonds that could expand
ownership
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been issued? 8
Which owners are involved in the day-to-day working of the business?
• Marketing plan – The marketing plan is written after conducting a market
analysis. It provides info on accessing the market’s size & growth,
defining the target market, articulating the value proposition. A sound &
realistic marketing plan is the best guarantee that a solid customer
connection will be made. The plan should be clear about aspects of
marketing like price, position, promotion, place, customer value
proposition.
• Operations plan – It deals with the transformation of ideas or raw
materials into products & services to be sold to the customer. It gives
overview of the flow of daily activities of the business operation &
strategies to support them. Also focuses on critical operating factors &
physical necessities like business’s physical location, raw materials,
technology, human resource, facilities, equipment. It provides description
of break even analysis, quality control measures, manufacturing process.9
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• Financial plan – It translates all other parts of the business into anticipated
financial results. This section determines whether or not the business idea
is viable, is the business plan going to attract any investment in business
idea. It analysis financial statements such as income statement, cash flow
projection, projected balance sheet, breakeven charts, cost of projects,
sources, uses of funds.
• Appendix – It contains document attachments & milestones of the project.
It contains the market survey report, financial projections, product &
technology specifications, process flow charts, photographs of the existing
or proposed firm, list of plants & machinery, organizational charts,
resumes of each member of the management team. Milestones plan lists
major events in the business’s development like prototype development,
installation & equipment, market test & penetration, requirement of key
personnel, funding from investors, breakeven point.
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Presenting a Business plan
Oral & Visual presentation
• The oral presentation is required in cases such as when the entrepreneur
is participating in a B- Plan competition; in front of potential partners &
investors; for potential customers & other stake holders in the business.
The presentation should be carefully structured & a script can be
prepared. A good set of slides should e prepared to support the oral
presentation.
• The visual presentation enables the presentation of visual info. Such as
product images, charts, graphs, numerical tables.

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Why do some Business plan fail?
• Failure to address the customer’s problems & needs – business plan
should address the customer’s problems/needs/wants. The entrepreneur
should document customer pain points before preparing the plan.
Customer needs can be identified from direct experience, letters from
customers, or from market research.
• Unrealistic goals set by the promoters – Setting goals by the
entrepreneur based on data & business plan who needs to be informed
about type of business & business environment. The goal set should be
Specific, Measurable, Achievable, Realistic, Time-bound (SMART). The
financial & market projections should be realistic, logical, reasonable.
• Lack of commitment to the business by the promoters – The promoters
must make a total commitment to the business in order to be able to meet
the demands of a new venture. Investors will not be interested in a
venture that does not have committed promoters to the business.
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• Lack of experience of the promoters – Lack of experience will result in
failure unless the entrepreneur can either attain the necessary knowledge
or team up with others who already have experience in this area.
• Lack of professionalism – The business plan should be brief, clear,
nicely organized. It should highlight those points that can attract
investors. The assumptions made in preparing the business plan should
be realistic.

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*Essentials of a good business plan
• A business plan should have all the relevant sections
• Describe the opportunity
• Explain the business model
• Team
• Strategy

