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Entrepreneurship Development: Unit No. 2


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As per PTU B.Com Entrepreneurship Development Syllabus , Unit No. 2: Identification of Business Opportunities and tests of feasibility Project Management Feasibility and Viability analysis – Technical -Financial – Network – Appraisal and Evaluation – Project Report Preparation, Mobilizing resources for start-up. Basic start-up problems.

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Entrepreneurship Development: Unit No. 2

  1. 1. Unit No. 2 Identification of Business Opportunities and tests of feasibility Project Management Feasibility and Viability analysis – Technical – Financial – Network – Appraisal and Evaluation – Project Report Preparation, Mobilizing resources for start-up. Basic start-up problems.
  2. 2. Discover The stage in which the entrepreneur generates ideas, recognizes opportunities, and studies the market Idea OpportunityInnovation
  3. 3. What is An Idea, Opportunity and Innovation? • An idea is a concept for a product or service that does not exist or is not currently available in a market niche. • In contrast, an opportunity is an idea for a new product or service with a market that is willing to pay for that product or service so that it can form the basis of a profitable business. • Innovation is the process of making changes to something that adds value to customers.
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  6. 6. What is an Opportunity? 2-6 An opportunity has four essential qualities
  7. 7. Three Ways to Identify an Opportunity Online Shopping Apps Electric
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  9. 9. Entrepreneurial Process • Generating Business Idea • Opportunity recognition • Environmental Scanning: Internal and External • Feasibility Analysis • Business Plan • Preparing Project Report 9
  10. 10. Where do I begin? Idea Generation Fun 95% perspiration and 5% inspiration
  11. 11. ‘Business is not about the idea of power, but the power of ideas’ •IDEA GENERATION is the creative process of generating, developing, and communicating new ideas.
  12. 12. From Where the Good Idea came???????? • Customer needs and wants are the logical place to start the search for ideas.
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  14. 14. Generating Ideas Employees Competitors Lead Users
  15. 15. Opportunity Recognition 15 Online Shopping Apps Electric
  16. 16. “It is useless to tell a river to stop running; the best thing is to learn how to swim in the direction it is flowing.” -Anonymous
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  18. 18. Competitor Analysis 23
  19. 19. • Project Management Feasibility and Viability analysis – Technical – Financial – Network – Appraisal and Evaluation 24
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  22. 22. Head start for village India • Company: Hippocampus Learning Centres • Founder: Mr. Mahesh Malhotra • Inception: 2011 • Area of business: Pre-schools of rural kids: tries to bridge the urban- rural gap in kindergarten education • Funding: $21 mn in 5 rounds • Investors: Asian Development Bank, Unitus Seed Fund, Khosla Impact, Acumen and Lok Capital 28
  23. 23. • In rural India, a vast majority of parents are less exposed to education facilities and demand far less than their urban counterparts • While addressing pre-schooling needs, it also generates employment for women who are trained for 15 days. Things taught during six months of Montessori training and two years of experience are condensed into a two- week curriculum. 29
  24. 24. • HLC charges Rs 2,000 per year per child as fees. • It has reached about 11,000 pre-school students and has a little over 600 teachers. • They invested in a business that is highly scalable and profitable, while serving a dire social need • Also, unlike these training centres where the pedagogy is mostly in English, HLC offers bilingual training. 30
  25. 25. Format of a Project Report: • 1. Cover Sheet • 2. TABLE OF CONTENTS • 3. EXECUTIVE SUMMARY • 4. THE BUSINESS • 5. Funding Requirement • 6. The Product or Services
  26. 26. Format of a Project Report: • 7. The Plan a. Marketing Plan b.Operational Plan c. Organization Plan d.Financial Plan • 8. Critical Risks • 9. Exit Strategy • 10. Appendix
  27. 27. EXECUTIVE SUMMARY • The first impression about the business personal
  28. 28. THE BUSINESS • Details about the business concept • Objective of the business • A brief history about the past performance of the company • Form of ownership
  29. 29. Legal Forms of Business Three basic legal forms of business: • Proprietorship - Single owner, unlimited liability, controls all decisions, and receives all profits. • Partnership - Two or more individuals having unlimited liability who have pooled resources to own a business. • Corporation - Most common form of corporation; regulated by statute; treated as a separate legal entity for liability and tax purposes.
  30. 30. Funding Requirement • Investors & financial institutions • A careful, well- planned funding requirement should be documented. • It is also necessary to project how these requirements would be fulfilled.
