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get employed anywhere jump into entrepreneurship, a real contrast to this is that 76% of establishmen

of new business in the year 2003 were due to an aspiration to chase openings. This emphasizes the fa

that entrepreneurship is not at all an encumbrance to an economy. Whats more is th

approximately 34 million of fresh employment opportunities were created by entrepreneurs from th

period of 1980. This data makes it clear that entrepreneurship heads nation towards better opportunitie

which is a significant input to an economy.

2) Contributed towards research and development system - almost 2/3% of all innovations are du

to the entrepreneurs. Without the boom of inventions the world would have been a much dry place t

live in. Inventions provide an easier way of getting things done through better and standardize

technology.

3) Creates wealth for nation and for individuals as well- all individuals who search busine

opportunities usually, create wealth by entering into entrepreneurship. The wealth created by the sam

play a considerable role in the development of nation. The business as well as the entreprene

contributes in some or other way to the economy, may be in the form of products or services

boosting the GDP rates or tax contributions. Their ideas, thoughts, and inventions are also a great he

to the nation.

4) Sky-scraping heights of apparent prospects - the individual gets maximum scope for growth an

opportunity if he enters into entrepreneurship. He not only earns, the right term would be he learn

while he earns. This is a real motivating factor for any entrepreneur as the knowledge and skills h

develops while owning his enterprise are his assets for life time which usually, lacks when a person

under employment. The individual goes through a grooming process when he becomes an entrepreneu

In this way it not only benefits him but also the economy as a whole.

5) It is a challenging opportunity for the people - although entrepreneurship is a challenging task b

in most of the cases the rewards it gives are much more than what one anticipates. It does not onl

reward an entrepreneur at financial levels but also on individual level. It provides self satisfaction to th

entrepreneur.

6) Entrepreneurship provides self sufficiency - the entrepreneur not only become self sufficient b

also provide great standards of living to its employees. It provides opportunity to a number of peop

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working in the organization. The basic factors which become a cause of happiness may be libert

monetary rewards, and the feeling of contentment that one gets after doing the job. Therefore th

contribution of entrepreneurs makes the economy an improved place to live in.

Significance of Entrepreneurship Development in Global Contexts

The importance of entrepreneurship for some countries is given as under; -

a) What role does entrepreneurship play in America: -

American economy is well known for its flexibility, adaptability, and grasping of opportunity and it

all because of prevalence of entrepreneurial culture in the economy. The above statement can be we

supported with the help of factual data given; taking into account the period 2003 to 2007 th

generation of employment has reached 7.2 millions which is more than the total jobs being generated i

Japan and Europe. For this the economy had to work upon the same for 41 months without an

postponement. For these jobs the American workforces are taking back home hefty amounts. Post ta

earnings have gone up by 9.6% that is $2,840 from the time when the president has taken oven th

charge. The growth of America is in leaps and bounds and that is all because of the insistence an

efficiency of American entrepreneurs.

b) Importance of entrepreneurship in European economy: -

The importance of entrepreneurial activities was realized by the European economy in the year 198

Recently a number of fresh opportunities for entrepreneurial proposals are being dug up in Europeaeconomy. The entrepreneurs are today seen as the catalyst which speeds up the process of creatin

wealth for the economy, providing jobs, and providing an assorted range of goods and services to th

consumers. Entrepreneurial undertakings are now being introduced to college going students whic

could give them an idea of creating and managing firms, relevance of entrepreneurship firms t

European financial system, uniqueness of monetary ventures, managing human resources, pecuniar

transactions, legality in dealings, and learning entrepreneurial skills.

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Process of Entrepreneurship Development

Of course, there are many ways to organize the effort of planning, launching and building a ventur

But there are a set of fundamentals that must be covered in any approach. We offer the following as way to break down the basic activities necessary.

It is useful to break the entrepreneurial process into five phases: idea generation, opportuni

evaluation, planning, company formation/launch and growth. These phases are summarized in th

table, and the Opportunity Evaluation and Planning steps are expanded in greater detail below.

1. Idea Generation: every new venture begins with an idea. In our context, we take an idea to be

description of a need or problem of some constituency coupled with a concept of a possible solution

(A characterization of this phase is still work in process on this site.)

2. Opportunity Evaluation: this is the step where you ask the question of whether there is a

opportunity worth investing in. Investment is principally capital, whether from individuals in th

company or from outside investors, and the time and energy of a set of people. But you should als

consider other assets such as intellectual property, personal relationships, physical property, etc.