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 Procedure for setting up an Enterprise
1. Selection of a Project
• Product or Service selection – The product or service is selected by the
entrepreneur depending on the existing business opportunity.
• Location selection – While selecting the location of the project, the
entrepreneur has to consider factors like proximity to the market, govt.
policy, incentives & subsidies, availability of infrastructural facilities,
raw materials, labour, transportation & communication facilities.
• Project feasibility study – It is an analysis that involves finding &
documenting potential solutions to a particular business opportunity. It
involves market analysis, technical analysis, financial analysis,
economic analysis, ecological analysis.
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• Business plan preparation – A business plan is a blueprint of the project.
It usually keeps the business on track to reach its planned goals.
• Preparation of project profile – A project profile is a summary of a
detailed project report. A project profile comprises of introduction,
business opportunity, details of promoters, cost of project & means of
finance, risk & return.
2. Decide on the Constitution – The various types of constitution of the
enterprise are sole proprietorship, partnership, limited company
(private/public), cooperative, franchising.
3. Obtain registration – Sole proprietor has no legal formalities.
Partnership firms are governed by Indian Partnership Act, 1932. Terms
& conditions of partnership are contained in the partnership deed.
Companies register with the registrar of companies & cooperative
register with the registrar of cooperatives.
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4. Obtain clearances from Departments as applicable – For setting up a
new enterprise in India, a number of clearances & approvals are
required from concerned authorities depending on the type of
enterprise.
5. Arrange for land/shed
• Industrial land – Once location of the unit is decided, the land for the
project could be conveniently taken fro State Industrial Areas
Development Board. However private land could be purchased but it has
to be converted for industrial purpose.
• Industrial shed – For setting up an enterprise, the promoters could
consider using a ready industrial shed. This could be on rent or
ownership basis.
• Application formalities
A copy of the Provisional Registration Certificate (PRC)
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A detailed project report.
Certified copies in support of educational qualification, experience &
other categories as applicable.
Applicable earnest money deposit.
6. Arrange for plant & machinery
• Direct purchase – Entrepreneur has to select & buy the required plants &
machinery from recognized & approved manufacturers or dealers. Banks
& State Financial Corporations maintain a list of approved machinery
suppliers.
• NSIC Hire purchase scheme – In the hire purchase scheme offered by
NSIC the required plant & machinery will be asset of NSIC & they will
lease it to promoters of the industrial unit.
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7. Arrange for infrastructure -
• Land & construction of building
Availability of basic amenities like power & water.
Connectivity to nearest rail, road or port.
Price of he land.
8. Prepare project report – It is an important document & should be
prepared carefully with following segments.
• General information
Name of the unit & address, product/service
Constitution of the unit, name of the promoter, educational qualification,
experience
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• Details of the project
Product/service details, details of machinery, raw material, utility,
manpower requirement, SWOT analysis
• Market survey
• Cost of project
Fixed cost, working capital, total investment, means of finance,
profitability
• Annexure – Promoter’s biodata, organizational chart, details of group
units, statutory sanctions/approvals, project feasibility study report,
project schedule, arrangement of land & building, statement of cost of
plant, machinery, equipment, financial statements.

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9. Apply for & obtain finance – A formal application needs to be made
for loans from financial institutions & commercial banks. The details
of documentation that need
Balance sheet & profit & loss statement for the previous three
consecutive years of firms held by promoters.
Income tax assessment certificates.
Architect’s estimate for construction cost.
Partnership deed/memorandum & articles of association of company.
Project report
Budgetary quotations of plant & machinery.

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10. Implement the project & obtain final clearances
• Erection & commissioning – Once the building is ready & the necessary
plant & machinery have arrived, entrepreneurs have to take steps to erect
the machinery as per the prepared plan. After the plan & machinery is
erected, the entrepreneurs should proceed to commission the plant.
• Obtain final clearances – Entrepreneurs are required to take several final
clearances when the unit is ready for commissioning or as soon as it
goes into production.

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 Institutes supporting
business opportunities

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 Central level institutions
1. National Board for micro, small & medium Enterprise (NBMSME)
• It was constituted in 2007 in pursuance of the MSME Development Act,
2006, to facilitate the coordination & inter-institutional linkages for the
development of MSME.
• The Office of the Development Commissioner (MSME) serves as the
secretariat for the Board. The Union Minister of Commerce & Industry is
the chairman of the Board.
• The NBMSME comprises of 50 members including state industry
ministers; select members of Parliament; secretaries of various dept. of the
Central Govt; financial institutions; public sector undertakings; industry
associations; eminent experts in the field as members.

