1 entrepreneurship-1

K’s
Entrepreneurship &
Practical Business Training
K's 1

Entrepreneurship

An activity that aims at starting,
establishing & increasing the size
of an enterprise that markets
goods or services

K's 2

Entrepreneurs

Men or Women who set up and
manage their own business

K's 3

Characteristics of a
Successful Entrepreneur
Self Motivated
Taking Initiatives
Organizing Resources
Taking Risks
Innovating
K's 4

Entrepreneurship vs.
Economic Development

Increase in overall productivity
Increase in employment
Transfer of technology
Increase in exports

K's 5

Entrepreneurial Competencies
12 Essential Competencies
required in an entrepreneur
1. Commitment 6. Opportunity Identification
2. Persistence 7. Systematic Planning
3. Information seeking 8. Problem Solver
4. Self-Confidence 9. Persuasive
5. Concern for efficiency 10. Purely professional -
& high Quality nothing personal
K's 7

Initiative
Case Study

Case Study of Gurdeep & his 3
friends who could not start their
software business because of lack
of INITIATIVE

K's 8

Persistence
Case Study

Case Study of Mrs. Lal who survived
from construction problems,
electricity problems, theft, outdated
technology, seizure of Land & building
but still managed to make project a
success because of PERSISTANCE

K's 9

Commitment
Case Study

Case study of Mrs. Bhatia, An
entrepreneur having a unit of
knitting cardigans who worked by
her own self continuously for
many nights to keep up to her
COMMITMENT

K's 10

Problem Solver
Case Study

• Case study of Mr. Ramalingam who
played trick on electricity department
to get his work done

K's 11

Purely professional – Nothing
personal
Case Study
• Case study of Mr. Vishal Sharma who
suffered huge loss in his Rubber
Chappal (Boiler) manufacturing unit
because of personal attitude

• Case study of Mr. Narayanan who
suffered losses in his finances due to
an incompetent Finance Manager
K's 12

Persuasion
Case Study

• Case study of Mrs. Bharti who
managed to get loan from bank
because of PERSUASION

K's 13

Major Mental Blocks in starting a
business
I don’t have money, I cant do business
I am too young, I cant start a business
I am a women
I am a housewife, I don’t have time to do business
I am in service, I cant even think of a business
I don’t have any family background of business
K's 14

Case Study of Macksalin Kharmudai
• 19 yr old boy from shillong, came from a tribal family, the eldest of the
5 children, father a govt. employee
• Learned some works in welding, fabrication, carpentry etc
• Father expired, Macksalin left the school, being the eldest son came
up with all the responsibility of the family.
• Macksalin plans to set up a fabrication unit at Shillong
• Applies for a loan of 1.5 Lacs to Meg.IDC, MIDC wanted him to invest at
least 25%. He had no money, he requested for some money from
relatives and also pledged a small piece of land in the village and
started up.
• Took a land at rent and constructed a shed, employed 2 workers &
started visiting contractors & clients for orders
• Started getting small orders, he always use to work on the low margins
& give high quality works to customers
• Today he is a well established fabricator for shutters, gates, grills 15
K's etc.

Case Study of Geeta Khandelwal
• Geeta M.A. (Socio) was a housewife & had one child, husband was in
the job in addition he had also established a small unit for
manufacturing ferrous & non-ferrous spare parts for melting arc
furnaces
• Met with an accident, husband died on-the-spot, Geeta and her child
were saved
• Geeta went financially weak, she took up the task for restarting the unit
of her late husband
• She sold the land, shifted the machinery in her house garage, Sold her
jewellery to get the working capital, finally started production
• She personally went to clients to do her sales calls along with her
small child
• Her persuasive competency helped her to get an order from BHEL
• Finally established herself in the market
K's 16

A Few Indian Leaders
of Entrepreneurship

K's 17

Case Study of Reliance

• Name: Mr. Dhirubhai
Hiralal Ambani

• Education: High School

• Previously: Gas Station
Attendant

• Presently: Founder
Chairman Reliance Group
K's 18

Case Study of Reliance
• Dhirubhai’s father was a school teacher and he started his
career with selling Bhajia
• At the age of 16 in 1948, he went to Aden, Yemen & took up as
the Gas station attendant & later as a clerk in a oil company
• In 1958, he returned back to India with Rs.50,000/- & started
textile trading company
• In 1960, he started his own textile unit

