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Derived from French word Entreprendre means ‘to undertake´.
Richard Carleton: “a person who buys factors of production at certain prices in order to combine them into a
product with a view to sell them at uncertain prices.”
Considered as a risk bearer. Ex. Farmer pays definite price for seeds, fertilizers, pesticides, labour etc but not
certain at which price he could sell his produce.
Peter F Drucker, “One who considers the changes that take place in market as an opportunity to do business.
Innovation is his tool.´
Joseph Schwmpeter, “Individuals who introduce something new in the market or economy.´
ILO, “Enterpreneurs are people who have the ability to see and evaluate business opportunities together with
the necessary resources to take advantage of them and to intimate appropriate action to ensure success.”
An individual who bears the risk of operating business in the face of uncertainty about the future conditions.
seven S model
Definition--Concept used as a measure of the quality of the performance of a firm, as indicated by 7 factors so
interrelated that changing any factor may effect changes in other six factors. These are 3 'hard' factors: strategy,
structure, and system; and 4 'soft' factors: style, shared values, skills, and staff.
entrepreneurship is the quality of being an entrepreneur, i.e. one who "undertakes an enterprise". The term puts
emphasis on the risk and effort of individuals who own and manage a business, and on the innovations that result from
their pursuit of economic success.
B.HIGGINS : “The function of seeing investment & production opportunities; organising an enterprise to undertake a
new production process; raising capital; hiring labour, arranging for raw material, finding a site & combining these
factors of production into a going concern; introducing new techniques, new commodities, discovering new sources
of natural resources & selecting top-managers for day-to-day operations.´
SCHUMPETER: Entrepreneurship is based on purposeful & systematic innovation. It includes not only the independent
businessman but also company directions & managers who actually carryout innovative functions.´
AMERICAN CONFERENCE ON ENTREPRENUERSHIP
:Entrepreneurship is attempt to create value through recognition of business opportunity, the management of risk
taking appropriate to the opportunity & through the communicative & management skills to mobilize human, financial
& material resources, necessary to bring a project to fruition.´
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Thus Entrepreneurship is a combination of various qualities like organisation skills, innovativeness, risk-bearing,
managing uncertainty, ability to bring together & use factor of production, analysing market opportunities, observing
the change taking place in the market, methods &technologies & studying the tastes & preferences of consumers.
Economic development generally refers to the sustained, concerted actions of policy makers and communities that
promote the standard of living and economic health of a specific area. Economic development can also be referred to as
the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development
of human capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health,
safety, literacy, and other initiatives. Economic development differs from economic growth. Whereas economic
development is a policy intervention endeavor with aims of economic and social well-being of people, economic growth
is a phenomenon of market productivity and rise in GDP. Consequently, as economist Amartya Sen points out:
“economic growth is one aspect of the process of economic development.”
ENTREPRENUERS & ECONOMIC DEVELOPMENT
OPTIMUM UTILISATION OF RESOURCES -Resources are put to proper use by Entrepreneurs. They combine various
resources Land, Labour, Capital, and Organisation to produce goods.
GENERATION OF EMPLOYMENT -provides employment, reducing unemployment problem.
IMPROVEMENT IN STANDARD OF LIVING OF PEOPLE
-by providing quality goods & services
BALANCED REGIONAL DEVELOPMENT: Government incentives encourage entrepreneurs to establish industry
units in rural &backward areas-create employment opportunities in industrially backward areas.
NEW / IMPROVE D GOODS &SERVICES :for the benefit of customers-by regulating taking market research.
HELP AGRI SECTOR -providing high yielding variety of seeds, fertiliser, pesticides, agricultural implements etc
many entrepreneurs buy agricultural produce for further processing.
PROMOTE INTERNATIONAL TRADE -exporting goods manufactured by them help govt to earn foreign exchange.
HELP COMMUNITY AT LARGE –by providing welfare activities-adopting villages, schools, starting educational
institutes, healthcare services, sports.
CAPITAL FORMATION-pooling the savings of people by issuing shares/ debentures-offering more returns
DISTRIBUTION OF INCOME & WEALTH -by establishing in rural / backward areas, not only balance regional
development but also redistribution of income & wealth
There are people working in big organisations holding key positions. They are quite innovative & bring many
changes in products & methods of production. They possess all qualities of an entrepreneur. Top managements
in big organisations encourage people holding key positions to come out with new ideas so that they can bring
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some changes in products & services. They are also known as enter corporate entrepreneurs or intraprenuers.
They serve as champions to others in the organisation.
Difference between Entrepreneur and Intrapreneur
Classification of Enterpreneurs
Based on Functional Characteristics
INNOVATIVE ENTREPRENEUR: he is the one who introduces a new product or a new method of production or
opens a new market or explore new source of supply of raw material or carry out a new type of organization. As
per Schumpeter innovative entrepreneur are real entrepreneur.
IMITATIVE / ADOPTIVE ENTREPRENEUR : are those who imitate the successful entrepreneurs in techniques
innovated by others.
DRONE ENTREPRENEUR : Drone entrepreneur are those who never allow any change in their production & style
of functioning. They never explore anything. They are also called Laggards. They are pushed out of market when
product loses its marketability.
FABIAN ENTREPRENEUR :are always cautious. They neither introduce new changes nor adopt new methods
invented by others. They are lazy. They follow old customs, old method of production, techniques.
Based on Developmental Angle
Prime mover: sets in motion powerful sequence of development, expansion and diversification.
Manager: content with just staying in business
Minor Innovator: find better use of existing resources
Satellite: Assumes Supplier’s role and slowly moves towards a productive enterprise.
Based on types of Entrepreneurial Business
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Based on Nine Personality types
The Improver: focus on using company as a means to improve the world.
