5. Business secrecy
Clear objectives
Innovation
Creativity
Emotional stability
Public relations
Technical knowledge
Business knowledge
Risk taking ability
Strong determination
Tactfulness
Ability to deal with a series of tough issues
Ability to create solutions and work to perfect
them
Can handle many tasks simultaneously
Resiliency in the face of setbacks
Willingness to work hard and not expect easy
solutions
Possess welldeveloped problem solving skills
Ability to learn and acquire the necessary
skills for the tasks at hand
Key elements of Entrepreneur
12. Motivation
The basic perspective on motivation looks something like this
Abraham Maslow’s “Need Hierarchy Theory” :
Abraham Maslow’s “Need Hierarchy Theory”
Maslow saw human needs in the form of a hierarchy, ascending from the lowest
to the highest.
As per his theory this needs are :
(i) Physiological needs :
Food, water, warmth, shelter, sleep, medicine and
education are the basic physiological needs
13. (ii) Security or Safety needs :
These are the needs to be free of physical danger and
of the fear of losing a job, property, food or shelter. It
also includes protection against any emotional harm.
(iii) Social needs :
need to belong and be accepted by others. People try
to satisfy their need for affection, acceptance and
friendship.
(iv) Esteem needs :
to be held in esteem both by themselves and by others.
power, prestige status and self-confidence. self-respect,
autonomy and achievements and external esteem
factors such as states, recognition and attention.
(v) Need for self-actualization :
Maslow regards this as the highest need in his
hierarchy. it includes growth, achieving one’s potential
and self-fulfillment. It is to maximize one’s potential and
to accomplish something.
14. Abraham Maslow’s “Need Hierarchy Theory”
McClelland Acquired Need theory
Most of these fall into three general categories of
needs:
need for Achievement
15. need forAffiliation
need for Power
Acquired Needs Theory is also known as the Three-
Need Theory or Learned Need Theory.
Achievers seek to excel and appreciate
frequent recognition of how well they are
doing. They will avoid low risk activities that
have no chance of gain. They also will avoid
high risks where there is a significant chance
of failure.
Affiliation seekers look for harmonious
relationships with other people. They will thus
tend to conform and shy away from standing
out. The seek approval rather than
recognition.
Power seekers want power either to control
other people (for their own goals) or to
achieve higher goals (for the greater good).
They seek neither recognition nor
16. Kakinada Experiment
David McClelland (1961), who conducted famous
KAKINADA Experiment in Andhra Pradesh,
emphasized that "entrepreneur is an energetic,
moderate risk taker with high need for achievement".
Kakinada is an industrial town In Andhra
Pradesh. The experiment started in January
1964.
Its main objective was to break the barriers of
limited aspirations by inducing achievement
motivation.
Total 52 persons were sleeted from business
and industrial community. They were given an
orientation program at Small Industry Extension
Training Institute (SIET) at Hyderabad. The
participants were grouped in 3 batches.
They were put under tainting for 3 months.
Program was designed in such a manner that it
could help the participants to improve
imagination and help to motivate them.
The impact of the training program on
participants was observed after a period of 2
years.
They were assessed by Thematic Assessment
Test (TAT). In this TAT ambition related pictures
were displayed to the trainees and they were
17. asked to interpret the pictures.
It has been observed that participants were
positively influenced by training
Woman Entrepreneurship
Women Entrepreneurs may be defined as
the women or a group of women who initiate,
organize
and operate a business enterprise
The Government of India has defined
women entrepreneurs as
―an enterprise owned and controlled by women
having a minimum financial interest of 51 per
cent of the capital and giving at least 51 per cent
of the employment generated in the enterprise
to women
Saddled with household chores and
18. domestic responsibilities women want to get
independence. Under the influence of these
factors the women entrepreneurs choose a
profession
as a challenge and as an urge to do
some thing new. Such a situation is
described as pull factors
While in push factors women engaged in
business activities due to family compulsion
and the responsibility is thrust upon them
Government of India has over 27 schemes for
women operated by different departments and
ministries.