3. Planning: Once you have decided that an opportunity, you need a plan for how to capitalize on th

opportunity. A plan begins as a fairly simple set of ideas, and then becomes more complex as th

business takes shape. In the planning phase you will need to create two things: strategy and operatin

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Opportunity evaluation

(investment prospectus)Company's plan Execution

Need / problem

Solution

Competitive position

Team

Risk / reward profile

Strategy

Target customer

Business model

Position

Milestones / company

objectives

Operating plan

Company timeline

Staffing plan

Budget

Financing plan

Market research

Marketing

Business development

Forecasting

Sales planning

R&D management

Operations management

People management

Process and infrastructure

Budgeting

Financing

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Unit II

Entrepreneurship Quality / Motivation : The Entrepreneurship Myths and Misconception, qualitie

characteristics and role demanded of an entrepreneur, Process of developing Entrepreneur Qualities.

Entrepreneurship Myths and Misconception

Top Ten Myths & Misconceptions about Entrepreneurship

1. Entrepreneurship is About Making Money

2. Entrepreneurs are Born, not Made

3. Entrepreneurship is About Great Ideas

4. Entrepreneurship is About Great Entrepreneurs

5. There is a Shortage of Capital

6. Entrepreneurs Fail Most of the Time

7. Jobs at Entrepreneurial Firms are Inferior

8. Entrepreneurs & Small Businesses Are Essentially the Same

9. Small Firms are the Job Creators

You have to be small/new to be entrepreneurial

10. We Can Have Innovation without Innovators;

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Characteristics and role demanded of an entrepreneur

Who is an entrepreneur?

An entrepreneur is a person who develops a new idea and takes the risk of setting up an enterprise produce a product or service which satisfies customer needs. All entrepreneurs are business persons, b

not all business persons are entrepreneurs. Let us now think of why all business persons are n

entrepreneurs. Think of a woman who sits by the roadside leading to your home and who has bee

selling the same type of food, from the same size of saucepan or pot, from the same table top, and ma

not have been able to change her standard of living to any appreciable extent. Such a woman may be

business person but not an entrepreneur. The entrepreneur, on the other hand is the business person wh

is not satisfied with his/her performance and therefore always finds ways to improve and grow.

Now let us consider the characteristics or some special qualities and strengths which make a

entrepreneur different from a business person. It is important for us to note that a successf

entrepreneur possesses the following characteristics.

Initiative

An entrepreneur takes actions that goes beyond job requirements or the demand of the situation.Th

Crate ideas that bring about phenomenal changes

Opportunity seeking

An entrepreneur is quick to see and seize opportunities. He/she does things before he/she is asked

work by people or forced by situation.

Persistence

An entrepreneur is not discouraged by difficulties and problems that come up in the business or his/hpersonal life. Once she sets a goal she is committed to the goal and will become completely absorbed

it.

Information seeking

An entrepreneur undertakes personal research on how to satisfy customers and solve problems. He/sh

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knows that different people have different capabilities that can be of help to them. He/she seeks releva

information from his/her clients, suppliers, competitors and others. He/she always wants to learn thing

which will help the business to grow.

Demand for quality and efficiency

An entrepreneur is always competing with others to do things better, faster, and at less cost he/sh

strives to achieve excellence.

Risk taking

Are you afraid of uncertainties? Then you cannot be an entrepreneur. Entrepreneurs are not high ris

takers. They are also not gamblers; they calculate their risks before taking action. They plac

themselves in situations involving moderate risk so they are moderate risk takers.

Goal setting

An entrepreneur sets meaningful and challenging goals for him/herself. An entrepreneur does not ju

dream. Him/she thinks and plans what he/she does. He/she is certain or has hope about the future.

Commitment to work

An entrepreneur will work long hours after into the night just to be able to keep his/her promise t

his/her client. He/she does the work together with his/her workers to get a job done. He/she knows ho

to make people happy to work for him/her due his/her dynamic leadership.

Systematic planning and monitoring

An entrepreneur plans for whatever he/she expects in the business. He/she does not leave things to luc

He/she plans by breaking large tasks down into small once and puts time limits against them. Since an

entrepreneur knows what to expect at anytime he/she is able to change plans and strategies to achiev

what he/she aims at.

Persuasion and networking

An entrepreneur acts to develop and maintain business contacts by establishing good workin

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relationship. Uses deliberate strategies to influence others.