The Advisor: customer focused
The Superstar: Based on Charisma and high energy of superstar CEO.
The artist: Creative
The Visionary: Based on future vision of Founder
The Analyst: focus is on fixing problems in systematic way
The Fireball: full of life, energy and optimism
The Hero: incredible ability to lead the world.
The Healer: nurturing and harmony to business.
Based on Schools of thought of enterpreneurship
The Great Person School
The Psychological characteristics School
The Classical School
The Management School
The Leadership School
The Intrapreneurship School
A competency may be defined as underlying characteristics of a person which results in effective performance of a job.It
may be include such motives, traits.skills.aspects of one’s self image or a body of knowledge which one uses in the
Only knowledge can not ensure success.Success depends upon the ability or skills of using the acquired knowledge for
achieving desired results. Skills refer to practical application or use of the knowledge. Thus, performance depends upon
both knowledge and skills. The personality of the person making use of knowledge and skills important in this context
Elements of Entrepreneurial Competencies
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Innovation is possible only through knowledge.In simple words, knowledge means collection of information and
retention of facts an individual store in some parts of his brain
Skill is ability to demonstrate a system and sequence of behaviours that are functionally related to attaining a goal. An
Entrepreneur is required to have certain skills which are as follows: Anticipatory Skills-foresight into a constantly
Visioning Skills-inducing a group to act in accordance with the leader’s purposes or the shared purposes of larger group.
Value Congruence Skills-the need to be in touch with employee’s
economic,safety,psychological,spiritual,swxual,aesthetic and physical needs in order to engage people on the basis of
shared motives, values and goals. Empowerment Skills-the willingness to share power and to do so effectively. Self
Understanding Skills-introspective or self knowledge skills as well as framework within which leaders understand both
their needs and goals and those of their employees.
Motives and traits
Motives deals with current concern for a goal, state or condition appearing in fantasy which drives, directs and select
behaviour of Individual.In simple words, motive represents thoughts related to a particular goals or state. Trait may be
defined as a disposition or characteristic way in which a person responds to a set of stimuli. Such responses represent
intelligence, enthusiasm, strength, bravery, integrity and self-confidence. An entrepreneur provides leadership to his
enterprise and so he must possess the leadership traits.
FACTORS AFFECTING ENTREPRENEURIAL GROWTH
1. ECONOMIC FACTORS
Lack of adequate overhead facilities: Profitable innovations require basic facilities like transportation, communication
power supply etc. They reduce cost of production and increase profit. Non availability of capital Inventions are capital
oriented. In less developed countries most capital equipment have to be imported which involves foreign exchange
which acts as a difficult problem.
Risk is high in case of less developed countries as there is lack of reliable information, markets for good and services is
Non availability of labor and skills
Though there is abundant labor supply there is generally scarcity of skills.
2. Non-Economic Factors
It involves the degree of mobility, both social and geographical, and the nature of mobility channels within a system.
The opinion that the social mobility is crucial for entrepreneurial emergence is not unanimous Some hold the view that
a high degree of mobility is conducive to entrepreneurship.
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Marginality: Social marginality is the designation of a person or group as peripheral to the main group or groups of
society; the status of being part insider and at the same time part outsider in a society or social group.
A group of scholars hold a strong view that social marginality also promotes entrepreneurship. They believe that
individuals or group on the perimeter of a given social system or between two social systems provide the personnel to
assume the entrepreneurial roles. They may be drawn from religious, cultural, ethnic, or migrant, minority groups, and
their marginal social position is generally believed to have psychological effects which make entrepreneurship
particularly attractive for them.
Need Achievement-To the best of our knowledge, the best known of primarily psychological theories is David
McClelland’s (1961) theory of need achievement.
According to David McClelland, 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.
The emergence of entrepreneurs in a society depends upon closely interlinked social, religious, cultural, psychological,
and political and economic factors.
Individuals who for some reason, initiate, establish maintain and expand new enterprises generate entrepreneurship in
society. It is observed that entrepreneurs grow in the tradition of their families and society and accept certain values
and norms from these sources.
RELIGIOUS, SOCIAL AND CULTURAL FACTORS:
Religious, social and cultural factors also influence the individual taking up an entrepreneurial career, in some countries
there is religious and cultural belief that high profit is unethical. This type of belief inhibits growth of entrepreneurship.
The psychological factors like high need for achievement, determination of unique accomplishment, self confidence,
creativity, vision, leadership etc, promote entrepreneurship among individuals. On the other hand psychological factors
like security, conformity and compliance, need for affiliation etc restrict promotion of entrepreneurship.
The political and also the political stability of country influence the growth of entrepreneurship. The political system,
which promotes free market, individual freedom and private enterprise, will promote entrepreneurship.
The economic policies of the government and other financial institutions and the opportunities available in a society as
a result of such policies play a crucial role in exerting direct influence on entrepreneurship. In view of the haphazard
development of economic zones, Government is encouraging the entrepreneurs to establish their business in backward
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and tribal areas. This is primarily to arrest the migration of people from the villages to cities and to create employment
opportunities locally. Government is promoting such development by giving incentives like tax holidays (both sales and
income), subsidized power tariff, raw materials,
transportation cost etc.
Entrepreneurial Development Programmes
Defined as a programme designed to help an individual in strengthening his entrepreneurial motive and in
acquiring skills and capabilities necessary for playing his entrepreneurial role effectively
Objectives of EDP
To identify the potential entrepreneurs.
To develop necessary knowledge & skills among the participants.
To understand the process & procedure of setting up of small business.
