CBSE XII NCERT ENtrepreneurship Unit 2 Entrepreneurial Planning

1. XII
CBSE
Ch.2 - ENTREPRENEURIAL
PLANNING
BY HENNA PUNJABI
Prepared
by
Henna
P.
1

2. CONTENTS OF CHAPTER
 Economic & Non-economic activities
 Types of Economic activities
 Manufacturing, Service, Trading
 Concept of business and its
characteristics
 Forms of Business : Sole
Proprietorship, Partnership and
Company
 Business Plan: concept, format
 Components of a Business Plan
• Organizational plan
• Operational plan
• Production plan
• Financial plan
• Marketing Plan
• Human Resource Planning
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3. Classification of activities
Economic Activities
 Production
 Distribution
 Consumption of good / services
Non-Economic Activities
 Activities done out of love, care,
affection, emotions, sympathy,
patriotism, etc.
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4. Types of Economic Activities
 Profession
 Employment
 Business
The above could be further categorized into :
 Manufacturing
 Service
 Trading
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5. What is Business ?
All economic activities related to the production
and distribution of goods and services
undertaken for monetary gains are
said to be business.
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6. Characteristics of business :
1. Entrepreneur’s presence
2. Economic activity
3. Production or procurement of goods and
services
4. Sale or exchange of goods and services
5. Regularity
6. Utility creation
7. Profit earning
8. Uncertainty of return
9. Element of risk
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7. Forms of Business Organization
 Private sector
 Public sector
 Joint sector
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8. Forms of enterprise
Forms of Enterprise
(Business)
Private sector
Sole Proprietorship
Partnership
Joint Stock Company
Hindu Undivided Family
Co-operative Society
Joint Sector Public Sector
Departmental
Undertaking
Public Corporations
Statutory Corporation
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9. Sole Proprietorship
 This is an oldest, simplest and most common form of
organization.
 Owned, financed, controlled and managed by one
person
 “Sole proprietorship is a business unit whose ownership
and management are vested in one person. The
individual assumes all risks of loss or failure of the
enterprise and receives all profits from its successful
operations.” – Edward Elbourne
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10. Characteristics of Sole Proprietorship
1. Individual Ownership
2. Individual Management and Control
3. Individual financing
4. No separate legal entity
5. Unlimited liability
6. Sole beneficiary
7. Easy formation and closure
8. Limited area of operation
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11. Suitability of Sole Proprietary form of business
1. Capital requirement is limited
2. Confidentiality / secrecy is important
3. Market is local
4. Goods are of artistic nature
5. Quick decision-making is necessary
6. Size of the venture is small
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12. Legal formalities involved in Sole Proprietorship
1. Business name
2. Service tax registration (form ST 1)
3. VAT / CST registration (VAT within state, CST inter-state)
4. Others (PAN, License, EPF Reg., Imp. Exp. Code)
5. Payment of taxes
(NB : Just go through this topic once for information)
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13. PARTNERSHIP
 “Partnership is a relationship between persons
who have agreed to share the profits of a
business carried on by all, or any of them
acting for all.”
- Indian Partnership Act, 1932
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14. Characteristics of Partnership
1. Two or more persons
2. Agreement
3. Profit sharing
4. Unlimited liability
5. Implied authority
6. Mutual agency
7. Utmost good faith
8. Restriction on
transfer of share
9. Continuity
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15. Suitability of Partnership
 Higher capital requirement
 Skills / expertise of a particular nature
present in some businessmen
 Direct contact with customers is essential
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16. Consequences of non-registration
 As per Partnership Act, 1932
 Cannot file suit
 Cannot enforce rights against
third party
 Cannot claim a set off in dispute
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17. Drafting of Partnership Deed
1. Name of firm
2. Nature of business
3. Name of partners
4. Place of business
5. Capital contribution
6. Profit sharing ratio
7. Loans and advances
8. Drawings allowed
9. Salary / commission
10.Duties, powers and
obligations
11.Accounts and Audits
12.Valuation of goodwill
13.Settlement in dissolution
14.Dispute settlement
15.Insolvency clauses
(NB : just go through this)
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18. Registration Procedure
(only go through)
STEP 1
 Name of firm
 Name of place of business
 Names of other places of business
 Date of partners joining the firm
 Full name and permanent address of partners
 Duration of firm
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19. Registration Procedure
STEP 2
Enclosures with registration application
 Application form – I
 Duly filled specimen affidavit
 Certified copy of partnership deed (by Registrar of firms)
 Proof of ownership of place of business or rental / lease agreement
thereof
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20. Joint Stock Company
A joint stock company is a voluntary association of individuals for
profit, having a capital divided into transferable shares, the
ownership of which is the condition of membership.
A company means a company formed and registered under this
act or any previous act.
- Indian Companies Act, 1956
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21. Characteristics of Joint Stock Company
1. Voluntary association
2. Artificial person
3. Separate legal entity
4. Common seal
5. Limited liability
6. Transferability of shares
(form SH-4, section 44)
7. Diffusion of ownership and
management
8. Number of members (Pvt.-2;
Pub - 7)
9. Limitation of action (Act,
MOA, AOA)
10. Winding up (Act)
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22. What is Private Company ?
