Unit 3 Setting up of a Business Enterprise.pptx

 In general sense, the term opportunity
implies a good chance or a favorable
situation to do something offered by
circumstances.
 business opportunity means a good or
favorable change available to run a specific
business in a given environment at a given
point of time.
 Identification and selection of a suitable
business opportunity serves as the trite
saying ‘well begun is half done.’


1. Their own or partners’ past experience in that business
line;
2. b. The Government’s promotional schemes and
facilities offered to run some specific business
enterprises;
3. c. The high profitability of products;
4. d. Which indicate increasing demand for them in the
market?
5. e. The availability of inputs like raw materials, labour,
etc. at cheaper rates;
6. f. The expansion or diversification plans of their own or
any other ongoing business known to them;
7. g. The products reserved for small-scale units or certain
locations.

Factors influencing business
enterprise

1. Economic Environment:
One of the most important factor affecting
entrepreneurship is economic environment. It comprises
of capital, labor, raw material and market demand.
 Capital: is one of the most important factor of
production for the establishment of an enterprise.
Increase in capital investment in viable projects
results in increase in profits which help in
accelerating the process of capital formation.
Entrepreneurship activity too gets a boost with the
easy availability of funds for investment.
Factors Affecting Entrepreneurial Growth

 Labor: Easy availability of right type of workers also effect
entrepreneurship. The quality rather than quantity of labor
influences the emergence and growth of entrepreneurship.
The problem of labor immobility can be solved by providing
infrastructural facilities including efficient transportation.
 Raw Materials: it is one of the basic ingredient required for
production. Shortage of raw material can adversely affect
entrepreneurial environment. Without adequate supply of
raw materials no industry can function properly and
emergence of entrepreneurship to is adversely affected.

 Market: The role and importance of market and
marketing is very important for the growth of
entrepreneurship. In modern competitive world no
entrepreneur can think of surviving in the absence of
latest knowledge about market and various marketing
techniques.

 1. Technological factors
 As technology continues to advance, companies
can benefit from these breakthroughs or face
challenges in competing with them.
 For example, a company that manufactures GPS
devices for personal cars may experience a
decline in business because of the integration of
GPS on mobile devices, but they can confront
these challenges by developing new products.
Other companies, such as healthcare providers,
can use modernized methods to collect
information from their patients, keep patient
records and streamline patient care.

2. Social Environment:
Strongly affect the entrepreneurial behavior, which
contribute to entrepreneurial growth. The social setting in
which the people grow, shapes their basic beliefs, values
and norms. The social factors can be
 Family Background – Joint Family can Provide Family
Resources to Invest and Expand Family Business.
 Friends and Relatives, Religion, Social status

3. Cultural Factor
◦ Tangible man made objects like furniture .
◦ Intangible concept like laws, morals knowledge.
◦ Values and behavior accepted within the society.
4. Facilitating Factor
◦ Elders are resistant to permit young entrepreneur.
◦ Parents should encourage the young entrepreneur
◦ The success stories of entrepreneurs can be
incorporated in the curriculum.

5. Psychological Factor
◦ Achievement motivation means a drive to overcome
challenges.
◦ It is a personality characteristics which is a major
determinant of entrepreneurship development.
◦ Average level of achievement motivation existing in a society
ensures a relatively high amount of entrepreneurship in the
society.
 People with low achievement motivation work for money or
other such incentive.
 People with high achievement motivation work for status, prefer
personal responsibility for decision, take moderate risk and
possess interest in concrete knowledge of the result.
◦ The trait of need for achievement can be developed through
various training programs.

6. Attitude of Government:
Government all over the world can play a very important
role in the emergence of entrepreneurship. Positive
actions by the government can facilitate growth of
entrepreneurship whereas negative actions can adversely
influence entrepreneurial emergence & growth. It is the
govt. which regulates business activities.
 Govt. policies are going to influence all the decisions of the
entrepreneurs regarding what to produce, how much to produce, of
what quality to produce where to produce and for whom to
produce.
 The entrepreneurs are to operate within the concessions and limits
set by the govt. It is in the interest of the potential entrepreneur to
thoroughly scan the govt. policies before taking decisions with
regard to setting up his enterprise.

 Government should maintain a proper distribution of
economic power between private and public sector.
 They Encourage the tempo of industrialization by
spreading entrepreneurship to every city, town or
village.
 They should disseminate the entrepreneurial talent
concentrated in a few dominant communities to a large
number of people of varied social and economic
groups.
 Several institutes should be established to encourage
the entrepreneurship.