To train the entrepreneurs to understand environmental threats & opportunities
To provide help in identification and formulation of viable projects
To impart training in managerial understanding and skills
To provide post training assistance and monitoring facilities
Role and relevance of EDP
Creation of employment opportunities
Balanced Regional development
Use of local resources
Improvement in per capita income
Improvement in standard of living
Preventing Industrial Slums
Reducing Social tension
Facilitating overall development
Phases of EDP
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Designing of Course Curriculum or contents
Introduction to entrepreneurship
Essentials of management
Fundamentals of project feasibility study
Organising the business
Selection of faculty or resource person --- The programme is well publicised and promoted to attract maximum
applications for screening. Selection of top 25 to 30 applicants only
Applications screened for:
Demographics and socio cultural data
age, education, work exp, financial resources, type of business etc–Motivation factors
pull factors, source of encouragement, credibility, endurance, concreteness of plans
Psychological test results- traits like risk taking, need for achievement
Insertion of advertisement
Selection of potential entrepreneurs
Written Instruction method
Post training or follow up phase
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Post training period reveals drawbacks in the pre-training and training phases and suggest guidelines for framing
future policy. The various aspects of post training phase include the following activities: Follow-up meeting of
the officials of EDP organizations with the participants or trainee
Correspondence with the trainees.
Counseling and guidance of the trainees.
Escorts service to the trainees.
Assistance in projection report preparation.
Assisting in selecting location of the unit.
Helping in bringing the trainees in touch with the financial institutions
Organisations providing EDP
National Institute for entrepreneurship and Small Business Development (NIESBUD)
Small Industries Service Institutes(SISI)
Small Industries DevelopmentOrganisation (SIDO)
National Small Industries Corporation(NSIC)
Entrepreneurship Development Institute of India (EDII)
National Alliance of Young Entrepreneurs (NAYE)
QUALITIES OF ENTREPRENUERS
Mental ability : intelligent person.
Creativity: germination, preparation, incubation, illumination and verification
Organising ability : good organisation.
Commitment and Hard worker : ready to work for long hours.
Discipline : highly disciplined-everything to be in order for them.
Clear objectives :regarding nature of business & products to be produced.
Need for high achievement -they have a strong desire for achieving something great.
Optimistic : highly optimistic-not disturbed by present problems-hope favourable future.
Risk taking : they like challenges.
H. R ability: maintain good relations with other people (employee, vendors, customers, bankers).
Emotional stability : have considerable amount of self-control-business pressure can be handled.
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Communication ability : good communication.
Self-confidence: tackle problems immediately with self-confidence.
Adaptability: highly flexible-adapt themselves for any conditions.
Positive attitude : always think positively, they do not leave hopes even under difficult conditions.
They are also good managers, pro-active, realistic, have comprehensive awareness & conceptual ability.
Entrepreneur Vs Manager
Entrepreneur vs Administrator
An entrepreneur starts and builds a business enterprise. He is the leader of the company, the chief executive officer. An
administrator is someone who manages a department, division, or functional area within an organization. His job is to perform the
tasks assigned to him as efficiently as possible and to meet all deadlines. An entrepreneur must have administrative abilities in the
sense of being able to complete tasks efficiently, but an administrator does not have to possess the qualities associated with being
an entrepreneur in order to succeed in his job.
Entrepreneurial Opportunity Search & Identification
The entrepreneurial process involves all the functions, activities, and actions associated with the perception of
opportunities and creation of organizations to pursue them. An entrepreneur is termed as opportunity seeker.
Business opportunity is an attractive project in terms of adequate return which motivates the entrepreneur to accept
that particular project for making investment decision.
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Favorable market demand available
Adequate rate of returns
Markets arise for new products & services from wants & needs of consumers. Observe surroundings and consciously
question how to resolve issues that come across. Develop sensitivity to changes around yourself. Carefully scan
environment to gather ideas. Scanning the Environment may include the following for identification of business
Sect oral Analysis
Scanning the environment for identification of business opportunities
Development of Product or Service idea
Assessment of feasibility of the idea
Preparation of Business Plan
Project Commissioning and Launch
Objectives of identification of business opportunities
To evaluate the possibilities of developing and utilizing physical resources of a particular region from the
technical and economic point of view.
To study and examine small, medium and large scale industrial activities.
To recommend by certifying the usefulness of other possible industries for the region.
To assess and estimate the capital, labour, transport, power, fuel, raw material for feasible industries.
To evaluate the impact of achievement in financial resources, production, employment and initial requirement
FACTORS AFFECTING IDENTIFICATION OF BUSINESS OPPORTUNITIES
Volume of internal demand
Availability of Industrial raw material
Availability of internal resources
Forms of external assistance
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Possibility of exports
Analysis of performance of existing units
Level of risk in the business
BUSINESS OPPORTUNITIES IN VARIOUS SECTORS
IT enabled services
Food, Fruit, Vegetables processing, Refrigration and transportation
The emergence, working and growth of entrepreneur is facilitated in the economies whose favourable condition
Schumpeter is of the opinion that an entrepreneur is always on the lookout of potential profitable opportunities
and exploit them in the best interest of his enterprise.
Acc. To Peter F. Drucker, an entrepreneur must be capable of analyzing the opportunities and exploits them
Adequate attention will be paid to 5Ms.
Opportunities are of three kinds:
Additive opportunities – enable the decision maker to better utilize the existing resources without
incorporating the change.
Complementary opportunities – Introduction of new ideas and as such do lead to certain amount of change in
the existing structure.
Breakthrough opportunities – involves fundamental change in both the structure and character of the business.
An entrepreneur after making appraisal of the resources at his command, perceives a business opportunity for
producing and marketing a product or service.