Some of these are:
Integrated Rural Development Programme
(IRDP)
19. Khadi And Village Industries Commission (KVIC)
Training of Rural Youth for Self-Employment
(TRYSEM)
Prime Minister‘s Rojgar Yojana (PMRY)
Entrepreneurial Development programme (EDPs)
Management Development progammes
Women‘s Development Corporations (WDCs)
Marketing of Non-Farm Products of Rural
Women (MAHIMA)
Asistance to Rural Women in Non-Farm
Development (ARWIND) schemes
Trade Related Entrepreneurship Assistance and
20. Development (TREAD)
Working Women‘s Forum
Small scale industries
A small-scale industry is a project or firm created on
a small budget or for a small group of people.
A small-scale industry produces its goods using
small machines, less power and hired labor.
It is located within a single place and produces
goods meant for few people.
A small scale industry (SSI)
industrial undertaking
investment in fixed assets in plant & machinery
does not exceed Rs. 2 Crore
Small Scale Industries can be characterized by
the unique feature of labor intensiveness
21. Importance :High employment generating
potential
The small scale industries are playing an important
role in the GDP of India
SSI- 40% share in the total industrial output and
35% share in exports
Types of small scale Industry
Manufacturing Industries-
Industries producing complete articles for direct
consumption and also processing industries
Feeder industries-
specializing in certain types of products and services
like casting, welding etc.
Serving industries- Covering light repairs and
maintenance
Ancillary industries- producing parts and components
and rendering services
22. Role of SSI in economy
i) Small scale industries can be characterized
with the special feature of adopting the labor
intensive approach for commodity production
(ii) It helps in absorption of the surplus
amount of labor in the economy
(iii) This, in turn, helps the system in scaling
down the extent of unemployment as well as
poverty.
iv)SSI help the economy in promoting balanced
development of industries across all the regions of
the economy
(iv) This industry helps the various sections of
the society to hone their skills required for
entrepreneurship
(v) SSI act as an essential medium for the
efficient utilization of the skills as well as resources
available locally.
(vi) It contributes almost 40% of the gross industrial value added
in the Indian economy
(vii) poverty eradication, employment generation, rural
development and creating regional balance in promotion and
growth of various development activities
23. Demand Forecasting
It is the activity of estimating the quantity of a
product or service that consumers will purchase
Demand forecasting involves techniques including
both informal methods, such as educated guesses,
and quantitative methods, such as the use of
historical sales data or current data from test
markets.
Demand forecasting may be used in making pricing
decisions, in assessing future capacity
requirements, or in making decisions on whether to
enter a new market.
Some Qualitative Methods
24. Jury of Executive Opinion :opinions of a small group of high-
level managers is pooled
Market Research Method :solicit input from customers or potential
customers regarding future purchasing plans
Delphi Method :a forecasting group uses a staff to prepare,
distribute, collect, and summarize a series of questionnaires and
survey results from geographically dispersed respondents, whose
judgements are valued
Quantitative Forecast Methods
Time Series Methods use historical data extrapolated into the
future.
They are best suited for stable environments. Ex:Moving
averages, exponential smoothing methods, time series
decomposition, and Box-Jenkins Methods.
Causal Methods assume demand is highly correlated with
certain environmental factors (indicators). Correlation
methods, regression models, and econometric models.
Limitation of SSI/Problem faced by SSI
25. 1. Problem of skilled manpower:
Non-availability of adequate skilled manpower in the rural sector
poses problem to small-scale industries.
2. Inadequate credit assistance:
scarcity of capital and partly due to weak creditworthiness of the
small units in the country.
3. Irregular supply of raw material:
faulty and irregular supply of raw materials. Non-availability of
sufficient quantity of raw materials, increased cost of raw materials,
lack of knowledge of entrepreneurs regarding government policy
4. Absence of organised marketing:
absence of organized marketing system, products compare
unfavorably with the quality of the product of large- scale units.fail
to get adequate information about consumer's choice, taste and
preferences of the type of product.