• In 1977, his gross sales was 67 crores, he now needed to expand
the capacity of his unit, instead of going to bank for money he
went to public & by 1980 he doubled the capacity of the plant
• By the year 2002 Reliance was making a turnover of 75,000 crore
K's 19

Case Study of Cadila
• Name: Late Mr. Raman
bhai Patel

• Education: B. Pharma

• Profession: Teacher in
a pharmaceutical
college

• Presently: Ex. M.D.,
Cadila
K's 20


• Name: Mr. Indravadan
Modi

• Education: B.Sc. (Tech.)

• Previously: Chief
Chemist in a Laboratory

• Presently: M.D., Cadila
K's 21
K’s

• Planned to start their enterprise, but were discouraged by parents
• Both pooled Rs.26,000/- to start on their own
• Ramanbhai would continue the job and will help after working hours
whereas Modi would run around for establishing the business
• Rented a bungalow @ Rs.50/- per month in March 1952, they started
the production work
• They produced 2 products Livirubra & Cadilagripe, No employees
• From 5 – 10 AM they were doing production, then do sales calls, call
the doctors and give them the samples, After 2 again do production till
5 PM, From 5- 8 PM, deliver the material on their cycle
• After 2 years a sales rep. was hired
• Today CADILA has 14 offices & turnover of over Rs.100 crores
K's 22

Photographs of
Late Mr. Raman Bhai Patel

K's 23

Case Study of Airtel
• Name: Mr. Sunil Mittal

• Education: Graduate
from Punjab University

• Previously: Hired
Rs.20,000/- to start up a
business of cycle spare
parts in Ludhiana

• Presently: M.D. Airtel
K's 24

Case Study of Airtel
• Soon discovered that business can not grow beyond a limit, he left that
business and came to Mumbai in the year 1979
• In 1982 started the business of importing portable Gensets from
Japan, the business was running well but suddenly the Government
allowed the manufacturing of such Gensets in India itself, Mr. Mittal
has to close down the business
• In 1986 started the business of telecom equipments, Fax machines,
Cordless Phones & apparatus, in the meanwhile the GSM services
were introduced in India in 1992 and TRAI rolled out a tender inviting
bids for various telecom circles
• Mr. Mittal submitted his bid for Delhi circle. His bid happened to be the
highest one & he was given license to operate Mobile services in Delhi
• Today Mr. Mittal operates in over 18 circles through out India and is the
largest Telecom operator of India
• Biggest Telecom Company of the world VODAFONE has invested over
1.5 Arab Dollars in this company in various projects
K's 25

Case Study of Biocon
• Name: Mrs. Kiran
Mazumdar Shaw

• Education: Master in
Brewing Technology from
Melbourne University

• Presently: M.D., Biocon
India Ltd. (Turn Over – 800 Crore)

K's 26

Case Study of Biocon
• Mrs. Kiran had her education from Bangalore, was a topper
in Science of Bangalore University
• Went to Australia for a Masters degree in Brewing, topped
there as well
• In 1978, at the age of 25, she planned to start a unit of
manufacturing enzymes, she went to a bank with her
proposal but her proposal was turned down
• She started on her own with a capital of Rs.10,000/- & a
garage at home as her office
• Today after 25 years, Mrs. Kiran is the richest women of
India & her company is making revenues in the tune of 800
Crores K's 27

Case Study of Career Launcher
• Name: Mr. R. Satya Narayan

• Education: MBA, IIM Bang.