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Search for prospective business idea
Processing for these ideas and seeking the best idea
Collecting the required resources and setting up the enterprise
Criteria to Select a Product
The selection of the right product is very essential for being successful in the business vanture. Various factors influence
the entrepreneur in selecting the right product. These decisive factors/ criteria are:-
Personal traits and experience of the entrepreneur
Skilled & unskilled labour positions
Availability of ready market
Availability of raw materials & machinery
Government policies- subsidies & incentives
Scope for further expansion
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Background and experience of the entrepreneur
Availability of technology and know how for the project
Marketability of the product/service
Availability of plant and machinery
Availability of rawmaterials
Availability of proper infrastructure facillities
Project Feasibility study
Feasibility studies aim to objectively and rationally uncover the strengths and weaknesses of an existing
business or proposed venture, opportunities and threats as presented by the environment, the resources
required to carry through, and ultimately the prospects for success.
In its simplest terms, the two criteria to judge feasibility are cost required and value to be attained.
As such, a well-designed feasibility study should provide a historical background of the business or project,
description of the product or service, accounting statements, details of the operations and management,
marketing research and policies, financial data, legal requirements and tax obligations
Important facets of project feasibility study
What would be the aggregate demand of the proposed product/ service in future?
What would be the market share of the project under appraisal?
Information required for market analysis
Consumption trends in the past and the present consumption level
Past and present supply position
Production possibilities and constraints
Imports and exports
Structure of competition
Elasticity of demand
Consumer behaviour, intentions, motivations, attitudes, preferences and requirements
Distribution channels and marketing policvies in use
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Administrative, technical and legal constraints.
Important questions raised:
Have the preliminary tests and studies been done or provided for?
Has the availability of raw materials, power and other inputs been established?
Is the selected scale of operation is optimal?
Is the production process chosen suitable?
Are the equipment and supplementary engineering works been provided for?
Has provision been made for the treatment of effluents?
Is the proposed layout of the site, buildings and pland sound?
Have work schedules been drawn up realistically?
Is the technology proposed to be employed appropriate from social point of view?
Investment outlay and cost of project
Means of financing
Break even point
Cash flows of the project
Investment worthiness judged in terms of various creteria of merit
Projected financial position
Level of risk
What are the direct economic benefits and costs of the project measured in terms of shadow(efficiency) prices
and not in terms of market prices?
What would be the impact of the project on the level of savings and investment in the society?
What would be the contribution of the project towards the fulfillment of certain criteria like self sufficiency,
employment and social order?
What is the likely damage caused by the project to the environment?
What is the cost of restoration measures required to ensure that the damage to the environment is contained
within acceptable limits?
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Table of contents of a Business Plan
• Title Page
• Executive summary
Vision and Mission statement
• Company Plan
• Marketing Plan
Market Description and target market
Methods of distribution
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Timing of market entry
• Supporting Plan
• Financial Plan
Summary of financial needs
Sources and uses of funds
Cash flow statement
Three year income projection
Break even analysis
Business financial history
• Supporting Documents
Personal financial statement
Copies of leases
Letters of reference
• All complex projects consist of three basic phases: the initial (or preparatory) phase; the project (or work) phase; and
the finalization phase. Each of these phases has its own challenges and pitfalls. These can be avoided by having a clear
picture of what should be achieved in each of these phases. A project plan is finalized when it is formally accepted and
approved by the project sponsor and other designated stakeholders. Formal approval acknowledges that all the
deliverables produced during the Plan Stage are complete, reviewed and accepted.
• The project plan is important because it provides baseline information such as the budget, schedule and management
plans for executing and controlling the project. A signed project plan represents a commitment to continue and to
dedicate the required time and resources toward the project. It ushers the way into the Execute and Control Stage.
Sources of Information
Survey of Market
Survey of Prospectus customers
Survey of Resources
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Trade Fairs & Exhibitions
Study of global Trends
The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in
terms of which the definition of micro, small and medium enterprises is as under:
(a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:
(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does
not exceed Rs. 5 crore; and
(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but
does not exceed Rs.10 crore.
In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and
the items specified by the Ministry of Small Scale Industries
(b) Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost
excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may
be notified under the MSMED Act, 2006 are specified below.
A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;
A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but
does not exceed Rs. 2 crore; and
A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but
does not exceed Rs. 5 crore.
Objectives of MSME
To create more employment opportunities with less investment
To remove economic backwardness of rural and less developed regions of the economy
To mobilise and ensure optimum utilisation of unexploited resources of the country
To improve standard of living of people
To ensure equitable distribution of income and wealth
To attain self reliance
To adopt latest technology aimed at producing better quality products at lower costs.
Importance of MSME (role and rationale of sme in economic development)
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Optimum use of capital
Facilitate Enterpreneurial development
Use of local resources
Balanced regional development
Conservation of foreign exchange
Equitable spread of income and wealth
Supporting large scale industries
Contribution towards national income
Promotes Rural and Semi Urban Growth
Fosters Women Employment
Drives the Employment avenues of Semi Skilled People.
Acts as an aid to large scale enterprises.
Promotes Rural Development and better habitat.
Problems of MSME
Under utilization of capacity
Formalities for setting up of a small Business
Selection of a project
Decide on the constitution
Obtain SSI registration
Obtain Clearances from departments as applicable
Arrange for land/shed
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Arrange for plant and machinery
Arrange for infrastructure
Prepare project report
Apply and obtain finance
Proceed to implement and obtain final clearances
Selection of a project
Product or service selection
Project feasibility study
Business plan preparation
Prepare Project profile
Decide on the constitution
It is necessary in case of starting industrial units. Certificate of registration will be issued in two stages.
Provisional Registration Certificate
Permanent Registration Certificate
Provisional Registration Certificate: It is the initial registration to starting a small scale industry. It is issued
for 5 years. This certificate
To get an industrial plot or industrial shade.