Independence and self confidence

Most entrepreneurs start business because they like to be their own boss. They are responsible for the

own decisions.

Process of Developing Entrepreneur Qualities

Personal Characteristics

First, examine your personal characteristics, values, and beliefs. Do you have the mindset that's typic

of successful entrepreneurs?

Optimism: Are you an optimistic thinker? Optimism is truly an asset, and it will help get yo

through the tough times that many entrepreneurs experience as they find a business model th

works for them.

Vision: Can you easily see where things can be improved? Can you quickly grasp the "b

picture," and explain this to others? And can you create a compelling vision of the future, an

then inspire other peopleto engage with that vision?

Initiative: Do you have initiative, and instinctively start problem-solving or busine

improvement projects?

Desire for Control: Do you enjoy being in charge and making decisions? Are you motivated

lead others?

Drive and Persistence: Are you self-motivated and energetic? And are you prepared to wo

hard, for a very long time, to realize your goals?

Risk Tolerance: Are you able to take risks, and make decisions when facts are uncertain?

Resilience: Are you resilient, so that you can pick yourself up when things don't go as planned

And do you learn and grow from your mistakes and failures? (If you avoid taking actio

because you're afraid of failing, our article on Overcoming Fear of Failure can help you fa

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your fears and move forward.)

Interpersonal Skills

As a successful entrepreneur, you'll have to work closely with people this is where it is critical to b

able to build great relationships with your team, customers, suppliers, shareholders, investors, an

more.

Some people are more gifted in this area than others, but, fortunately, you can learn and improve thes

skills. The types of interpersonal skills you'll need include:

Leadership and Motivation: Can you leadandmotivate others to follow you and deliver yo

vision? And are you able to delegate work to others? As a successful entrepreneur, you'll hav

to depend on others to get beyond a very early stage in your business there's just too much t

do all on your own!

Communication Skills: Are you competent with all types of communication? You need to b

able to communicate well to sell your vision of the future to investors, potential clients, tea

members, and more.

Listening: Do you hear what others are telling you? Your ability to listen can make or brea

you as an entrepreneur. Make sure that you're skilled at active listening and empathet

listening.

Personal Relations: Are you emotionally intelligent? The higher your EI, the easier it will b

for you to work with others. The good news is that you can improve your emotion

intelligence!

Negotiation: Are you a good negotiator? Not only do you need to negotiate keen prices, yo

also need to be able to resolve differences between people in a positive, mutually beneficiway.

Ethics: Do you deal with people based on respect, integrity, fairness, and truthfulness? Can yo

lead ethically? You'll find it hard to build a happy, committed team if you deal with people

staff, customers or suppliers in a shabby way.

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Critical and Creative Thinking Skills

As an entrepreneur, you also need to come up with fresh ideas, and make good decisions abo

opportunities and potential projects.

Many people think that you're either born creative or you're not. However, creativity is a skill that yo

can develop if you invest the time and effort.

Creative Thinking: Are you able to see situations from a variety of perspectives and come u

with original ideas? (There are many creativity tools that will help you do this.)

Problem Solving: How good are you at coming up with sound solutions to the problems you'

facing? Tools such as Cause & Effect Analysis, the 5 Whys Technique, and CATWOE are ju

some of theproblem-solving tools that you'll need to be familiar with.

Recognizing Opportunities: Do you recognize opportunities when they present themselve

Can you spot a trend? And are you able to create a plan to take advantage of the opportunitie

you identify?

Practical Skills

You also need the practical skills and knowledge needed to produce goods or services effectively, anrun a company.

Goal Setting: Do you regularly set goals, create a plan to achieve them, and then carry out th

plan?

Planning and Organizing: Do you have the talents, skills, and abilities necessary to achiev

your goals? Can you coordinate people to achieve these efficiently and effectively? (Her

effectiveproject management skills are important, as are basic organization skills.) And do yo

know how to develop a coherent, well thought-throughbusiness plan, including developing an

learning from appropriate financial forecasts?

Decision Making: How good are you at making decisions? Do you make them based o

relevant information and by weighing the potential consequences? And are you confident in th

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decisions that you make?

Core decision-making tools include Decision Tree Analysis, Grid Analysis, and Six Thinkin

Hats.