 1) has a minimum of two and a maximum of fifty members excluding
its past and present employees.
 2) restricts the right of its members to transfer shares.
 3) prohibits an invitation to the public to subscribe for any shares or
debentures of the company, or accept any deposits from persons
other than its directors, members or relatives.
 4) has a minimum paid up capital of one lakh rupees (subject to
change)
 5) uses the word 'Pvt. Ltd.' at the end of its name.
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23. What is Public Company ?
 Under Section 3(i) (ii) of the Companies Act, a public company is a
company which is not a private company. By implication, a public
company:
 1) has minimum seven people to commence with no upper limit to
membership
 2) does not restrict any transfer of shares
 3) invites public to subscribe for its shares, debentures and public
deposits.
 4) has a minimum paid up capital of five lakh rupees. 5
 5) uses the word 'Ltd.' at the end of its name.
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24. Why Private company is
more desirable ?
1) Only two members are required to form a private company.
2) Only two directors are required to constitute the quorum to validate the proceedings of the meetings.
3) Such company can file a statement in lieu of prospectus with the Registrar of Companies.
4) It can commence its business immediately after incorporation.
5) Holding of a statutory meeting or filing of a statutory report is required by a private company.
6) A non-member cannot inspect the copies of the profit and loss A/c filed with the Registrar.
7) Limit on payment of maximum managerial remuneration does not apply to a private company.
8) Restrictions on appointment and reappointment of managing director do not apply.
9) Maintaining of index of members is not required by a private company.
10) Directors of the private company need not have qualification shares.
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25. Public vs. Pvt.
Basis Public Private
Min. no. of members 07 02
Max. no. of members No limit 200
Min. no. of Directors 03 02
Min. paid up capital 5 lakhs 1 lakh
Public invitation of capital Free to invite Cannot invite
Transfer of shares No restriction Restricted transfer
Commencement of business i. Certificate of
incorporation
ii. Certificate of
commencement
i. Certificate of
incorporation
(only)
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26. Suitability of company form of org.
 1) Venture is a heavy and basic industry type
 2) Large-scale operations are involved
 3) Business requires huge funds
 4) Enterprise involves heavy risks
 5) Enterprise is technologically complex and
sophisticated, banking heavily upon experts and
professionals.
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27. Legal formalities (topic just to go
through)
1. PAN
2. Current Account
3. Register Company (DIN, DSC)
4. Register Service Tax (14%)
5. Register VAT / Sales Tax
6. Excise duty
7. Custom Duty
8. Entrepreneurship Memorandum (form)
9. Apply for Tax Deduction (TAN)
10. Permission required at construction stage
11. Employees Provident Fund
12. Employees State Insurance Scheme
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28. What is PAN ?
 Permanent Account Number (PAN)
 PAN Card is issued to individuals, companies, non-
resident Indians or anyone who pays taxes in India.
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29. Director Identification Number (DIN)
 Director Identification Number (DIN) as the name suggests ‘identify’ the
directors, whether existing, proposed or new, electronically. It is a unique
identity number (consisting of 8 digits) that helps in representing the directors
on a common platform and maintaining all the information related to them in
a database. Once allotted, it can be valid for lifetime unless deactivated or
cancelled. A director can hold one DIN irrespective of the number of
companies he is a director in.
 #6959#70
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30. Digital Signature Certificate
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31. Service Tax
 Service tax was an indirect tax levied by the government on
services offered by service providers but it is paid by customers
who receive services.
 Sales Tax ID no. is availed by service providers
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32. VAT (Value added tax)
 Value of goods and services increase at each stage of
production or transfer of goods or services
 It is a tax on final consumption of goods or services
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33. Excise Duty
 Excise duty is a form of tax imposed on goods for their production,
licensing and sale. ... Today, excise duty applies only on petroleum and
liquor. Excise duty was levied on manufactured goods and levied at the
time of removal of goods, while GST is levied on the supply of goods and
services.
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34. Customs Duty
 Indirect tax levied on goods imported to India
as well as goods exported from India.
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35. Employees Provident Fund (EPF) &
Employees State Insurance Scheme (ESIS)
 These are employee benefit schemes prescribed by
government. Here the employees are given a certain
amount of percentage of their basic salary from
employers. The employers and employee both
contribute to these benefits during service period and
later the amount is reimbursed to employee after
completion of service.
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36. Tax Deduction Account No. (TAN)
 TAN is to be obtained by the person responsible to
deduct tax, i.e., the deductor. In all the documents
relating to TDS and all the correspondence with the
Income-tax Department relating to TDS one has to
quote his TAN.
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37. Ministry of Corporate Affairs
 http://www.mca.gov.in/MinistryV2/homepage.html
 Efiling website (for knowledge)
 https://www.incometaxindiaefiling.gov.in/home
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38. To be continued………….
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39. XII
CBSE
Ch.2 - ENTREPRENEURIAL
PLANNING
(part B)
BY HENNA PUNJABI
Prepared
by
Henna
P.
1