To avail bank loan.
To get license from local administration.
To get water & power supply.
For procuring plant machinery & raw materials.
To get NOC from PC board
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Permanent Registration Certificate: It is issued when all the formality of establishing the unit is over. This
certificate will be useful :
a)To apply for subsidies & incentives
b)To avail bank loan
c)To get income tax & sales tax concession
d)To avoid central excise duty concession
The application in the prescribed form along with the following are to be submitted by the entrepreneur.
Prescribed court fees stamp
Affidavit, as per format on appropriate stamp paper.
The permanent registration is normally issued immediately, across the table on submission of application.
Objectives of the Registration scheme
To enumerate and maintain a roll of small industries at which the package of incentives and support are
To provide a certificate enabling the units to avail statutory benefits mainly in terms of protection
To serve the purpose of collection of statistics.
To create nodal centres at the centre, State and District levels to promote SSI.
Features of registering scheme
DIC is the primary registering centre.
Registration is voluntary and not compulsory
Two types of registration are done in all states. A Provisional registration certificate is given first. After
commencement of production, a permanent registration certificate is given.
PRC is normally valid for five years and permanent registration is given in perpetuity.
Basis of Evaluation
The unit has obtained all necessary clearances
Unit does not violate any location restrictions in force at the time of evaluation.
Value of plant and machinery is within prescribed limits
Unit is not owned, controlled, or a subsidiary of any other industrial undertaking as per notification.
A small scale unit can violate the regulations in the following ways which will make it liable for the registration:
It crosses the investment limit
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It starts manufacturing a new item or items that require an industrial licence or any other kind of
It does not satisfy the condition of owned, controlled, or being a subsidiary of any other industrial
NOC From Pollution Board
• As per the provisions of the Water (Prevention & Control of Pollution) Act, 1974 and Air (Prevention & Control
of Pollution) Act, 1981, any entrepreneur desirous of establishing a new industry or expansion of its existing unit
is required to obtain ‘consent to establish’ (NOC) from the Board before taking any steps for
establishment/expansion of the said industry. The Board has categorized the small scale industrial units into two
• Green Category and Red Category taking into consideration their pollution potential loads. The Board has laid
down very simple procedure for obtaining ‘consent to establish’ (NOC) for the said categories of industries.
Machinery & Equipment Selection
You must know the different types of machinery and equipment that are needed to set up your enterprise.
Make a listing of the leading dealers/suppliers where the machinery is available. The following factors determine the
type of machines you will need:
Capacity of the proposed unit
Minimum scale of production which is economical
Expected performance standards
Minimization Availability of spare parts for the new machinery
Prepare Project Report
Project report gives a detailed insight of the project and indicates the techno-economic viability of the project.
Contents of a Project Report(specimen)
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Project Planning & Scheduling using Networking Techniques
The Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a statistical tool, used in project
management, that is designed to analyze and represent the tasks involved in completing a given project. First developed by
the United States Navy in the 1950s, it is commonly used in conjunction with the critical path method(CPM). PERT is a method to
analyze the involved tasks in completing a given project, especially the time needed to complete each task, and to identify the
minimum time needed to complete the total project.
PERT was developed primarily to simplify the planning and scheduling of large and complex projects. It was developed for the U.S.
Navy Special Projects Office in 1957 to support the U.S. Navy's Polaris nuclear submarine project.
It was able to incorporate
uncertainty by making it possible to schedule a project while not knowing precisely the details and durations of all the activities. It is
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more of an event-oriented technique rather than start- and completion-oriented, and is used more in projects where time is the
major factor rather than cost. It is applied to very large-scale, one-time, complex, non-routine infrastructure and Research and
Development projects. An example of this was for the 1968 Winter Olympics in Grenoble which applied PERT from 1965 until the
opening of the 1968 Games.
This project model was the first of its kind, a revival for scientific management, founded by Frederick Taylor (Taylorism) and later
refined by Henry Ford (Fordism). DuPont's critical path method was invented at roughly the same time as PERT.
PERT chart for a project with fivemilestones (10 through 50) and six activities (A through F). The project has two critical paths: activities B and C, or A, D, and
F – giving a minimum project time of 7 months with fast tracking. Activity E is sub-critical, and has a float of 1 month.
PERT event: a point that marks the start or completion of one or more activities. It consumes no time and uses no resources.
When it marks the completion of one or more activities, it is not “reached” (does not occur) until all of the activities leading to
that event have been completed.
predecessor event: an event that immediately precedes some other event without any other events intervening. An event can
have multiple predecessor events and can be the predecessor of multiple events.
successor event: an event that immediately follows some other event without any other intervening events. An event can have
multiple successor events and can be the successor of multiple events.
PERT activity: the actual performance of a task which consumes time and requires resources (such as labor, materials, space,
machinery). It can be understood as representing the time, effort, and resources required to move from one event to another.
A PERT activity cannot be performed until the predecessor event has occurred.
PERT sub-activity: a PERT activity can be further decomposed into a set of sub-activities. For example and activity A1 can be
decomposed into A1.1, A1.2 and A1.3 for example. Sub-activities have all the properties of activities, in particular a sub-activity
has predecessor or successor events just like an activity. A sub-activity can be decomposed again into finer-grained sub-
optimistic time (O): the minimum possible time required to accomplish a task, assuming everything proceeds better than is
pessimistic time (P): the maximum possible time required to accomplish a task, assuming everything goes wrong (but excluding
most likely time (M): the best estimate of the time required to accomplish a task, assuming everything proceeds as normal.
expected time (TE): the best estimate of the time required to accomplish a task, accounting for the fact that things don't always
proceed as normal (the implication being that the expected time is the average time the task would require if the task were
repeated on a number of occasions over an extended period of time).