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• The board examines factors affecting promotion & development of MSME
& advices Central Govt. to facilitate their promotion & development in
order to enhance competitiveness.
• The board operates in areas like policies & programmes; development of
industries in a specific region such as North-East; quality improvement &
marketing assistance; credit facilities; taxation & modernization; industrial
sickness.
2. MSME-DO
• Micro, Small, and Medium Enterprises-Development Organization
(MSME-DO) is the apex body for assisting the govt. in formulating,
coordinating, implementing, monitoring policies & programmes for the
promotion & development of MSME in the country.
• MSME-DO provides a comprehensive range of common facilities,
technology & support services, marketing assistance, entrepreneurial
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development.
• It has over 60 offices & 21 autonomous bodies under its management.
• MSME-DO has a network of 30 MSME development institutes, 28 branch
MSME development institutes, 4 MSME testing centres, 7 MSME field-
testing stations. 2 departmental training institutes, 1 departmental MSME
hand-tools development centre. Theses institutes conduct consultancy,
training & facility services.
• It has initiated various schemes for the promotion of MSME sector in India
like entrepreneurship development programmes; management training
programmes; skill development programmes; initiative for environmental
control.
3. National Small Industries Corporation (NSIC)
• The NSIC work towards the growth of micro, small & medium enterprise
in the country.
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• The NSIC provides a package of services & various schemes to support
MSME in the country like facilitating market support, credit support,
technology support.
• It has devised a number of schemes such as consortia & tender marketing;
single-point registration for govt. purchase; B2B web portal for
marketing; marketing intelligence; exhibition & technology fairs; export;
buyer-seller meets to support MSME in their marketing efforts.
• NSIC facilitates credit requirements of MSME by providing financial
assistance for the procurement of raw materials for upto 90 days; finance
through syndication with banks; facilitating import of scarce raw
materials.
• NSIC has received various accolades & awards. The Govt. of India has
accorded it “Mini Ratna” status, which gives it a higher degree of
autonomy to provide greater service through its innovative schemes for
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growth & development.
 State level institutions
1. State Directorate Industries & Commerce
• It acts as a catalyst for the overall development of the industrial sector
through effective implementation of policies.
• The policies developed by Central Govt. serve as guidelines but each state
evolves it own policy & package schemes.
• The Directorate develops growth centres, industrial parks, export zones,
special economic ones, industrial clusters, infrastructure reqd. for industrial
development.
• The main function of Directorate is to carry out industrial development in
the state. Implement policies & schemes of the Govt. Of India & the state
Govt.
• The commissioner/Director of Industries & Commerce is the head of the
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institution & is assisted by additional directors, joint directors, deputy
directors, assistant directors, & other support staff.
2. District Industries Centres (DIC)
• The concept of DIC was announced by the Govt. of India during new
industrial policy formulate on 23rd Dec, 1977.
• DIC are the main focus agencies for promoting MSME at the district level
also generating greater employment opportunities especially in rural &
backward areas of the country.
• The functions & activities of DIC are monitored by the Directorate of
Industries & Commerce.
• DIC are district level institutions set up by the Govt., which provide all
services & facilities to entrepreneurs in one place to set up MSME. These
services & facilities include identification of suitable scheme, preparation
of project feasibility report, arrangements for supply of plant, machinery,
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equipment, provision of raw materials, credit facilities, research &
entrepreneurial training.
• DIC are headed by a joint director who is assisted by deputy
director/assistant director, industrial promotion officer & industrial
extension officer at the taluk level.
• The functions of DIC are registration of MSME; providing infrastructure
assistance to entrepreneurs; formulating employment generation
programmes; incentive schemes; conducting entrepreneurship
development & awareness programmes at village taluk & district levels.
3. State Financial Corporation (SFC)
• It is established in each state under the State Financial Corporation Act,
1951.
• They aim to finance & promote MSME in their respective states for
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achieving balanced industrial growth. They act as catalysts to generate
employment & widen the industrial base. The important services provided
are infrastructure development, financial services & term loans.
• SFCs are managed by board of directors , executive committee, audit
committee, principal officers.
• SFCs have decentralized system of working. They operate through branch
offices, circle offices, field offices, internal audit cell. They operate a