• Previously: Executive with
Ranbaxy Labs

• Presently: M.D., Career
Launcher (Turn Over – 70 Crore)

K's 28

Entrepreneurial Opportunities
Agriculture

Channel / Trading
Dealer / Distributor / Wholesaler / Franchising

SSSBE
(Small Scale Service & Business Enterprise)
(Dry cleaning/ Tailoring/ Photo Lab/ Beauty parlors/ Crèches/ etc.)
Manufacturing Industries
(SSI / Tiny / Cottage)
K's 30
Spices/ Bread/ Biscuits/ Paints/ Soaps/ Detergents/ Hosiery etc

Manufacturing
Industry Sectors
Chemical – Inks / Paints / Detergents / etc
Electrical – Tandoor / Toaster / Auto Lamps
Rubber – Chappels / Erasers /
Plastic – Mug / Bucket / Frames / etc
Food – Pickles / Bread / Buns / Spices / etc
Hosiery – Undergarments / T-Shirts / Dyeing
Glass & Ceramics – Crockery / Mirror / Tiles
K's 31

Manufacturing
Industry Sectors
• Mechanical - Pumps/Pistons/Stpl. Pins etc

• Leather - Purses / Chappels / Shoes etc

• I.T.& Electronics - Amplifiers / TV Tuners /
UPS / Weighing Scales / Transformers etc

K's 32

Cottage / Household Industries
Industry where the products are manufactured in-
house, using locally available raw materials, not
mass manufactured & usually traditional in
nature
Handlooms, Paintings, Handicrafts, Pottery, Carpet
weaving, Wood work,
Recent Additions to this category: Atta chakkis (flour mills),
clay and modelling with plaster of paris, dairy products, dry
cleaning,, milk cream separation, manufacture of jute products,
manufacture of bindi, photo-copying of drawings, packaging of
shampoos, packaging of hair oil, rubber stamps, screen painting
and mixing and packaging of utensil washing powder.
K's 33

Tiny Industries / Micro Enterprises
Industry where the investment in plant
& machinery are calculated up to Rs. 25
Lakhs
Items like Land, Building, some quality control &
pollution control equipment are not included in the
calculation – Only investment in plant & machinery
is considered

K's 34

Small Scale Industries (SSI)
& machinery are calculated above 25
Lakh but does not exceed Rs. 5 Crore
is considered

Industries like Hosiery, Stationery items, Drug & Pharmacy & Sports goods
have an investment limit of 5 Crore to be in SSI’s
K's 35

Ancillary Enterprise
Industry engaged in the manufacturing
of parts, components, tools, etc, which
proposes to supply at least 50% of its
production or services to one or more of
the industrial undertakings & where the
investment in plant & machinery are up
Items likeCrore are termed as Ancillary
to Rs. 1 Land, Building, some quality control &
Enterprise
calculation
K's 36

Medium Scale Enterprise
& machinery are above Rs. 5 Crore and
up to Rs. 10 Crore are termed as Medium
Scale Enterprise
is considered

K's 37

Service Industry
Micro Scale Service Enterprise

Service enterprise where an investment
in fixed assets is calculated up to Rs. 10
Lakhs
Items like Land, Building are not included in the
calculation – Only investment in equipment is
considered

K's 38

Service Industry
Small Scale Service Business Enterprise (SSSBE)

in fixed assets is calculated to be more
than 10 Lakh but does not exceed Rs. 2
Crore
considered

K's 39

Service Industry
Medium Scale Service Business Enterprise

in fixed assets is calculated to be more
than 2 Crore but does not exceed Rs. 5
Crore
considered

K's 40

SSSBE
Small Scale Sector Business Enterprise
Advertising Agencies
Marketing / Industrial Consultants
STD / PCO / FAX / XEROX Centers
Auto / TV / Refrigerator / Watch / etc.
Repairing Centers
Beauty Parlors
Crèche
Photography Lab
Dry Cleaning
Tailoring
K's 41

Repair & Maintenance Services
Automobile Repairs
2-Wheelers / 4-Wheelers / etc.
Electronic Repairs
AC / Fridge / TV / Stereo / Washing Machines etc.
Electric Repairs
Iron / Fans / Mixers / Coolers etc.
Mobile Phone Repairs

K's 42

Professional Services

Medical Services Doctor
Legal Services Lawyer
Placement Services Placement Consultants
Construction Services Architects
Company Affairs Chartered Accountants

K's 43

Service Enterprises
Schools Education
Professional Colleges Higher Education
Hotels Temporary
Accommodation
Banquet Halls Wedding facilities
Internet Cafes Internet surfing
Restaurant Food & Good time
Gymnasiums Health services
Clubs Socializing & spending
good times
K's 44

Channel / Trading
• FMCG Sector / Non Durable Sector /
Consumer Durable Sector

Super stockiest – stockiest – retailer

Super distributor – distributor – retailer

Company - retailer
K's 45

The Million Dollar
Question
What business should I start ?

