factors influencing small start up,steps in starting a small business

1. Unit-3
Starting a small industry

2. introduction
• Small – scale industries play a key role
• They provide large scale employment.
• Shorter gestation period.
• Lower investment.
• Dispersal of industries in small towns and rural
areas.

3. • Industrial policy and multinationals has
hampered the growth of small scale
industries.
• The need of the hour is an appropriate
industrial policy for the development of
SSIs.

4. Following factors are consider before
starting a business
• Business opportunity
• Identification
• Scanning the business environment
• Evaluation of alternatives

5. Business opportunity
• Every entrepreneur start business because of
opportunity.
• Eg:
• So,business opportunity is a concept which
explains the situation that there is a
wonderful opportunity to start a business

6. Business opportunity is governed by
following factors
• Good business environment
• Economic feasibility
• Whether business will serve and satisfy the
target consumers.
• Competitors
• Cost – benefit analysis.

7. • All these issues will tell us whether
there is sufficient opportunity to start
a business or not

8. Identification
• Business opportunity cannot be identified
casually.
• Investigations has to be done.

9. How to identify the business
opportunity
• Conduct a small survey to know the existing condition.
• Market condition, consumer behavior, financial
support, legal aspects have to be examined.
• Market study helps to predict the factors affecting the
sales.
• Study on consumer behavior explains the demand
situation of the proposed business.

10. • Financial assistance available.
• Legal aspects

15. • HUL

19. Scanning of business environment
• Environmental forces have two types of
variable
i)controllable or internal factors
ii)Uncontrollable or external
factors
• By evaluating all these factors will help the
entrepreneurs to find the possibility of
starting a business

21. Scanning the environment reveals the
following factors
• The environment is conducive to start or not to
start.
• Proposed production is needed in that locality or
not.
• Whether production facilities are available or not.
• Whether product can be produced at cheaper
cost

22. • Whether technology to produce is available and
at what cost.
• Can it easily market its products.
• whether total cost of the project can be arranged.
Answer to these questions will help the
entrepreneur to take decision to establish his
enterprise.

23. Evaluation of alternatives
• Study of these factors will help the
entrepreneurs to CONTINUE OR DROP the
business idea
• It help to select the best alternatives.
• It is necessary to prepare 2 to 3 plans.

25. Stages involved in preparing action
plan
• Develop the business idea
• Screening the ideas
• Business analysis
• Feasibility report
• Alternative plans

26. • Preparing a right plan
• Project implementation
• Feedback and commercial production

27. Develop the business idea

28. • Business idea is like sowing a quality seed to reap fruit of success .
• Good business idea makes way for successful business activity.
• Idea must be good for entrepreneurs
• Entrepreneur should have 5 to 6 ideas.
• Best idea can be selected based on cost involved, environmental
factors, risk involved, less dependent on external fund etc

29. Screening the ideas

30. • Entrepreneur has to identify one best idea by
making comparative analysis of location,
availability of infrastructure, financial aspects,
marketing opportunity ,target customers etc

31. Business analysis

32. • It is concerned with cost benefit analysis.
• Costs include fixed cost and variable cost.
• Total investment cost includes location cost , cost of
technology , equipment cost, marketing and
distribution cost etc..
• After examining the total capital and its cost,
entrepreneur should know the time involved to get
profit.

33. • Business analysis includes
Technical analysis
Marketing analysis
Financial analysis
• When the firm reaches the BEP (break even
point) and when it start making profit should
be known.

34. Feasibility report
• A detailed draft report has to be prepared.
• This report gives the clear picture of proposed
business.
• Three alternatives to be considered
Feasible –next step can be taken
Not feasible – drop the idea
Unable to arrive at conclusion – collect
more data

35. Alternative plans
• Feasibility report provides all data relating to the
proposed business.
• All the results of all analysis are put together to
arrive at right conclusion.
• Entrepreneur has to prepare 2 to 3 alternatives
plan

36. • Example : Plan A- is financial aspects
Plan B – is labor aspects
Plan C – is government regulations
These alternative plans will help the
entrepreneur to select best idea

37. Preparing a right plan
• A comparative analysis of all alternative plans
has to be made and final action plan has to be
prepared to implement the business idea

38. Project Implementation
• In this entrepreneur start implementing various
activities to start his business.
• Entrepreneur should see that the gestation
period is as minimum as possible
• When the business is ready, trial production
starts.