  31. 31. The Product/ Services • Key features of product & the product range
  32. 32. The Plan- Marketing Plan • Marketing Mix strategies are to be drawn based on the market research • Taste, needs, habit of the customer – Marketing Segmentation and Targeting • Marketing mix strategies • Budget
  33. 33. Operational Plan • Plant location & plant layout. • Budget
  34. 34. Organization Plan • Responsibilities & duties amongst people in the organization • Information about board of directors • Manpower plan • Details about the laws that would be governed in managing the employees of the organization • Budget
  35. 35. Financial Plan • Two to five years for an existing company • 1.Projected sales • 2.Projected income & expenditure statement. • 3.Projected breakeven point • 4.Projected profit & loss statement • 5.Projected balance sheet • 6.Projected cash flows. • 7.Projected fund flows. • 8.Projected ratios
  36. 36. Critical Risks • The investors are interested in knowing the tentative risks • Purpose- To evaluate the viability of the project & to measure the risks involved in the business • It give confidence to the investors as they can calculate the risks involved
  37. 37. Exit Strategy • How the organization would be dissolved, what would be the share of each stakeholder in case of winding up of the organization.
  38. 38. Appendix • The curriculum vitae of the owners, ownership agreement • Certificate from pollution board • Memorandum of understanding, article of association • All the supporting agreements/documents that can help in marketing the project viability at large.
  39. 39. Essentials for Project Report • 1. The project report should be sequentially arranged. • 2. The project report should be covering all the details about the proposed project. • 3. The project report should not be very lengthy a subjective. • 4. The project report should justify the financial needs and financial projection. • 5. The project report should also justify market prospects and demands. • 6. The project report should be attractive to the financial agencies and investors. 45
  40. 40. Bollant Industries • Founder: Srikanth Bolla. • Idea: Eco-friendly, disposable consumer packaging solutions • Uniqueness: Employs uneducated and disabled employees 46
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  42. 42. • Being born blind was just one part of the story. He was also born poor • They are raising $2- million (around Rs 13 crores) in funding and have already raised Rs 9 crores. 48
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  46. 46. Feasibility study • Feasibility study is an assessment of the practicality of a proposed project. • Preliminary evaluation of idea to determining if it’s worth pursuing • Provides more secure notion that a business idea is viable 52
  47. 47. • A feasibility study aims to objectively and rationally uncover the strengths and weaknesses of an existing business or proposed venture, opportunities and threats present in 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. 53
  48. 48. Why to do feasibility Analysis • Assess Economic Viability of Project • Protects from large capital investment • Outline ideas before implementation • Presents associated risk and return • Gives objective evaluation of project to lenders 54
  49. 49. Types of feasibility • Economic • Financial • Technical • Operational • Managerial • Marketing
  50. 50. Economic feasibility • The purpose of the economic feasibility assessment is to determine the positive economic benefits to the organization that the proposed system will provide. • It includes quantification and identification of all the benefits expected. This assessment typically involves a cost/ benefits analysis.
  51. 51. METHODS • Economic rate of return (ERR) • Social rate of return A vision to build a sustainable company with a workforce comprising 70 percent people with disability is no mean task. “Srikanth’s vision is inbuilt in the company. It is not just a lip service to CSR
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  53. 53. Technical feasibility • This assessment is based on an outline design of system requirements, to determine whether the company has the technical expertise to handle completion of the project. • The technical feasibility assessment is focused on gaining an understanding of the present technical resources of the organization and their applicability to the expected needs of the proposed system. • It is an evaluation of the hardware and software and how it meets the need of the proposed system
  54. 54. • When writing a feasibility report, the following should be taken to consideration: • A brief description of the business to assess more possible factors which could affect the study • The part of the business being examined • The human and economic factor • The possible solutions to the problem
  55. 55. Factors • Material Inputs • Manufacturing Process and Technology • Plant Capacity • Location • Machinery and Procurement
  56. 56. Financial Feasibility • Capital requirements • Financial rate of return • Overall attractiveness of the investment • Sources of Financing the project 62
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  58. 58. Marketing • Demand • Supply • Distribution • Prices
  59. 59. Marketing • Demand: Bobba estimates the in-home health care sector to be growing at 25-30 per cent compounded annually. It will be a $100-billion market in 15-20 years, he says. • Prices: It provides post-surgery care and senior care using high-end technology. Among the healthcare packages is a ~9,999 scheme for individuals, including a visits by doctors and services including blood pressure, sugar checks and email consultations.
  60. 60. • Supply and Distribution: Here, there are no operating beds and there’s no real estate. It is about last-mile delivery. It’s about remote patient care 66
  61. 61. Factors • Marketing Potential • Competitors • Cost of Project • Economic Trends
  62. 62. Factors • Marketing Potential: In-home healthcare is estimated to be a $3-billion opportunity in India. • Competitors: With the number of old people rising, the business can only grow and more players are looking to enter the segment • Cost of Project • Economic Trends:
  63. 63. Operational feasibility • Operational feasibility is a measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development. • The operational feasibility assessment focuses on the degree to which the proposed development projects fits in with the existing business environment and objectives with regard to development schedule, delivery date, corporate culture, and existing business processes.