5. Lack of machinery and equipment:
Most of the small units employ outdated and traditional technology
and equipment. Lack of appropriate technology and equipment
create a major stumbling block for the growth of small-scale
industries.
6. Absence of adequate infrastructure:
lack of of power supply, water and drainage problem, poor roads,
raw materials and marketing problem.
7. Competition from large-scale units and imported articles:
8. Other problems:
include poor project planning, managerial inadequacies, old and
orthodox designs, high degree of obsolescence
26. Policies governing SSI
Purpose
To protect, support and promote small
enterprises
To help them become self-supporting
A number of protective and promotional
measures have been undertaken by the
Government.
The promotional measures cover:
industrial extension services
institutional support in respect of credit
facilities
provision of developed sites for construction of
sheds
provision of training facilities
supply of machinery on hire-purchase terms
assistance for domestic marketing as well as
exports
special incentive for setting up enterprises in
backward areas
Technical consultancy & financial assistance for
technological upgradation.
27. 1990 Policy for Small Scale Industries
The investment ceiling in plant & machinery for
small scale industries (fixed in 1985 at Rs. 35
lakhs) was raised to Rs. 60 lakhs
For ancillary units from Rs. 45 lakhs to Rs. 75
lakhs
For Tiny units from Rs. 2 lakhs to Rs. 5 lakhs
A number of technology centres, tool rooms,
Process and Product Development Centres, testing
centres, etc. would be set up under the umbrella of
an apex Technology Development Centre in Small
Industries Development Organiasation.
A special cell would be established in Small
industries development organization(SIDO) and
State Directorates of Industries to assist women
entrepreneurs.
28. The sector has been substantially delicensed.
Further efforts would be made to deregulate and
debureaucratise the sector with a view to remove all
fetters on its growth, reposing greater faith in small
and young entrepreneurs
All statutes, regulations and procedures would be
reviewed to ensure that their operations do not
militate against the interests of the small and village
enterprises
Investment limits in plant and machinery of Small
scale industries, Ancillary units, Tiny units and
Export oriented units to Rs 60 Lakhs, Rs 75 Lakhs,
Rs. 5 Lakhs, and Rs 200 Lakhs respectively
‘Tiny’ enterprises would be eligible for easier
access to institutional finance, priority in the
Government Purchase Programme and relaxation
from certain provisions of labour laws
Funding through National Equity Fund Scheme will
cover projects upto Rs. 10 Lakhs for equity support
(upto 15 per cent)
Single Window Loan Scheme has also been
enlarged to cover projects upto Rs 20 Lakhs with
working capital margin upto Rs 10 Lakhs
29. FINANCIAL SUPPORT MEASURES
Emphasis would shift from subsidised/cheap credit, and
efforts would be made to ensure adequate flow of credit
and the quality of its delivery
A beginning has been made towards solving the problem
of delayed payments to small industries by setting up of
‘factoring’ services through Small Industries
Development Bank of India (SIDBI).
National Small Industries Corporation (NSIC) would
concentrate on marketing of mass consumption items
under common brand name and organic links between
NSIC and SSIDCs would be established
Industry Associations would be encouraged and
supported to establish quality counselling and common
testing facilities
Technology Information Centres to provide updated
knowledge on technology and markets would be
established.
In the Budget 1995-96, the limit of Rs.2 crore turnover
for a small scale unit to be eligible to exemption from
excise duty was revised to Rs.3 crore
30. Procedure to set up SSI
The state directiorate or commissioner of industries or
District Industries Centres (DIC's) are the concerned
authorities for registration of small scale units
This registration is both location specific and product
specific.
A small scale unit is generally subjected to two types
of registration
Initially, a provisional registration is granted for the
proposed enterprise.
It is termed provisional because the enterprise is yet
to come into existence.
It is granted for a specified period of time during
which the unit is expected to be setup.
A 'Provisional Registration Certificate (PRC)'
enables the unit to obtain
(i) term loans and working capital from financial
institutions, banks under priority sector lending
ii) facilities for accommodation, land and other
approvals;
iii) no objection certificates (NOCs) and clearances from
regulatory bodies such as pollution control board, labour
regulations, etc.