39. Feed back and commercial production
• Entrepreneur has to adapt for commercial
production and concentrate on marketing the
product to generate the revenue

40. Steps involved in starting a business
venture
• Decision to become an entrepreneur
• Selection of product
• Decide on form of ownership
• Identification of location

41. • Preparation of project profile
• Arrange of infrastructure
• Designing capital structure
• Clearances and permits

42. • Licensing
• Registration

43. Market Feasibility
• Marketing of a product is the biggest task for any
business.
• Success of any business depends on its marketing
effort and market share that it possess.
• If the products are not accepted and readily sold within
a year then the units become sick.
• The customer consideration is paramount in business

44. • SSIs cannot set up distribution network on
large scale and they are facing difficulty in
marketing their product

47. Limitation of SSI towards marketing
• SSI products take time to standardize
• Lack of quality finishing
• Poor bargaining power
• Poor after sales service
• Stiff competition from large industry
• Shortage of finance for marketing and hence less
advertising

48. • Normally SSI sell their products to large units
and hence they lose their identity.
• So SSI should prepare a proper marketing
plan.

49. Financial Feasibility
• Financial aspects tell us the total capital
required for proposed business.
• Areas where finance would be needed are:
Purchase and installation of machinery
Procurement of raw material and so on

50. • SFC (State Finance Corporation) provide long
term credit for purchase of fixed assets.
• Application should be submitted along with
following documents:
Project report
Copy of registration
Cash- flow statement

51. • Commercial banks provides loan for meeting
working capital needs, purchase of raw
material.

52. Investment Proposal normally
contains:
• General information on the product, company
history, the nature of the industry.
• Information on manufacturing methods and
financial statement.
• Information on steps taken to implement the
project

53. Financial Analysis should include:
• Total project cost
• Schedules for financial projection
• Returns on investment
• Risk analysis

54. Technical feasibility
• Small projects need not go for very high
technology. It is better to adopt indigenous
technology.
• Technical analysis will help the entrepreneur to
know whether the project is technically feasible
or not

55. Important aspects to be considered
while selecting a technology
• Technology should be already established(well-known).
• Degree of success and risk should be calculated.
• Technology should work under local conditions
• Technology should be tune with the national goals
• In selecting a particular technology, the risk of
obsolescence should be analyzed.

56. Social Feasibility
• It is necessary to consider the total impact of
the project on the society.
• Social cost-benefit analysis should be done

57. • Social cost-benefit analysis include:
(i)estimation of cost for consumer’s benefit
(ii) cost for community development(iii)cost
for economic development.
• Entrepreneur should consider whether the
proposed business will satisfy the social need
of the society

58. • Social needs means environmental protection,
maintaining values in the society, addressing
to social problems etc
• Entrepreneur cannot run the business against
the society.

59. • Social cost- benefits analysis will help the
entrepreneur to understand the social
feasibility of the project.

60. • In social feasibility analysis, entrepreneur have
to study the problem of society and how the
business will help to overcome the societal
problem.
• To conclude entrepreneur should examine all
the start up issues in order to run his business
successfully.

61. Small industry start-up issues
• Location
• Clearances and permits
• Licensing
• Registration

62. Location
• Reason for selecting a site:
new business
expansion
leased one and renewal is not possible
problem with existing location
• Thorough analysis should be done before
selecting an Optimum location(beneficial
location)

63. Clearances and permits
Licensing
• Provisional registration from DICs(District
Industrial Centers) has to be obtained for
following types of industries:
SSI – investment below 1cr
Ancillary Industries – investment below 1cr
Tiny industries – investment below 25lakhs

64. Other clearances
• Environmental clearances from GOI
• NOC from pollution Control Board
• Permission for building layout from Gram Panchayat/Municipality
• Plant and machinery approval from Department of Factories.
• Need to get permit for scarce raw materials from Industries
Department.

65. • Power – State Electricity Board
• Water – own source, public supply and for
bulk consumption from State Irrigation
Department. Supply from State Govt Authority
incase of Industrial Parks.

66. Licensing
• Industries employing less than 100 workers
and having fixed assets less than Rs10 lakhs
need not obtain license

67. Registration
• Any SSI employing more than 10 workers should get registered with
Director of Industries in their state.
• A copy of this application for registration should be sent to the Director
of SSI institute in that state
• Such registration will help SSI to obtain financial assistance, marketing
assistance, raw material assistance, export assistance etc from govt