You need knowledge in several areas when starting or running a business. For instance:

o Business knowledge: Do you have a good general knowledge of the main function

areas of a business (sales, marketing, finance, and operations), and are you able t

operate or manage others in these areas with a reasonable degree of competence?

o Entrepreneurial knowledge: Do you understand how entrepreneurs raise capital? An

do you understand the sheer amount of experimentation and hard work that may b

needed to find a business model that works for you?

o Opportunity-specific knowledge: Do you understand the market you're attempting

enter, and do you know what you need to do to bring your product or service to market?

o Venture-specific knowledge: Do you know what you need to do to make this type

business successful? And do you understand the specifics of the business that you wa

to start? (This is where it's often useful to work for a short time in a similar business.)

You can also learn from others who have worked on projects similar to the ones that you'

contemplating, orfind a mentor someone else who's been there before and is willing to coach you.

Unit III

Enterprise Launching & Resources : Government Programmes, Policies, Incentive and Institution

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Networking for Enterprise setting, Steps of setting new Enterprise, Scanning Business Environmen

Sensing Business opportunity & Identifying Product

Enterprise Launching & Resources

Credit Guarantee Fund Scheme for MICRO AND SMALL ENTERPRISES

Introduction

There are an estimated 26 million micro and small enterprises (MSEs) in the countr

providing employment to an estimated 60 million persons. The MSE sector contributes about 45%

the manufacturing sector output and 40 % of the nation's exports. Of all the problems faced by th

MSEs, non-availability of timely and adequate credit at reasonable interest rate is one of the mo

important. One of the major causes for low availability of bank finance to this sector is the high ris

perception of the banks in lending to MSEs and consequent insistence on collaterals which are n

easily available with these enterprises. The problem is more serious for micro enterprises requirin

small loans and the first generation entrepreneurs.

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by th

Government of India to make available collateral-free credit to the micro and small enterprise secto

Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry o

Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI

established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. The scheme wa

formally launched on August 30, 2000 and is operational with effect from 1st January 2000. The corpu

of CGTMSE is being contributed by the Government and SIDBI in the ratio of 4:1 respectively and h

contributed Rs.1906.55 crore to the corpus of the Trust up to March 31,2010. As announced in th

Package for MSEs, the corpus is to be raised to Rs.2500 crore by the end of 11th Plan.

Eligible Lending Institutions

The institutions, which are eligible under the scheme, are scheduled commercial banks (Public Secto

Banks/Private Sector Banks/Foreign Banks) and select Regional Rural Banks (which have bee

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classified under 'Sustainable Viable' category by NABARD). National Small Industries Corporatio

Ltd. (NSIC), North Eastern Development Finance Corporation Ltd. (NEDFi) and SIDBI have also bee

made eligible institutions. As on March 31, 2010, there were 112 eligible Lending Institution

registered as (MLIs) of the Trust, comprising of 27 Public Sector Banks, 16 Private Sector Banks, 6

Regional Rural Banks, 2 Foreign Bank and 6 other Institutions viz., NSIC, NEDFI, SIDBI and Th

Tamil Nadu Industrial Investment Corporation(TNIIC).

Eligible Credit Facility

The credit facilities which are eligible to be covered under the scheme are both term loans and workin

capital facility up to Rs.100 lakh per borrowing unit, extended without any collateral security or thi

party guarantee, to a new or existing micro and small enterprise. For those units covered under th

guarantee scheme, which may become sick owing to factors beyond the control of managemen

rehabilitation assistance extended by the lender could also be covered under the guarantee scheme. It

noteworthy that if the credit facility exceeds Rs.50 lakh, it may still be covered under the scheme bu

the guarantee cover will be extended for credit assistance of Rs.50 lakh only. Another importan

requirement under the scheme is that the credit facility should be availed by the borrowing unit from

single lending institution. However, the unit already assisted by the State Lev

Institution/NSIC/NEDFi can be covered under the scheme for the credit facility availed from memb

bank, subject to fulfillment of other eligibility criteria. Any credit facility in respect of which risks aadditionally covered under a scheme, operated by Government or other agencies, will not be eligible f

coverage under the scheme.

Guarantee Cover

The guarantee cover available under the scheme is to the extent of 75 per cent of the sanctioned amoun

of the credit facility. The extent of guarantee cover is 80 per cent for (i) micro enterprises for loans u

to Rs.5 lakh; (ii) MSEs operated and/or owned by women; and (iii) all loans in the North-East Regio

In case of default, Trust settles the claim up to 75% (or 80% wherever applicable) of the amount i

default of the credit facility extended by the lending institution. For this purpose the amount in defau

is reckoned as the principal amount outstanding in the account of the borrower, in respect of term loa

and amount of outstanding working capital facilities, including interest, as on the date of the accou

turning Non-Performing Asset (NPA).