31. Once the unit has commenced commercial production, it
is granted permanent registration
It is a life time registration given after physical
inspection of the enterprise and scrutiny of certain
documents
Some of the formalities required to be completed for seeking
permanent registration are :-
Clearance from the municipal corporation
State pollution control board clearance
Sanction from the electricity board
Ownership/tenancy rights of the premises where unit is
located
Copy of partnership deed/Memorandum of articles of
association in case of a private limited company
Sale bill of product manufactured
Sale bill of each end product
Purchase bill of each raw material
Purchase bill of machinery installed
BIS/QC certificate if applicable
An affidavit giving status of the unit, machinery installed,
power requirement, etc.
The registration certificate so issued by the concerned
authority is seen as a proof of the unit being a small scale
unit.
32. It enables the unit to get several concessions like :-
Income tax exemption and Sales tax exemption as per the
State Government policy.
Incentives and concessions in power tariff, etc.
Price and purchase preference for goods produced.
Availability of raw material depending on existing policy.
Unit VI
Preparation of project report
The project report is a document, which gives an account of the project
proposal to ascertain the prospects of the proposed plan/activity.
The project report contains detailed information about:
• Land & building required
• Manufacturing Capacity per annum
• Manufacturing Process
• Machinery & equipment along with their prices and
specifications
• Requirements of raw materials
• Power & Water required.
• Manpower needs
• Marketing
• Cost of the project and production
o Financial analyses & economic viability of the project.
Project Report for Small Scale Industry helps in identifying the
product line and target market of the sector, besides evaluating
the level of skill and accuracy
33. After the market survey and final selection of the products
a project profile is to be prepared.This is a brief description
of the project and would include the following details:
1. Introduction about the promoter: giving his complete
Bio-datai.e. age, educational and professional qualification,
Past experience, Present activity and relationship with each
other in case of partnership concerns
2.Manufacturing process:
All operations, which are to be carried out from the Raw
Material stage to be finished stage, are to be explained in
detail.
3. Market Survey report that has already been prepared, is to
be included.
4. Installed capacity of the plant, capacity utilization,
during initial 1-3years and Annual Sales, Maintenance,
Salaries, Selling expenses, packing and Selling expenses,
packing etc.
5. Complete details about the land and building (e.g. cost,
area etc.). These are to be supposed by documentary
evidence and building plans prepared by an approved
Architect.
6. Details of the Plant Machinery. To be supported with
quotations from three different suppliers. This should
include expenses incurred on taxes, transportation,
installation, accessories etc.
7. Details of the Annual requirement of Raw Material and
consumables, also to be supported with quotations.
8. All annual expenses (e.g. Utilities, Administrative expenses,
Repair
9. Working capital requirement, showing the margin on
34. working capital and Bank finance required. Items considered
for working capital are:
Raw material stock
Finished Goods stock
Work in process
Bills receivable
Working expenses
10. Cost of the project : The items to be included in this area
as follows:
• Land
• Building
• Plant and Machinery
• Misc. Fixed Assets
• Contingencies
• Pre-operative Expenses
• Margin on Working Capital
• Means of Finance
• Term loan
• Promoters Contribution
• Subsidy (if applicable)
• Special Capital Assistance (if applicable) (or seed capital)
11.Calculation of Interest and Repayment of Term Loan:
The repayment schedule is prepared in equal Annual
installments according to the repayment period allowed by
the financial institution. Along with this, the interest for each
year is calculated at the rate applicable in the financial
institution.
12. Calculation of Depreciation:
The depreciation of Building, Machinery and miscellaneous fixed
assets is calculated for the complete repayment period
13. The cost of production and profitability:
This is calculated for the repayment period and would include all
direct and indirect annual recurring expenses.