TE = (O + 4M + P) ÷ 6
float or slack is a measure of the excess time and resources available to complete a task. It is the amount of time that a
project task can be delayed without causing a delay in any subsequent tasks (free float) or the whole project (total float).
Positive slack would indicate ahead of schedule; negative slack would indicate behind schedule; and zero slack would
indicate on schedule.
critical path: the longest possible continuous pathway taken from the initial event to the terminal event. It determines the
total calendar time required for the project; and, therefore, any time delays along the critical path will delay the reaching
of the terminal event by at least the same amount.
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critical activity: An activity that has total float equal to zero. An activity with zero float is not necessarily on the critical path
since its path may not be the longest.
Lead time: the time by which a predecessor event must be completed in order to allow sufficient time for the activities that
must elapse before a specific PERT event reaches completion.
lag time: the earliest time by which a successor event can follow a specific PERT event.
fast tracking: performing more critical activities in parallel
crashing critical path: Shortening duration of critical activities
PERT chart explicitly defines and makes visible dependencies (precedence relationships) between the work breakdown
structure (commonly WBS) elements
PERT facilitates identification of the critical path and makes this visible
PERT facilitates identification of early start, late start, and slack for each activity,
PERT provides for potentially reduced project duration due to better understanding of dependencies leading to improved
overlapping of activities and tasks where feasible.
The large amount of project data can be organized & presented in diagram for use in decision making.
There can be potentially hundreds or thousands of activities and individual dependency relationships
PERT is not easily scalable for smaller projects
The network charts tend to be large and unwieldy requiring several pages to print and requiring special size paper
The lack of a timeframe on most PERT/CPM charts makes it harder to show status although colours can help (e.g., specific
colour for completed nodes)
When the PERT/CPM charts become unwieldy, they are no longer used to manage the project
Critical Path Method
Has some common characteristics with PERT
Defined by activities and events
An activity is a time-consuming effort that is required to complete part of a project. Shown as an arrow on the diagram
An event is denoted by a circle and defines the end of one activity and beginning of the next. An event may be a
The essential technique for using CPM
is to construct a model of the project that includes the following:
1. A list of all activities required to complete the project (typically categorized within a work breakdown structure),
2. The time (duration) that each activity will take to complete,
3. The dependencies between the activities and,
4. Logical end points such as milestones or deliverable items.
Project appraisal is a generic term that refers to the process of assessing, in a structured way, the case for proceeding
with a project or proposal. In short, project appraisal is the effort of calculating a project's viability. It often involves
comparing various options, using economic appraisal or some other decision analysis technique
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Pay back Period Method
Accounting Rate of Return
Profitability Index (post Pay back)
--Time Adjusted Methods
Net Present Value Approach
Internal Rate of Return
A company chooses the expected number of years required to recover an original investment. Projects will only be selected if initial
outlay can be recovered within a predetermined period. This method is relatively easy since the cash flow doesn't need to be
discounted. Its major weakness is that it ignores the cash inflows after the payback period, and does not consider the timing of cash
Net Present Value
A project's net present value is determined by summing the net annual cash flow, discounted at the project's cost of capital and
deducting the initial outlay. Decision criteria is to accept a project with a positive net present value. Advantages of this method are
that it reflects the time value of money and maximizes shareholder's wealth. Its weakness is that its rankings depend on the cost of
capital; present value will decline as the discount rate increases.
Internal Rate of Return
This method equates the net present value of the project to zero. The project is evaluated by comparing the calculated Internal rate
of return to the predetermined required rate of return. Projects with Internal rate of return that exceed the predetermined rate are
accepted. The major weakness is that when evaluating mutually exclusive projects, use of Internal rate of return may lead to
selecting a project that does not maximize the shareholders' wealth.
This is the ratio of the present value of project cash inflow to the present value of initial cost. Projects with a Profitability Index of
greater than 1.0 are acceptable. The major disadvantage in this method is that it requires cost of capital to calculate and it cannot
be used when there are unequal cash flows. The advantage of this method is that it considers all cash flows of the project.
Unit-4 Role of Support Institutions and Management of Small Business
Government has recognized the important role of entrepreneurs in the industrial development of the country, especially
through the small scale industries (SSIs).
SSIs are essential for Indian economy in terms of employment generation, foreign exchange earnings, its share in industrial
output, and contribution to national income.
The government of India and state governments provides a number of special facilities and incentives. The incentives not
only motivate entrepreneurs to set up industries in the small scale sector, but also strengthen the entrepreneurial base in
The new entrepreneurs face a number of problems on account of inadequate infrastructure facilities and other support
The government offers a package of services through its specialized institutions and motivates entrepreneurs to take
advantage of the various facilities and establish enterprises and flourish.
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This package includes assistance in obtaining finance, help in marketing, technical guidance, training, and technology
upgradation etc. It is hoped that institutional incentives would play a key role in the promotion of small enterprises and
ensure their self-sustained growth.
DIRECTORATE OF INDUSTRIES (State Directorate of Industries )
Under the constitution of India promotion and development of small scale industries is a State subject. Therefore, the
primary responsibility for implementation of policies and programmes of assistance rests with the Directorate of Industries
in each State. It acts under the overall guidance of SIDO and concerned Central institutions. It performs both regulatory and
developmental functions. It functions through a network of District Industries offices, industries offices and extension
offices at district sub-division and block level respectively.The main functions of Directorate of Industries are as follows:
Registration of small scale units
Providing financial assistance
Distributing scare and indigenous raw materials to industrial units
Granting essentiality certificates for import of raw material
Establishing industrial estates and industrial co-operatives
Developing industrial infrastructure
Undertaking industrial surveys and collecting information
Arranging concessions and incentives for industries.