7. Education and Technical Know How
 Education, entrepreneurship and development are
interrelated. Education helps in the development of
capabilities of individuals which facilitates the emergence
and growth of entrepreneurship
 In the modern competitive world to survive the
entrepreneurs have to keep an eye over the technological
advances taking place around. These technological
development provide opportunities for the entrepreneurs
to develop and produce new product.

8. Financial Assistance from Institutional Sources
◦ Liberal financial assistance from institution certainly
boosts moral of young entrepreneurs.
 For seeking the assistance it is necessary for the
entrepreneurs to have some financial base and the
institutions and banks also provide facilities in the form of
finance, consultancy, purchase of land, availability of fixed
assets on hire-purchase installment.
◦ The government grant finance to the entrepreneur on
concessional basis at the low rate of interest
◦ Various types of subsidies, concessions and facilities
are given to attract entrepreneurs in backward area.

9. Accommodation in Industrial Estate
◦ The industrial estate are meant to provide wide variety
of facilities to the entrepreneur. Including common
production and testing facilities.
◦ The provision of industrial estates has helped
 Create new employment opportunity
 Disperse industry outside the concentrated cities
 Relocate the existing units operating in congested areas
 Raise the efficiency of small units through common
facilities.

10. Encourage from Large Business
◦ Reservation policy initiated by the government prohibits
the large houses to compete with the small.
11. Machinery on Hire-purchase
◦ Entrepreneurs are supplied machinery through
liberalized terms and condition

 Creation of Employment Opportunity
 Unemployment is one of the most important
problems confronting developing and
underdevelopment countries
 Entrepreneurs by setting up their own units enabling
themselves to get self employment.
 With the setting up of more and more units by
entrepreneurs both on small and large scale,
numerous job opportunities are created for others.
Importance of Entrepreneurship in The
Process Of Economic Development

 Capital Formation
 Entrepreneurs as an organizer of factors of
production employs his own as well as borrowed
resources for the setting up of his enterprise.
 Entrepreneur mobilizes idle saving of the public
and put them to productive use. In this way he
helps in capital formation which is so essential for
the industrial and economic development of a
country.

 Balanced Regional Development
 Small scale units can be set up in industrially
backward and remote areas with limited financial
resources.
 Use of Local Resources
 In the absence of any initiative local resources are
likely to remain unutilized.
 Proper use of those resources can result in the
progress or development of the area and that too at
lower cost.

 Improvement in Per Capita Income
 More enterprises will lead to more production, employment
and generation of wealth in the form of goods and services.
 It will result in the increase in the overall productivity and per
capita income in the country.
 Improvement in The Standard of Living
 Entrepreneurs by adapting latest innovations helps in the
production of wide variety of goods and services.
 By making efficient use of the resources they start producing
more of better quality and that too at lower costs which
ensures easy availability of better quality products at lower
prices to the consumer and results in the improvement in the
standard of living of the people.

 Economic Independence
 Entrepreneurs develop substitute goods being imported
and thus prevent over-dependence on foreign countries
and at the same time help in saving of previous foreign
exchange.
 Through sale of their surplus products in foreign market
entrepreneurs enable a country to earn foreign
exchange.
 Export promotion and import substitution thus help in
promoting economic independence of the economy.

 Preventing Industrial Slums
 Dispersal of industries can help in the overcoming the
problem of industrial slums which results in over
burdening of civic amenities.
 Reducing Social Tension
 Unemployment amongst the young and educated people
is emerging as the major cause of social unrest.
 Entrepreneurship Development can help in channeling
the talent of this section of society in the right direction by
providing proper guidance, training and assistance for
setting up their enterprise.

 Facilitating Overall Development
 An entrepreneur acts as a catalytic agent for change
which results in chain reaction.
 With the setting up of an enterprise the process of
industrialization is set in motion.
 This unit will generate demand for various types of inputs
required by it and there will be so many other units which
will require the output of this unit. This leads to more and
more unit there.
 Entrepreneurs, thus create an environment of
enthusiasm and convey a sense of purpose.

3-26
Feasibility Analysis
• Feasibility analysis is the
process of determining
whether
a business idea is viable.
• It is the preliminary
evaluation
of a business idea,
conducted
for the purpose of
determining
whether the idea is worth
pursuing.