K's 46

Choosing your business

• Study your own
self

Who am i ?
What can i do ?
What i can not do ?
Where do i stand ?
What do i want ?
K's 47

Top Ten Techniques.

that help you find the right
business opportunity
for you
K's 48


•Technique No. 1

Look at the nature around you

K's 49

•Technique No. 2
Add a little value add to the
existing product
• Ganga Water
• A car signed by Sachin tendulkar
• Air, water & a smile is free with patrol
K's 50

•Technique No. 3

Join the established markets

• Ready Market & Customers
• Ready availability of raw materials, skilled workers
• Easy availability of finances from local banks
K's 51

Established Markets
Furnishing Fabrics Panipat
Power loom Bhiwandi & Surat
Machine Tools Batala, Faridabad
Brassware Jamnagar, Moradabad
Knitwear Ludhiana, Trichy
Gem & Jewellery Jaipur
Diamond Cutting & Surat
Polishing
Leather Chennai, Kanpur, Agra
Electrical App. Faridabad Haryana
K's 52

•Technique No. 4
Look at the requirements of the
industries around you & in the
pipeline
• Raw material requirements
• Consumable items requirements
• Packaging K's 53

Look at the industries around you
Case Study of Mr. Sapan Jhavar

• Mr. Sapan Jhavar is B.E. and has got good
experience in the Metallurgical Industry
• 6 Pharma factories in his region and one tooth paste
manufacturing unit who have regular requirement of
tubes
• All of them showed good interest if they could locally
get these tubes
• One tube manufacturing facility already operational in
town.
• Sapan started the unit and kept the price marginally
lower then the other factory
• For One year he could not get any orders from any54of
K's
these companies

What actually happened ???
• Out of 6 pharma factories one has invested in the tube
factory
• The purchase managers of 2 of the factories had
understanding with the existing tube factory
• One of the factory bargained by showing the availability of
tubes locally and got better price and service from the
existing supplier
• One of the factory bargained in terms of the credit with the
existing supplier
• The nephew of the director of the tooth paste company
was already in the business of tubes so they did not
shifted to the other supplier
K's 55


Why did they encouraged Mr.
Sapan to start the project ??

K's 56


Why did they encouraged Mr.
Sapan to start the project ??

An extra supplier is always welcome so that in
case of any problem with the existing supplier
they have a second option ready with them

K's 57

•Technique No. 5

Look at the waste of the
industries around you

• Use the By-products as a resource
K's 58

By-products from some Industries
Industry By-product Commercial
product
Sugar Mill Bagesse / Press Cattle Feed /
Mud / Molasses Paper / Wax / Chalk
/ Chemical /
Steel Plants Naphthalene Alcohol
dyestuff

Textile Pieces of small Tiny garments
sizes

Fertilizer Gypsum Plaster board
Plant K's 59

•Technique No. 6

Think of an absolutely new &
original idea

K's 60

Business based on new ideas
Time-share resorts
Fire extinguisher for homes & offices (CF)
Water Parks
Dating Service

Synthetic soft drink concentrates

Pre-cooked vegetables & paranthas

Multi Marketing Concept (Amway)
K's 61

•Technique No. 7

Study the statistics available on
different businesses

K's 62

Literature available on
Business Statistics
Literature Published by

Handbook of Industrial Ministry of Industries
Statistics
Guidelines of Industries A journal published by
the Ministry of Industries
Handbook of statistics Confederation of Indian
Industries

K's 63

Industry-specific Literatures
Industry Literature / Journals
Engineering Current Engineering Practice
Hosiery Hosiery & Textile Journal
Paint Colourage
Rubber Rubber news / Rubber India
Plastic Popular plastic
Wool Woolens & worsteds of India
Chemical Chemical weekly
Food Food Industry News
Leather Indian Leather
K's 64