Overall administration of village and small scale industries.
Maintaining liaison with other agencies for industrial development.
DISTRICT INDUSTRIES CENTRES (DICS)
The District Industries Centers programme was launched in 1978 for effective promotion of cottage and small
scale industries widely dispersed in rural areas and small towns.
These centers are the focal points providing all the services and support required by small scale and village
entrepreneurs under one roof. These serves as an integrated administrative framework at the district level for
The main functions of DIC’s are as follows:
a) It conducts surveys to know industrial potential of a district keeping in view the availability of raw
material, human skills, infrastructure, demand, etc.
b) It prepares an action plan for industrial development.
c) It appraises the various investment proposals received from entrepreneurs.
d) It guides and assists entrepreneurs in buying appropriate machinery and equipment and raw
e) It suggests appropriate marketing strategies to entrepreneurs.
f) It maintains links with research and development institutions for upgradation of technology, quality
improvement, industrial training etc.
g) It conducts artisans training programmes.
h) It has been assigned operation responsibility for special schemes to provide self-employment to
educated unemployed youths.
SMALL INDUSTRY DEVELOPMENT ORGANIZATION (SIDO)
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The Office of the Development Commissioner (Small Scale Industries) is also known as the Small Industry Development
It is an apex body, established in 1954, for assisting the Ministry in formulating, coordinating, implementing and
monitoring policies and programmes for the promotion and development of small scale industries.
It has over 60 offices and 21 autonomous bodies under its management, including Tool Rooms, Training Institutions and
Project-cum-Process Development Centres etc.
Functions of such main bodies are as follows:
Small Industries Service Institutes (SISIs) are operational one in each state. They provide technical support and
consultancy services, conduct entrepreneurship development programmes, and export promotion and liaison
activities Emphasizes is also placed on implementation of programmes on modernization, energy conservation,
quality control / upgradation and pollution control for the benefit of entrepreneurs.
Regional Testing Center (RTC) provides Testing facilities for product quality upgradation.
Tool Rooms/Tool Design Institutes (TRs/TDI) assist SSIs in technical upgradation, and provide good quality tooling
by designing and producing tools, moulds, jigs & fixtures, components, etc.
Product-cum-Process Development Centres (PPDCs) look into their specific problems and render technical service.
Central Footwear Training Institutes (CFTIs) develop footwear designing to promote exports.
Sub-Contract Exchanges for Ancillary Development (SCXs) register and create database of the spare
manufacturing/service capacity of SSI; create database of requirements of large/medium units and match the
requirements with the spare capacity available with small units; and arrange Buyer-Seller Meets, organise vendor
exhibitions, seminar workshops for large-small units coordination, quality upgradation, export promotion, etc and
facilitate flow of data on vendor development.
The main services rendered by DC SSI office are:
Advising the Government in policy formulation for the promotion and development of small scale industries.
Providing techno-economic and managerial consultancy, common facilities to small scale units.
Providing facilities for technology upgradation, modernisation, quality improvement and infrastructure.
Developing Human Resources through training and skill upgradation.
Providing economic information services.
Maintaining a close liaison with the Central Ministries, Planning Commission, State Governments, Financial
Institutions and other Organisations concerned with development of Small Scale Industries.
Evolving and coordinating policies and programmes for development of Small Scale Industries as ancillaries to
large and medium scale industries.
Monitoring of Prime Minister Rozgar Yojna (PMRY) Scheme.
NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)
The National Small Industries Corporation Ltd. was set up in 1955 with a view to promoting, aiding and fostering the
growth of small scale industries in the country with focus on commercial aspects of these functions. NSIC continues to
implement its various programmes and projects throughout the country to assist the SSI units.
The Corporation has been assisting the sector through the following schemes and activities:
Composite Term Loan Scheme: To promote small-scale sector, NSIC has launched a Composite Term
Loan Scheme for the benefit of existing and prospective entrepreneurs to acquire land and building,
machinery and equipment and working capital under one roof to the tiny units.
Hire Purchase Scheme: Supply of indigenous and imported machinery and equipment on easy financial
terms with special focus on women entrepreneurs, weaker sections, handicapped and ex-servicemen
and SC/ST entrepreneurs.
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Equipment leasing: It is done mainly to facilitate SMEs to expand their capacities or diversify and/or
upgrade their technology according to the needs of the market.
Working Capital Finance: This Scheme aims at augmenting working capital of viable and well managed
units, on selective basis in case of emergent requirements to enable them to pay-off their purchase of
consumable stores, spares and production related overheads particularly electricity bills, statutory dues.
Raw Material Assistance: It facilitates availability of scarce raw material either through the domestic
market or by importing.
Marketing Support Programme: NSIC has been trying to act as a major agency to bring SMEs closer to
various Governmental purchasing agencies, with the intention of creating confidence in the purchasing
agencies about SMEs, and their capabilities to supply goods and services of requisite quality, economic
prices and adherence to agreed delivery schedules.
Tender Marketing: It participates in bulk local/global tender on behalf of Small Scale
Industries/Enterprises. It is aimed at assisting SSIs with the ability to manufacture quality products but
which lack brand equity & credibility or have limited financial capabilities.
Integrated Marketing Support: NSIC has been operating an Integrated Marketing Support Programme in
which bills pertaining to supplies made by small scale units to eligible purchasers are discounted by NSIC
up to a certain specified limit.
Government Stores Purchase Programme: The units registered with the Corporation for participation in
government purchase programme are considered at or with individual purchase organisations and
derive all the benefits like free supply of tender forms, exemption from payment of earnest money,
security deposits, etc.