 Timing of Feasibility Analysis
 The proper time to conduct a feasibility analysis is
early in thinking through the prospects for a new
business.
 The thought is to screen ideas before a lot of resources
are spent on them
 Components of a Properly Conducted
Feasibility Analysis
 A properly conducted feasibility analysis includes four
separate components, as discussed in the following
slides.
3-27

3-28
Role of feasibility analysis in developing business
ideas.

 Economic feasibility
 Technical Feasibility
 Financial Feasibility
 Market feasibility
3-29

 It should be refer to Cost benefit analysis.
 It should be studies cost or budget of project.
 Break-even analysis
 Cash flow/fund analysis
3-30

 Factors considered in Technical feasibility:
 Material Input
 Production/Product Mix
 Plant capacity
 Location
 Selection and procurement of machinery and
Equipment
3-31

 Assessment of total cost, initial capital requirement
& cash flow relating to the project timings
 A financial analysis showing the returns on
investment, returns on equity, break-even volume &
price analysis
 It supporting schedules for financial projection,
inventory levels, payment period of purchases &
expenses.
 sources of funds
Eg:- equity shares, preference shares, debentures,
bank loan, trade credit, other sources.
3-32

 Element of market feasibility
 Demand
 Supply
 Distribution
 Price
3-33

Factors considered in market feasibility
 Market potential
 Cost of project
 Competitors
 Economic trends
 Price structure in market
3-34

 Location refers to the choice of region and the
selection of a particular site for setting up a
business or factory.
 A business person should try to attempt at the
optimum or ideal location. An ideal location is
one where the cost of the product is kept to a
minimum, with a large market share, the least
risk, and the maximum social gain.
 It is the place of maximum net advantage or
which gives the lowest unit cost of production
and distribution, for achieving this objective,
this purpose.

 Location analysis is a dynamic process where
entrepreneur analyses and compares the
appropriateness or otherwise of alternative
sites to select the best site for a given
enterprise.

 Demographic Analysis
 It involves the study of population in the
area in terms of total population (in no.),
age composition, per capita income,
educational level, occupational structure,
etc.
 Trade Area Analysis
 It is an analysis of the geographic area that
provides continued clientele to the firm. He
would also see the feasibility of accessing
the trade area from alternative sites.

 Competitive Analysis
 It helps to judge the nature, location, size, and
quality of competition in a given trade area.
 Traffic Analysis
 To have a rough idea about the number of potential
customers passing by the proposed site during the
working hours of the shop, the traffic analysis aims
at judging the alternative sites in terms of pedestrian
and vehicular traffic passing a site.
 Site Economics
 Alternative sites are evaluated in terms of
establishment costs and operational costs under this.
 Costs of the establishment are the cost incurred for
permanent physical facilities. Still, operational costs
are incurred for running a business on day to day
basis, they are also called as running costs.

 To hold minimum investment and operational cost
 The foremost objective in selecting an ideal location is to
ensure minimum investment and lower operational costs.
 This could be achieved if the business is located in a place
where raw materials, labor, transport, and power are easily,
regularly, and sufficiently available.
 To ensure the smooth operation of the business.
 Another objective of the ideal location is to ensure the
smooth operation of the business.
 This could be achieved if the business is located in a place
where the services of banking, communication, transport,
repairs, and maintenance are available easily and regularly.

 To promote employee welfare.
 If the business is located where the educational
recreational, medical, and religious needs of employees
are met, they will certainly feel attached to the
enterprise. They would develop loyalty and
commitment to it.
 To co-ordinate with Government Policies.
 The entrepreneur, while selecting a location, must
ensure that his decision does not conflict with the
government policy of balanced regional development.

 Nature and Type of Business
 The nature and type of your business is the single
greatest determinant of where the business should be
located. Businesses that rely on walk-in customers
from the public are the most affected, the main ones
being in the service industry.
 If your business relies heavily on walk-in clients as
opposed to businesses that prospect, then location is
everything. Getting your location wrong can spell
doom for your business.
 In the restaurant business, for example, there are three
“main” rules when setting up. These are “LOCATION,
LOCATION, and LOCATION.”

 Budget
 The amount of money you can afford to obtain
premises must, of course, come into play. Most first
time entrepreneurs will be renting due to budget
constraints.
 Always try and secure premises that provide the best
value for your money, considering the nature of
business.
 Space required
 Certain types of businesses require very large amounts
of space.
 For example, car dealerships and car rentals require a
large space to park their vehicles. This may mean
looking for an out of cheap town location.