number of schemes for refinance of IDBI & SIDBI.
4. State Industrial Development Corporation (SIDC)
• SIDCs are wholly owned undertakings of the state Govt. set up under The
Companies Act, 1956.
• They act as catalysts for industrial development in their respective state.
• They develop land for providing industrial infrastructural facilities in the
form of industrial estates by developing industrial land & readymade
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industrial shed.
• They also provide facilities such as roads, power, water supply, drainage,
other amenities.
5. State Industrial Area Development Board (SIADB)
• It is a statutory board constituted under Industrial Areas Development Act,
of the respective state Govt. of India.
• The primary objective is to promote & assist in the rapid growth &
development of enterprises in industrial areas.
• The SIADB acquires & provides developed land suited for industries. Also
prepares industrial plots of various sizes to suit different industries along
with requisite infrastructural facilities.
• The basis facilities developed in industrial areas include roads, drainage,
water supply, power supply. It provides various amenities in industrial
areas such as banks, post office, telephone exchanges, telecommunications,
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fire stations, police outposts, ESI dispensaries.
 Other Institutions
1. National Bank for Agriculture & Rural Development (NABARD)
• NABARD was established by an Act of Parliament in July 1982 to provide
focused attention to the development of rural India by facilitating credit
flow for the promotion of agriculture & the rural non-farming sector.
• It provides refinance assistance to State Coorporation Banks, Regional
Rural Banks & other approved institutions for all kinds of production &
investment credit to industries, artisans, cottage & village industries,
handicrafts.
• It also helps entrepreneurs to procure loans for setting up industries in any
part of the country.
• NABARD’s primary goal is to promote sustainable & equitable agriculture
& rural prosperity through effective credit support, related services,
institution
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• NABARD’s functions can be classified into – credit planning, financial
services, promotion & development, supervision.
• It is governed by a board of directors & assisted by approximately 25
depts. working for the improvement of the rural economy. It has regional
offices, training establishments, district development offices for
implementing policies & various initiatives.
2. Technical Consultancy Organization (TCO)
• A TCO is a premier professional, industrial, technical, & management
consultancy organization.
• A network of TCOs was established by all-India financial institutions in
the 70s and 80s in collaboration with state-level financial/development
institutions & commercial banks to cater to the consultancy needs of
MSME & new entrepreneurs.
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• There are 18 TCOs operating in various states.
• TCOs provide a total package of consultancy services to enterprises, Govt.
depts, commercial banks, other institutions for activities relating to
industrial development & financing.
3. Small Industries Development Bank of India (SIDBI)
• SIDBI was founded in 1990 under an Act of Parliament.
• It is the principal financial institution for the promotion, financing,
development of MSME sector & other institutions engaged in similar
activities.
• It facilitates the timely flow of credit for term loans & working capital to
MSME in collaboration with commercial banks.
• The four main functions set by SIDBI for the development of MSME
sector
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are financing, promotion, development & coordination. 35
• SIDBI finances technology transfer & upgradation, quality improvement
programmes, export promotion, environmental care, rural industrialization.
4. Export Promotion Councils (EPCs)
• The export promotion councils for different industries make efforts to
promote the exports of their member units through direct marketing,
developing vendor relations, opening respective sales outlets abroad as a
collective export marketing strategy.
• MSME get access to export-related services from the councils.
• Some of the councils obtain bulk purchase orders from foreign buyers &
distribute them among member units for supply to the council for onward
export.
• EPCs offer a package of other services to existing as well as new members
by providing info. about the developments taking place in the international
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arena also changes to export-import policies & procedures, customs &
excise duty rules.
5. Non-Governmental Organizations (NGOs)
• NGOs provide financial assistance, information, training, marketing
support, legal advice & so on to MSME.
• In 1991 SSI policy of the Govt. of India favoured assistance to MSME
through NGOs.
• A few training programmes for unemployed youth to help set up industries
under the PMRY have been assigned to state Govt. to some NGOs.
• The role of NGOs is assuming increasing importance for assistance to
entrepreneurs, particularly under microfinancing activities.
• Many NGOs have set up Sub Contracting Exchanges (SCXs) to promote
entrepreneurship by developing & strengthening linkages between buyers
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& sellers.