Technology Upgradation: Excellent technical support is provided to SSIs/SMEs through five
NSICTechnical Service Centres. These centres have been recognised by Council of Scientific and
Industrial Research for in-house R&D. NSIC has set up a Technology Transfer Centre. The latest
information is provided to on-line connections and networks of computers on matching technology
seekers and technology providers are arranged through the Technology Transfer Centre.
Software Technology Parks: NSIC has set up a NSIC-STP Complex under Software Technology Parks of
India (STPI). Software Technology Parks facilitates small scale units to establish their units for the 100%
export of software and also act as the major point to activate software exports directly through NSIC.
STATE INDUSTRIAL DEVELOPMENT CORPORATIONS (SIDCS)
Incorporated under the companies Act 1956 SIDC’s were set up in different states as wholly owned companies for
promoting industrial development in their respective states. The main functions of SIDC’s are as follows:
Providing term finance to all small, medium and large industrial enterprises set up in state.
Underwriting and directly subscribing to shares, and debentures of debentures of industrial enterprises
being set up in the state.
Preparing feasibility studies, conducting market surveys and motivating private entrepreneurs to set up
their industrial ventures in the state.
Collaborating with private entrepreneurs to set up industrial ventures in joint and assisted sector.
Implementing scheme of ‘Industrial Development Bank of India’ of seed capital in the state.
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Under the constitution of India promotion and development of small scale industries is a State subject.
Therefore, the primary responsibility for implementation of policies and programmes of assistance rests with
the Directorate of Industries in each State.
It acts under the overall guidance of SIDO and concerned Central institutions.
It performs both regulatory and developmental functions.
It functions through a network of District Industries offices, industries offices and extension offices at district
sub-division and block level respectively.
The main functions of Directorate of Industries are as follows:
a) Registration of small scale units
b) Providing financial assistance
c) Distributing scare and indigenous raw materials to industrial units
d) Granting essentiality certificates for import of raw material
e) Establishing industrial estates and industrial co-operatives
f) Developing industrial infrastructure
g) Undertaking industrial surveys and collecting information
h) Arranging concessions and incentives for industries.
i) Overall administration of village and small scale industries.
j) Maintaining liaison with other agencies for industrial development.
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)
The SIDBI was established in 1990 as the apex refinance bank. The SIDBI is operating different programmes and
schemes through 5 Regional Offices and 33 Branch Offices. The financial assistance of SIDBI to the small scale
sector is channelised through the two routes – direct and indirect.
a) SIDBI’s financial assistance to small sector is primarily channelised through the existing credit delivery system,
which consists of state level institutions, rural and commercial banks.
b) SIDBI provides refinance to and discounts bills of Primarily Lending Institutions (PLI).
c) The assistance is available for
i. Marketing of SSI product
ii. Setting up of new ventures
iii. Availability of working capital
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vi. Human resource development
vii. Diversification of existing units for all activities
a) The loans are available for new ventures, diversification technology upgradation, modernization and
expansion of well run small scale enterprises. Assistance is also available for private sector.
b) Small scale sector is eligible for maximum debt-equity ratio of 3:1
c) Foreign currency loan for import of equipment are also available to export oriented small scale enterprises.
d) SIDBI also provide venture capital assistance to the entrepreneurs for their innovative ventures if they have a
sound management team, long term competitive advantage and a potential for above average profitability
leading to attractive return on investment.
New Initiatives of SIDBI
a) Two Subsidiaries viz. SIDBI Venture Capital Limited and SIDBI Trustee Company Limited formed to oversee
b) Technology Bureau for Small Enterprise formed to oversee Technology Transfer, Match making Services,
Finance Syndication and facilitating Joint Ventures.
c) SIDBI Foundation for Micro Credit has been launched to provide financial assistance to the poor and to meet
emerging needs of the micro finance sector especially in rural areas.
STATE FINANCIAL CORPORATIONS (SFCS)
State Financial Corporation Act 1951 was brought into force to enable all the state governments (except Jammu and
Kashmir) to set up State Financial Corporations as regional development banks. Presently following assistance is
provided to small scale and medium scale entrepreneurs or units:
a) Providing long term finance to industrial enterprises having sole proprietary, partnership, company
and co-operative society form of business organization.
b) Subscribing equity and debentures of industrial enterprises.
c) Providing financial assistance to small and medium enterprises engaged in service sector.
d) Provide working capital loans and meeting various short-term needs of their clients.
The National Institute for Entrepreneurship and Small Business Development(NIESBUD) was established in 1983
by the ministry of industry(now ministryof small scale industries), Govt of India, as an apex body for
coordinatingand overseeing the activities of various institutions/agencies engaged inentrepreneurship
development particularly in the area of small industry and small business.
Functions of NIESBUD
To serve as an apex National level resource institute to accelerate theprocess of entrepreneurship development
ensuring its impactthroughout the country among all strata of the society
To organize and conduct training programmes.
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To co-ordinate the training activities of various institutions andorganizations in the country imparting training.
To identify potential entrepreneurs from among technical and nontechnical personnel.
To train the potential entrepreneurs who are identified.
To assist the potential entrepreneurs who are identified and trained.
To hold examinations and test and confer certificates and diplomas onthe trainers as well as trainees.
To undertake documentations and tests and research in the field of entrepreneurship and small business
To conduct work-shops, seminars and conferences etc for promotionand development of entrepreneurship in
small scale industries andsmall business.
To provide a forum for interaction and exchange of view with agenciesengaged in various aspects of
entrepreneurship in small.
To assist in setting up of a regional and state level training institutesfor entrepreneurship and small business
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 bothexisting 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.
Production Management- Definition
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“Production management deals with the decision making related to production process of that the resulting goods and
service is produced according to specificationsin the amounts and at the scheduled demanded and at minimum cost” –