 Special facilities needed
 Certain types of businesses require special facilities to
carry out their business effectively. For example, IT
companies have some very special mechanical,
electrical, plumbing, and fire suppression requirements.
 Server rooms and computer areas need dedicated
cooling units. These must be taken into consideration
before settling on a business location.
 At one point, we may want to determine the size of the
business. This helps in knowing whether it’s growing
or not.

 A business license is essential to establish and
operate a business within a specific territory.
 It is obtained legally from the state licensing
organisation to register the business legally.
 Even if for a small business, acquiring a business
license is equally essential like it is for a big
corporation or big business.
 Entrepreneurs when planning to enter the Indian
dimension should make sure that they are
complying with all the legal obligations that the
law of the land demands.

 Starting a new business venture in India is not as
easy as it might seem. Several legal formalities are
to be complied with, for both new as well as
established businesses and startups.
 Some of these formalities include financial
regulations, tax obligations as well as employment
law regulations, which are central to the
functioning of every business organization in
India.

 1) Deciding on a business name:
 Once you decide which business structure fulfils your purpose,
you are then required to choose a business name that reflects
your venture’s ideology and make sure it is not already claimed
by some other entity.
 For this, you will have to choose an entity name that safeguards
your entity at the state level, a trademark that safeguards your
entity at the national level and a domain name that gives life to
your venture online.

 2) Creation of a founder’s agreement
 A Founder’s Agreement is a document that has important
details about the founding members of a venture/business.
 The document thus acts as an agreement that legally establishes
the rights, ownership, responsibilities, dispute resolution and
other terms executed between the founders and the company.

 3) Acquire all the legal licenses and registrations
 Once the Founder’s Agreement is drafted, the authorization to
do business is what’s required next. The authorizations come in
the form of legal licenses and registrations. While some of
them are general and are required for all kinds of businesses
other are specialized and are additionally required for certain
kinds of businesses. Example Include:
 General registrations:
 GST registration
 Permanent Account Number
 Tax Account Number
 Bank Account
 Shop and Establishments license (License for physical premises to the
commercial establishment)

 4) Be acquaint with labour laws
 Labour laws are part of every organization, small or big.
When your venture is recognized as a company that hires
people, your organization is subject to several labour laws
regardless of its scale.
 These laws govern crucial issues such as minimum wages,
gratuity, PF payment, weekly holidays, maternity benefits,
sexual harassment, and payment of bonus among other
key areas.

 5) Safeguard Intellectual Property
 Intellectual property is a vital part of most businesses
today, especially for tech-centric ventures. Be it codes,
algorithms or even research findings, all these are some
of the common intellectual property owned by an
organization.
 6) Have a clear idea about the mode of winding up
 Winding up a company is a difficult call to make. When a
company decides to shut down, all the stakeholders, from
vendors to investors are needed to be informed in advance
making the entire procedure a task that needs to be
thoroughly planned and executed.

 7) Get business insurance of your choice
 Business insurance can safeguard your venture in cases
where the personal liability protections of your venture
aren’t enough. Insurance can protect not just your
individual assets, but your business’s assets too. Some
types of insurances such as unemployment and
disability insurance are even compulsory by law.
 It’s also a wise decision to have avail insurance that
protects your startup from other potential risks. Some
of these include general liability insurance, product
liability insurance, commercial property insurance etc.

 Entrepreneurs are required to obtain statutory clearance relating to pollution
control & environment conservation for setting-up industrial project with
respect to the specified industries.
 This list of 29 industries include industries like petrochemical complex,
petroleum refineries, cement, thermal power plants, bulk drugs, fertilizers & so
on.
 No Objection Certificate should be obtained from the state pollution control
board before commencement of construction activity.
 In case the industry falls in the highly polluting category or rapid
environmental impact Assessment has to be carried-out & submitted to the
state pollution control board for approval, after which the construction can
commence.
52

 For setting up new industries and for change in production
process/ modernization/ capacity enhancement, provision has
been made that the entrepreneur shall have to obtain No
Objection Certificate from the Board from the point of view of
Air Pollution.
 The motive behind issuing No Objection Certificate is that where
the industry is proposed to be implemented there may not be any
future aggravation in environmental Pollution due to the
establishment of the industry.
53

Some of the important information & document required to be
submitted along with the application form are as follows:
Documents:
 Location Map
 NOC form local Authority
 Attested copies lease document/Rent receipt
 Affidavit in prescribed form
54

Information:
 List of row materials & product per day
 Process Flow chart
 Amount of Water and different fuels used
 Wastes generated per day
 Gaseous emissions
 Hazardous solid waste
 Proposal for controlling the Wastes.
55

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