•Technique No. 8

Take ideas from other markets

• Developed countries – Undeveloped Countries
• One State - Another
• City – Towns - Villages
K's 65

Ideas that came to India from
Developed Countries
Fast Food Restaurants

Amusement Parks

Personal Computers
Credit Cards
Coffee Shops
Departmental Stores
Sanitary NapkinsK's 66

Take idea from other markets
Case Study of Mr. Praveen Jha
Returned to his hometown in
Ahmedabad from USA
Wanted to invest in the real estate
business
Ahmedabad either had Bungalows for
high class or Flats for lower class
In USA Row Houses are a common
thing
He introduced the concept of Row
Houses to Ahmedabad - A house for
Middle Class
He was a Big Success K's 67

•Technique No. 9

Take the help of Government
Machinery

K's 68

Some Major Govt. Bodies
Institution Work
District Industry Center Support services in establishing the SSI,
( One in each District ) Reg. formalities, project identification

National Small Industry Corp. Provides M/C on hire purchase basis
(In metros & some states) Supply of Raw material, export promotion
Internal Marketing, training
State Financial Corporation Selection of project, finances
(In the major districts of all states)
Technical Consultancy Org. Project Identification, identification of
technology sources, diagnostic reports for
(One in each state)
sick units, marketing assistance
Single window mechanism Offering complete industrial counseling,
helping them comply with necessary
(Gujarat / U.P. / MP / Mahrashtra /
government formalities, finances, project
Punjab / Haryana /Karnataka / TN / Goa )
implementation

Industrial Infrastructure Ag. Infrastructure facilities like land / sheds on
K's 69
hire/pur. basis, power, water, drainage
(In almost all states)

A few other Government Bodies
Institution
Small Industries Service Institute

National Industrial Development Corporation

Khadi & Village Industries Commission

Commissioner of Cottage Industries

State Small Industries Development Corporation

K's 70

•Technique No. 10

Identify the gaps in the market

K's 71

Identify the gaps
Case Study of Mr. Jyoti prakash
• Mr. Jyoti works at Jamshedpur with TISCO he often has to visit
Kolkata on official purpose
• Mr. Dave his friend at Jamshedpur owned a club and often
showed movies to the members
• Mr. Dave requested Jyoti to get one famous movie from Kolkata
which he was not able to get anywhere
• Mr. Jyoti got the movie at 50,000/- and sold to club at 60,000/-
• Mr. Jyoti spoke to other clubs & film theatres and found out that
they too were facing the similar problem of availability
• He identified the gap and filled it. He now is a successful film
distributor and has offices in Kolkata & Jamshedpur
K's 72

Identify the gaps
Case Study of Mr. Vishal Agrawal
• Mr. Vishal was working in the production department of an
engineering company
• He noticed one major problem that whenever the equipments
broke-down it use to take a long time to get them repaired,
which harmed the production
• He enquired and found out that the only workshop doing the
repairing job was situated 1000 kms. away from their unit and
besides it was very difficult to take these equipment out for
repairs
• He spoke to other Engg. Companies in the area and found that
they too were facing the similar problems
• Mr. Vishal identified the gap, he left the job & established his
K's 73
own workshop for repairing & reconditioning of such eqpmts.


♠ If you shortlist 10
business projects -
chances are 8 of them
are wrong for you
K's 74


The best way of
selection is
REJECTION
K's 75

Selecting the right proposal
Case Study of Mr. Somesh Dutta

• B.Tech. in Mechanical • On the basis of information
collected from various
Engineering
sources shortlists enginn. /
• Worked for 1 Year with electronic / plastic /
chemical & pharma / wire
textile processing machinery
industries
• Father can afford to invest
• Project invstt. available in
Rs. 2 Lacs in his business
the range of 5 - 7 Lacs
• Father is a government
• Discards the idea of
employee and earns well to
chemical & pharma because
support family but will retire of inability to handle the
after 2 years complexities & high
investments needed
• Father has good contacts
with the govt. deptts. & with • Discards wire because of
banks K's 76
unease of availability of raw
material

Selecting the right proposal
Case Study of Mr. Somesh Dutta

• There were many plastic factories in the area and the ROI was
not attractive the idea of plastic was discarded

• Somesh has got contacts only within the frame of textile
processing houses he however has friends who are working in
the large engineering public sectors

• He wants to achieve a break-even in less then 2 years time

• He further discards electronic industries because of no
additional strength in this area

• He finally chose ENGINEERING INDUSTRY
K's 77

.