40. BUSINESS PLAN
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41. BUSINESS PLAN
1. Scope of Business Plan
2. Imp. Of Business Plan
3. Formats of Business Plan
4. Components of Business Plan
5. General Introduction
6. Description of venture
7. Production Plan
8. Operational Plan
9. Organisational Plan
10. Financial Plan
11. Human Resource Plan
12. Marketing Plan
13. Assessment of Risk
14. Appendix
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42. BUSINESS PLAN
 The business plan is a comprehensively written
down document prepared by the entrepreneur
describing formally all the relevant external and
internal elements involved in starting a new venture.
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43. What is a Business Plan ?
 Feasibility and viability of the proposed venture
 Helps to make provision for bottlenecks
 Assess the potential for success of the project
 Describes necessary inputs needed
 Explains mode of utilization of resources
 Detailing strategies
 Outlines desired goals
 Sensitivity and profitability of venture
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44. Scope of Business Plan
 Marketing
 Finance
 Operations
 Human Resources
 Legal compliance
 Intellectual Property Rights
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45. Who should write the plan ? (sources)
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Business
Plan
Banks,
financial
institutions
Friends,
relatives,
mentors,
etc.
Internet
sites
Lawyers
Accoun-
tants
Marketing
consultants
Engineers

46. Prepared by Henna P.
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Importance of Business Plan
 Road-map
 Determines viability of venture
 Identifies planning of resources
 Helps in obtaining licenses
 Meets legal requirements
 Satisfies concerns of
stakeholders
 Self-assessment / self-
evaluation
 Identification of obstacles
 4Cs – Character, Cash Flow,
Collateral, Contribution
 Develops clarity

47. Formats of Business Plan
I. Elevator Pitch (short speech form)
II. A pitch deck with oral narrative (slide show + speech)
III. A written presentation for external stakeholders
(investors)
IV. An internal operational plan (for employees)
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48. 1. Introductory Profile / General Introduction
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Introductory
Profile
Entrepre
neur’s
Bio-data
Industry
Profile
Constituti
on and
Organisa
tion
Product
details