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Tenure of Guarantee

The Guarantee cover under the scheme is for the agreed tenure of the term loan/composite credit.

case of working capital, the guarantee cover is of 5 years or block of 5 years.

Fee for Guarantee

The fee payable to the Trust under the scheme is one-time guarantee fee of 1.5% and annual service fe

of 0.75% on the credit facilities sanctioned. For loans up to Rs.5 lakh, the one-time guarantee fee an

annual service fee is 1% and 0.5% respectively. Further, for loans in the North-East Region, the one

time guarantee fee is only 0.75%.

Website

Operations of CGTMSE are conducted through Internet. The website of CGTMSE has been hosted

www.cgtsi.org.in.

Scheme Awareness Programmes

CGTMSE has adopted multi-channel approach for creating awareness about its guarantee schem

amongst banks, MSE associations, entrepreneurs, etc. through print and electronic media, b

conducting workshops/seminars, attending meetings convened at various district/state/national fora, etAs on March 31,2010, 1080 workshops and seminars were conducted on Credit Guarantee Schem

Also, CGTMSE participated in 19 exhibitions and attended 304 SLBC/meetings convened by RBI/oth

Government offices. Posters and mailers have been circulated to banks, industry associations, and oth

stakeholders for promoting the scheme and creating its greater awareness. With a view to impartin

training to MLIs through their training colleges, multimedia CD-ROM containing operation

modalities of the scheme, was distributed to the staff training centers/colleges of the MLIs. The Tru

has recently launched an advertisement campaign in 194 newspapers across the country through DAV

which has created considerable awareness about the scheme among the target audience.

Operational Highlights of CGTMSE

Operational Highlights of CGTMSE 10. As on March 31, 2010, 3,00,105 proposals from micro an

small enterprises have been approved for guarantee cover for aggregate credit of Rs.11550.61 cror

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extended by 85 MLIs in 35 States/UTs. A year-wise growth position is indicated in the table below:

Period Active MLIs

Number of Proposals

Approved

Credit Amount

Approved (Rs. inLakh)

FY 2000-01 9 951 606

FY 2001-02 16 2296 2952

FY 2002-03 22 4955 5867

FY 2003-04 29 6603 11760

FY 2004-05 32 9516 32677

FY 2005-06 36 16284 46191

FY 2006-07 40 27457 70453

FY 2007-08* 47 30825 105584

FY 2008-09* 57 53708 219940

FY 2009-10* 85 151387 687511

Scheme of Micro Finance Programme

The Government has launched a Scheme of Micro Finance Programme in 2003-04.The Scheme ha

been tied up with the existing programme of SIDBI by way of contributing towards security deposi

required from the MFIs/NGOs to get loan from SIDBI.The scheme is being operated in underserve

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States and underserved pockets/districts of other states.

The Government of India provide funds for Micro-Finnance Programme to SIDBI, which is calle

'Portfolio Risk Fund'(PRF).At present SIDBI takes fixed deposit equal to 10% of the loan amount.Th

share of MFIs/NGOs is 2.5% of the loan amount (i.e. 25% of security deposit) and balance 7.5%(i.7.5% of security deposite) is adjusted from the funds provided by the Government of India.

As on 31st March 2010, the Government has released an amount of Rs.80.00 crore towards 'Portfol

Risk Fund'(PRF).An amount of Rs .6.00 crore has been released during 2009-10. As on 31st marc

2010,cumulative loan amount of Rs.1299.68 crore has been provided to MFIs/NGOs under the Schem

benefiting approximately 20.21 lakh persons. Of this,more than 80% are estimated to be wome

beneficiaries.

Steps of setting new enterprise

There are three main stages in setting up an enterprise.

IDENTIFICATION OF OPPORTUNITY

CONSOLIDATION OF RESOURCES

IMPLEMENTATION OF PROJECT

Identification of Opportunities

When the entrepreneur scans the environment and looks for technology, market demand and the

selects the project idea.

Consolidation of Resources

The entrepreneur consolidates resources like finance, land, building, machineries, raw materials, skiand makes a business plan accordingly.

Implementation of the Project

The entrepreneur sets the business venture, manages the enterprise, involving manufacturing, finan

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management, personnel management, etc. creates and looks for success and growth.