Checking Project
Viability
K's 78

Take 4 tests to
check
Viability of the
Investment & Infrastructure check
Market check
project
Technical Know-how check
Financial Viability check - I
K's 79

• Investment & Infrastructure check

Fixed Assets Working Capital
Land & Building Salaries
Plant & Machinery Office expenses (Tel /
Electricity / etc)
Furniture Interest on Loan
Vehicle Traveling expenses
Office equipment Raw material expenses
K's 80

• Investment & Infrastructure check

Other Expenses Involved
Legal expenses
Trial production
Cost on money invested by you
Contingency estimates
• You go wrong on estimations
• Raw material prices may hike
• You have to give credit facilities to your customers
K's 81

.

Market Check

K's 82

Market Check
Benefits
• Estimating the demand
• Estimating the profitability
• Determining Pricing
• Determining quality.…accordingly procuring the
right machinery, tools & raw materials
• Knowing Competition
• Knowing Customer behavior
• Determining marketing strategy
• Understanding Key determinants of success in
the industry K's 83


What is Market Check ?
Gathering information from similar business
owners, raw material suppliers, employees
working in that enterprise, dealers, packing
material suppliers, customers, machinery
suppliers, research studies, Government data &
research agencies regarding the business
Using your own network to gather the related
information
K's 84

Procedure of Market Check

• Primary Data

• Secondary Data

K's 85

Market Check
• Primary Data

Talk to similar business owners, employees
working in that enterprise, dealers, packing
material suppliers, customers, machinery
suppliers, raw material suppliers

• Telephonically
• Mail Contacts
• Personal Contacts
K's 86

Market Check
• Collecting Primary Data
Who is to be surveyed
Target Customers / Dealers / Employees especially
Sales Force / Raw Material Suppliers / Machinery
Suppliers / Similar Business Owners
Choose the right sample of people
Randomly / Quota wise / Cluster wise
What information do you need from them,
design a proper questionnaire ?
Closed ended question / Yes or No type / Open
ended / 5-choice answers
K's 87
Analyze the data collected

Market Check
• Secondary Data
• Credit Rating Agencies
• Trade publications & records
• Libraries
• Govt. agencies such as
TIC – Trade Information Centers.
TCO – Trade Consultancy Organization
DIC – District Industries Center
• News papers & magazines
K's 88

Market Check
• Secondary Data
Credit Rating Agencies
• Credit Rating Information Service of India Ltd
• Credit Analysis & Research Ltd.
• Investment Information Credit Rating Agency of
India
• Marketing & Development Research Associates

K's 89

Market Check

• Can I start a Squash business
in Bangalore ???

Determine on the basis of secondary data

K's 90

Market Check
Study on the Soft drink Market 1991-92
Year Consumption Population Per Capita
(Millions) (Millions) (In Thousands )

1978-79 778 646 1.21
1979-80 1057 660 1.60
1980-81 1842 675 2.73
1981-82 1998 690 2.89
1982-83 2123 706 3.01
1983-84 2410 722 3.34
1984-85 2600 738 3.52
1987-88 3283 788 4.17
K's 91
1991-92 5200 850 6.12

Market Check

Delhi 60.6%

Mumbai 19.7%

Chennai 8.8%

Kolkata 7.4%

Bangalore 3.5%

K's 92

Market Check

Product Avg. of 5 Metros

Coca Cola 35%

Pepsi 25%

Packed 25%
Juices
Synthetic Drinks 15%
(Squash / Rasna etc.)
K's 93

Market Check

Product Avg. of 5 Delhi Mum Bangalore
Metros
Coca Cola 35% 20% 40% 25%

Pepsi 25% 30% 20% 10%

Packed 25% 38% 22% 25%
Juices
Synthetic 15% 12% 18% 40%
Drinks (Squash /
K's 94
Rasna etc.)