49. 2. Description of Venture /
Business Venture
 Physical Infrastructure
- Raw material
- Labour
- Utilities
-Pollution control
- Transport & communication system
- Machinery & equipment
- Production process
 Mission statement
 Site Location
 Physical Infrastructure
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50. 3. PRODUCTION PLAN
 What product will be produced ?
 How the product will be produced ?
 When the product will be produced ?
 Who will be producing ?
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51. PRODUCTION PLAN
 No manufacturing involved (trading)
 Partial manufacturing : name, location, cost,
time, contracts, clarity of role
 Complete manufacturing : plant layout,
machinery and equipment, raw material, cost
of manufacturing, future capital requirement
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52. OBJECTIVES OF PRODUCTION PLAN
 Production schedule (no. of units, time limit)
 Machinery required
 Plant layout
 Time, motion and work study
 Manpower requirement
 Inventory requirement
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53. 4. OPERATIONAL PLAN
 Production means : Plan your work
 Operations means : Work your plan
 Smooth flow of work
 Coordination
 According to plans
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54. OPERATIONAL PLAN
 Orderly flow
 Raw material to production
 Production to consumers
 No blocked inventory (raw material)
 Minimisation of wastage
 Economical system
 Quality checks
 Production policies
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55. Objectives of Operational Plan
 Quantity
 Quality
 Time
 Place
 Cost
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56. Elements of Operational Plan
 Routing (raw material to finished product)
 Scheduling (time-frame into detail)
 Dispatching (issue of order to produce)
 Follow-up (evaluate, assess, appraise, give
remedy, improvise )
 Inspection (comparison with standards)
 Shipping (for consumers)
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57. Factors affecting operational plan
 Nature of venture
 Type of product / service
 Scale of operation
 Technology involved
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58. 5. ORGANISATIONAL PLAN
 Selecting the Form of Organisation (sole,
partnership, etc.)
 Type (Manufacturing, wholesale, retail, service)
 Documentation (legal documents, registration)
 Structure (type, names, job titles)
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59. Elements of Organisational Plan
 Terms and conditions
 Authority and responsibility
 Names, titles
 Stake of members
 Conflict management
 Payment methods
 Voting rights, managerial and
controlling rights, etc.
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60. 6. FINANCIAL PLAN
1.Financial requirements
2.Sources of raising funds
3.Exact assessment of the costs,
revenue, profits, cash flows,
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61. Elements of Financial Plan
1.How much funds are required ?
2.Where will the funds come from ?
3.How are they disbursed ?
4.The amount of cash available
5.General financial well-being
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62. Components of Financial Plan
 Proforma investment decisions
 Proforma financing decisions
 Proforma income statement
 Proforma cash flow
 Proforma Balance sheet
 Break-even point
 Economic and social variables
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63. (a) Proforma investment decisions
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 Land and Building
 Machinery and plant
 Installation cost
 Preliminary expenses
 Margin of working capital
 Expenses on research and development
 Investment in short-term assets

64. (i) Proforma investment decisions
 Fixed capital (long term)
 Working capital (short term)
 Machinery
 Raw material, cash in hand
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65. (ii) Proforma financing decisions
 Brief summary of sources of finance
 Owner’s funds
 Borrowed funds
 Cost of capital + Risks => minimum
 Return on investment + Profitability
=> Maximum
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66. (iii) Proforma income statement
 Projected revenue for the year
 Projected sales per month
 Sale projection techniques
- Marketing research
- Industry sales
- Survey of buyer’s intentions
- Expert opinions
- Financial data on similar start-ups
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67. Prepared by Henna P.
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68. (iv) Proforma Cash Flow
 Projected cash available – projected
cash payments
 (Cash in LESS Cash out)
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70. Prepared by Henna P.
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71. (v) Proforma Balance Sheet
 Financial position of a business at the end
of its first year.
 Projected Assets
 Projected Liabilities
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72. Prepared by Henna P.
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73. (vi) Break Even Point
 Neither Profit Nor Loss
 Minimum level of output to be produced
 Effect of change in quantity of output upon the profits
 Selling price of product
 Profitable options in the line of production
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74. Prepared by Henna P.
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75. (vii) Economic and Social Variables
a. Employment generation
b. Import substitution
c. Ancillarisation
d. Export promotion
e. Local resource utilisation
f. Development of the area
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76. 7. HUMAN RESOURCE PLAN
 What kind of people are required ?
 How many people are required ?
 Selection process
 Training needs
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77. 8. MARKETING PLAN
 Pricing
 Promotion
 Place (distribution, convenience)
 Product (need)
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78. 8. MARKETING PLAN - STEPS
1. Business situation analysis (are, reach, how)
2. Identify target market (demographics, segmentation)
3. SWOT
4. Establish goals (4Ps)
5. Defining marketing strategy
6. Implementation & Monitoring of plan
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79. 9. ASSESSMENT OF RISK
 Identify potential hazards
 Develop alternative strategies to either
prevent, minimise or respond to the risk.
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80. 10. Appendix
 Letters from customers, distributors, etc.
 Any primary or secondary research data.
 Copies of contracts, agreements or any price
lists if received.
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