  64. 64. Elements • Process • Evaluation • Implementation • Resistance • Strategies • Adapt and Review
  65. 65. Managerial Feasibility • Purpose: determine if business has sufficient skills/resources to bring product/service to market successfully • Non-financial factors important to consider here • 2 primary issues to consider: 1. Management prowess 2. Resource sufficiency
  66. 66. Importance of Feasibility Analysis • Understanding Demand • Assessing resources • Marketing feasibility • Marking a Time line
  67. 67. Project Management • Discipline of planning, organizing and managing resources to bring about the successful combination of specific project goals and objectives
  68. 68. Some major issues • Product Quality • Risk • Cost • Staffing 74
  69. 69. Story of Entrepreneur • Startup is like jumping off the cliff and then building a parachute before you hit the ground. • Tried with website for alumni for collaborate, help and connect with friends but it was very costly project • The experimented with website for vocational training in city and review for it and make board with friend 75
  70. 70. • Took nearly a month • Website offers the course, review, location, demo lecture etc. • Got order from 10 colleges for the startup 76
  71. 71. • Focus shifted from Great product to generating revenues. • Validation from Student: Zero • No one cared about the same 77
  72. 72. • Promoted through college festival and web traffic increased by 300% but no one opted • Promoted through advertisement and heavy discounts but got only 11 applicants • Students bypassed them and gone for group discounts , some joined govt colleges 78
  73. 73. Learning • Plan and Validate • Find a great founder • Don’t fall in love with prototype • Define your end user • Advertising is bad option • Don’t run after review 79
  74. 74. Resourcing The stage in which the entrepreneur identifies and acquires the financial, human, capital and material resources needed for the venture startup, etc Start-up resourcesStart-up resources
  75. 75. Financial Mobilization • Cash Flow Challenges • Capital Investments • Lengthy Product Development Cycles 81
  76. 76. Source of Fund • Short Term • Long Term 82
  77. 77. Human Resource Mobilization • Helps in achievements of organization goals • Employ skills and abilities of workforce efficiency • Ethical and Social needs of society • Maintain Quality of Work life 83
  78. 78. Material Mobilization • Two Categories • Raw material to produce goods and services • Managing the administration 84
  79. 79. Resourcing Identify potentialIdentify potential investorsinvestors HireHire employeesemployees Apply for loans,Apply for loans, grants andgrants and assistanceassistance
  80. 80. Basic Start Up Problems • Poor Planning • Lack of Govt. Support • Ineffective advertising • Fund raising issues • Location • Poor Industry Knowledge • Expansion beyond resources 86
  81. 81. Basic Start Up Problems • Legal Problems • Poor Management Skills • Inability to forecast demand • Lack of Technical competence 87
  82. 82. Network Analysis • Graphical representation of project operation and composed of activities and events that can be completed to reach the end of the project 88
  83. 83. PERT/CPM • PERT • Program Evaluation and Review Technique • Developed by U.S. Navy for Polaris missile project • Developed to handle uncertain activity times • CPM • Critical Path Method • Developed by Du Pont & Remington Rand • Developed for industrial projects for which activity times generally were known • Today’s project management software packages have combined the best features of both approaches.
  84. 84. PERT/CPM • PERT/CPM is used to plan the scheduling of individual activities that make up a project. • PERT/CPM can be used to determine the earliest/latest start and finish times for each activity, the entire project completion time and the slack time for each activity. • Both rely on a logical sequence of tasks • Organized visually (Charts), tabular or simple lists • PERT and CPM are similar in their basic approach, they do differ in the way activity times are estimated.
  85. 85. • For each PERT activity three times (optimistic, pessimistic and most likely times) are combined to determine the expected activity completion time and its variance. Thus, PERT is a probabilistic technique: it allows us to find the probability of the entire project being completed by any given date. • CPM, on the other hand, is called a deterministic approach. It uses two time estimate, the normal time and the crash time, for each activity 91
  86. 86. Critical Path Method • Finding the critical path is a major part of controlling a project. • The activities on the critical path represent tasks that will delay the entire project if they are delayed. • Manager gain flexibility by identifying noncritical activities and replanning, rescheduling, and reallocating resources such as personnel and finances 92
  87. 87. Example: ABC Associates • Consider the following project: Immediate Activity Predecessor time (days) A -- 6 B -- 4 C A 3 D A 5 E A 1 F B,C 4 G B,C 2 H E,F 6 I E,F 5 J D,H 3 K G,I 5
  88. 88. Example: network A B C D E F G H I J K 1 2 3 4 5 6 7 6 4 3 5 1 4 2 6 5 3 5 0 6 9 13 19 18 23 23 18 20 13 9 6 0 ES LF Forwar d Backward
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  91. 91. Appraisal And Evaluation • Step by step process of collecting , recoding and organizing the information about the project result including both short and long term outcomes.
  92. 92. Evaluation Criteria • Customer Satisfaction • Efficiency • Commercial Success • Future Potential
  93. 93. Techniques of Project Appraisal and Evaluation • Non Discounting Techniques: Payback period and Return on Investment • Discounting Techniques: Net Present Value, Profitability Index and Internal Rate of Return