14. Debt Service Coverage Ratio:
35. the method for calculation the D.S.C.R. is given below: Calculate
the total (A), of
Profit after Tax
Depreciation
Interest on term loan
Then the total (B), of
Repayment of term loan and interest on term loan
Average D.S.C.R. is A/B
15. Cash Flow Statement:
Sources of funds is calculated by adding up the following for the
complete repayment period:
• Profit before tax with interest added back
• Depreciation
• Increase in Term Loan
• Increase in Bank Finance
• Increase in Promoters Contribution
• Then calculate disposition of funds by totalling
• Increase in Fixed Assets
• Decrease in Term Loan
• Increase in Current Assets
• Interest on Term Loan and Working Capital
• Income Tax
• Total of sources of funds - total of Disposition of funds = Surplus/Deficit
Opening Balance + Surplus = Closing Balance (Starting from nil doing 1st
year)
• This is completed for the complete repayment period
16. Projected Balance Sheet:
Preparation of project balance sheet as follows:
Reserves and Surplus
Term Loan
Promoter's Contribution
Bank Borrowing (Bank Finance of working Capital)
Assets :Fixed assets- Depreciation (cumulate Depreciation over the
36. operating years)
Current Assets
Cash and bank Balance
The total of liabilities and total Assets should tally for each operating year
individually, for a correct Balance Sheet
17. Break Even Point:
This is the level of production at which the unit is running at no profit no loss.
Hence , it is essential to calculate the BEP to ascertain the level of production
at which the units starts earning profits.
BEP=( Fixed Cost * Percentage of optimum cap. Utilization) * 100/ contribution
Contribution = Sales - Variable Cost
This is calculated for the year during which the unit reaches optimum capacity
utilization.
After preparation of the project Report the Entrepreneur is required to get the
provisional Registration Certificate from the concerned District Industries
Center, and the Application for the Term loan and Working Capital with the
Financial Institution/ Bank Depending upon the scheme under which he wishes
to apply.
Check List of Document to be submitted along with the loan application
The number of documents shall depend upon product size, nature and location of project
• Prescribe application form in Duplicate
• Project Report in Duplicate
• List of total movable and immovable Assets of the promoters.
• Income Tax and Wealth Tax details of last three years, with copies of
Assessment / Return if applicable.
• Provisional Registration Certificate from the concerned District Industries
Centre.
• Memorandum of Articles of Association and Certificate of in corporation (in
case of Company).
• Certified copy of Registration Certificate issued by the Registrar of firms ( if
partnership concern) if forms 'A' and 'C'.
• Registration with the Tourism Department, and the license for eating house
in case of Hotel Industry.
• Permission/license from Competent Authority (in case of Textile, Drugs,
Foods etc.).
• Certified copy of sale deed in respect of land. (The land should be in the
name of sole proprietor/partner/company whichever applicable
37. • Certified copy of sale deed in respect of land. (The land should be in the
name of sole proprietor/partner/company whichever applicable
OR
• Rent agreement in case of rented premises.
• Three quotation in respect of each item of plant and machinery andraw
material, proposed to be purchased.
• Details of power requirement and tie-up with State Electricity Board.
• Copy of instructions to your Bankers to give full information about the
concern on request to State Financial Corporation.
• Permission from Water Pollution Control Board.
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Factors governing project selection
Availability of raw material
Availability of labors
Availability of water
Availability transport facilities
Nearness of market
Availability of land
Supply of power
Availability of banks
Availability of ancillary materials and services
Market survey
A market survey is an important requirement for
initiating any successful business
38. The objective of a market survey is to collect
information on various aspects of the business.
This survey is a tool through which we can minimize
risk. After the market survey, the results must be
analyzed in order to finalize a business plan.
Steps in doing a market survey
Step1: Define objectives and specify information to be
collected
Identifying sources of information
Assessing time and costs required for the survey
Selecting methodology
Preparing an action plan
Step 2: Select a sample
Determining where to conduct the survey
Determining when to conduct the survey
Step 3: Prepare a questionnaire for the survey
Step 4: Collect data and analyze the information obtained
Step 5: Prepare a report based on data analyzed
Broad areas for information collection
Market Buyers/ customers