• Technical Know-how check

Are you fully aware of the technical intricacies
involved in the project
Do you have a stable resource which can
handle the technical aspects
Can you fully rely on the hired resource for
the purpose

K's 95

Case Study of Mr. Sunil Bhatia
• Mr. Bhatia worked for over 7 years as a chemist
with a dyestuff factory at Ahmedabad
• Holds thorough understanding of the dyestuff
production
• Starts up his own dyestuff factory
• Factory gets well established and began to give
good profits
• Mr. Jignesh who had little knowledge about the
technical aspects of the business was watching
the growth of this factory,
• He decides to starts up his own factory and
picks up the production supervisor from bhatia’s
factory K's 96

Case Study of Mr. Sunil Bhatia

• Production supervisor was not so good in the
know-how of the process
• Product coming out was substandard and the
batches were not passed during inspection for
quality control
• Struggled for 8 months to improve the quality and
soon the supervisor found a better job and he left
• Mr. Jignesh was left in lurch and faced huge loss

K's 97

• Financial Viability checks - I
ROI Return on Investment
(Profit / Investment x 100)
Gross profit on turnover Profit calculated after deducting
the production & selling costs
Gestation period Initial period when you continue
to operate with losses or without
losses at break even
Break even point Point at which you neither make
profits nor make any losses
K's 98

Case Study of Mr. Mohd. Faris

• Mr. Faris has done ITI in mechanical works, makes up
his mind to start up a business enterprise
• Can invest a maximum of Rs. 3 Lacs
• Can not afford a gestation period of more then 2 Years
• Must reach break even by 2nd year
• By 3rd year he needs a ROI of not less then 25%
• He is looking for an industry where his technical skills
are also used

K's 99

Case Study of Mr. Mohd. Faris
Product Gas Link Cutlery Paint
Lighter Clips Brushes
M/c. Cost 2.5 – 3.0 80,000/- 2.5 – 3.0 1.25 Lacs
Lacs Lacs
Annual 27 Lacs 1.20 10-11 15 Lacs
Turnover Lacs Lacs
Gestation 2 Years 1 Year 2 Years 1 Year
Period
Estimated 80% 15% 35% 60%
ROI
K's 100

8 Common errors done While choosing a
1. Falling prey to the attractive numbers
project
2. A partial or incomplete view of the project
3. Mismatch between personal & project profile
4. Lack of interest in the project
5. Lack of confidence in the project
6. Blind faith on the information collected from the
market
7. Failure to grasp the key determinants of success in the
given project
8. Me-Too Syndrome K's 101

Falling prey to attractive numbers
Case Study of Mr. Navneet Gupta
• Mr. Gupta came across the demand of cheese in many
parts of Rajasthan & Gujarat
• He enquired about the cheese projects from the plant
manufacturers. This is the information he received
On 100% capacity utilization, the No plant in that industry worked for
plant would produce 10000 cubes of over 90% capacity utilization, so
50gms in one month max. production would be 9,000
cubes
Cost on production per 50gms cube Cost of milk was never stable so the
of cheese would be Rs. 3 cost on production of cheese also
increased at that time(Rs.3.5)
Market price per 50gms cube is The margin of Rs. 1 given to the
Rs.6 dealers was never told (Rs.5)
From above estimates his profit per K'sFrom above estimates his profit per
102
month would be Rs.30,000/- month would be Rs.13,500/-

Failure to grasp key determinants
Case Study of Mr. Himanshu Chadha
• Mr. Himanshu is a BE in Mechanical Engineering
• His friend Mr. Ganesh made him aware of the high demand of power
coil used in the two-wheeler
• Himanshu developed the power coil and both friends started the
business in partnership
They produced high quality coil Quality was never a key
Thereby charging high price for it determinant of that industry, but
low price definitely was
They would work on advance Industry had a culture of giving
payments with wholesalers & not long credits to the wholesalers and
give any credit no advance payments
They were ready to give a guarantee Wholesalers were satisfied with life
of up to 10 years on it of 3-5 years of a coil
K's 103

Failure to grasp key determinants
Case Study of Mr. Himanshu Chadha

They would advertise to Industry worked largely on
establish the brand name interest of wholesalers rather
then advertisements
They would make timely Competitors were evading tax to
payments regards to their curb costing
liabilities & govt. taxes
It took them full one year to realize the key determinants of the
business and change themselves according to the industry, till
that time they incurred losses

K's 104

Constitution of an
Organisation

K's 105

Forms of Organization
Proprietorship

Partnership
Private Limited Company
Public Limited Company
Co-operative Enterprises
K's 106

Proprietorship
100% Owner of the Organization
One man control – single ownership
Unlimited Liability
No difference between your personal &
business assets

K's 107

Proprietorship
ADVANTAGES DISADVANTAGES

Complete Control Limited Funds

No difference of Limited Skills
opinion
Quick decision Unlimited Liability

K's 108

Partnership
Minimum 2 partners – maximum 10 in banking &
20 in non-banking business
Contractual relationship – written / oral
agreement among the partners
Liability not limited to your share in the
partnership, it is still unlimited
No difference between your personal &
business assets
Sharing of profit & lossK's amongst members on 109
mutually agreeable percentages

Partnership
Larger Financial An incompetent or dishonest
resources partner can cause disaster to
the business
Combined abilities, Transferring of partnership
skills & judgment rights to an outside person is
results in better not possible without the
decisions & better permission of other members
management
Survival capacity of a Disagreement & distrust among
business is much the partners can lead to
higher breakage of partnership & 110
K's

business in question

Shareholders are the owners of the company
Minimum 2 shareholders, Maximum 50
shareholders
Prohibits any invitation to the public to subscribe
for any shares
Family members can also be the shareholders
Limited Liability
Less paperwork because many of the company
laws do not apply to private limited companies 111
K's

Limited Liability transfer of shares
restricted by the
articles of association
Larger Financial Can not raise capital
resources from the public
Freedom from Not suitable for a
excessive legal control Large scale
& regulations organisation
Stable permanent life K'sDelayed decisions 112

Shareholders are the owners of the company
Minimum 7 shareholders, Maximum unlimited
can be millions of shareholders
Can raise more money from the market then a
private limited company
Limited Liability
More paperwork because many of the company
laws are applicable to public limited companies
K's 113

Limited Liability No secrecy – full publicity
of accounts
Large Financial Excessive legal control &
resources regulation
Free transferability of Delayed decisions
shares
Any amount of capital Time-consuming,
can be raised from the Expensive & Difficult
public formation
Stable permanent life K's 114

Co-Operative Enterprises
Basic aim is to render service to its members &
society in general
Management of a society is entrusted to a managing
committee elected by its members
State Government has full right to conduct periodic
inspection on audited accounts, annual reports etc.
Must get registered under the Co-operative
Societies Act, 1912.
Voluntary association of people, who are open to
become a member or leave it at their own free will
K's 115
The capital to run it is provided by the members

Co-operative Enterprises
Ease of formation Lack of motivation

Limited Liability Rivalries often seen
within the society
Tax Advantage Under state
(Advantage in Income tax, Surcharge, stamp regulations
duty & Reg. fees)
Eligible for state patronage Lack of competent
(in the form of loans, grants etc.) management
Suitable for small sized business
operations
(Usually business related to socio-economic
development of weaker sections of the K's 116
society like educational institutes, etc.)

Ownership Patterns in some SSI’s in India
INDUSTRY Sole Family Non-Family Cooperatives
Proprietor Partnership Partnership
ship
Flour Mills 36.4 49.1 14.5 -
Hosiery 63 25 20 1
Drugs 60 35 3
Utensils 55 38 6 1
Soap 27 53 20
Oil Mills 15 70 12 2
Printing Press 52 28 20
Wooden Furniture 60 31 8 1

Electrical Goods 25 69 6
K's 117

Choice of Constitution Depends upon
Size of Business
Nature of Business
Control over Business
Amount of Capital
Risk & Liability
Government regulations &
control
Tax liability
K's 118

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