BUSINESS PLANNING

One of the important things in an enterprise is the Business Plan. Put simply, the business plan means

detailed analysis of the business in which all factors needed for business success are considered.

Starting from selection of the product idea, finding how to make it, looking at the market and decidin

what part of the market will be focused on, down to managing the production, cash flow, employee

and quality are analysed and a plan of action is set down in a Business Plan. A Business Plan also plan

for the future, in terms of deciding how the business will function in the coming years, how it shoul

grow, and in what directions.

A Business Plan is not something that is prepared once and then followed. As the environment in whic

the enterprise exists keep changing, the enterprise also has to respond to these changes. Some of thes

may have been taken care of in preparing the Plan, but not others. As such, the Business Plan must b

reviewed regularly, to check if what actually happens agrees with what was planned. Periodic change

to Business Plan are needed to keep abreast of the changes in the market and other environment.

An enterprise starts with a business idea. The entrepreneur scans the environment, for a project ide

from among the various opportunities available, and select one project idea. The entrepreneur does a

initial market survey and checks if the project idea is worth taking up and also checks if appropriat

technology is available. In the first Business Plan therefore, the entrepreneur must think and put dow

how she would do these things, and what action she plans to take in this regard.

The different aspects of an enterprise, which the entrepreneur must understand and know well, an

practice fully, are covered in the chapters following. These also are factors, which need to be covered

the Business Plan. Therefore, it is suggested that in the following chapters, the entrepreneur must sta

writing her Business Plan step by step, so that by the time she goes through all the stages of learninabout entrepreneurship, she also has a Business Plan ready, which may need only minor modificatio

later.

Key Elements of Business Planning

_ PRODUCT IDEA

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_ TECHNOLOGY

_ MARKETING

_ MANUFACTURING

_ MONEY

_ EMPLOYEES

_ START UP /LAUNCH

_ SUCCESS AND GROWTH

The various elements which go into a business plan are :

Idea, entrepreneur, market match

An entrepreneur and enterprise / business idea as also the market need to match . A assessment of th

attitude and aptitude as also socio economic consideration of an entrepreneur matter most in creating a

enterprise. The fit needs to be assessed objectively.

For example an entrepreneur may not go into silk reeling activity, for she saw that the silk worms g

killed before the silk yarn is removed from the cocoons. The very idea was repulsive to her.

This match between the idea, entrepreneur and market has to be done after the initial market survey.

For instance, checking if there is a market for the product idea selected, what kind of market and w

the entrepreneur be able to penetrate such a market will help decision making. If it is challenge, is th

entrepreneur capable of taking such a challenge or is their an alternate option. If so entrepreneur can g

ahead, if not she has to start with a new idea.

The enterprise must also be within the resource reach of the entrepreneur.

_ Initially, market survey, market segmentation and demand measurement needs to be carried out an

strategies to be adopted in penetrating the market niche needs to be carried out subsequently.

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_ Infrastructure requirements and planning, like land, building, water electricity etc., their costs needs

be assessed and proper estimates have to prepared.

_ Determining the technology, machinery /equipments requirements and obtaining the details of th

their costs is one of the key steps.

_ List of all costs involved in running the enterprise and its projection

_ Profit projection consists of Cash flow statement, repayment of loan, means of finance, equity

owner's contribution etc. Break even point, the point where there is no profit or no loss.

Return on investment and other ratios

_ By equity or owner's contribution it is meant that the entrepreneur brings in some own resourcinto the enterprise which is entrepreneurs contribution. There are special schemes of the Governmen

for various disadvantaged people and regions or areas which provides for special funds or 100% loa

grant plus loan. Depending on the size of enterprise it is called micro and small enterprise. This is nee

to be explored.

MICRO AND SMALL ENTERPRISE ( MSE)

The definitions of small or micro enterprises vary from country to country. In most countries, there some form of assistance or benefits provided to enterprises that are defined as micro and sma

enterprises. Most developing countries take into account investment or project cost as the basis for suc

a definition. The project cost, as defined by United Nations Development Program (UNDP), is fixe

capital + net Initial capital.

This could be taken as a basis for all the countries in calculating their project cost. Based on th

individual Government policy, it could be classified whether it is in micro An entrepreneur is a perso

with a dream, originality and daring, who acts as the boss, who decides as to how the commerciorganization shall run, who co-ordinates all activities or other factors of production, who anticipates th

future trend of demand and prices of products.

An entrepreneur is one of the important segments of economic growth. Basically he is a perso

responsible for setting up a business or an enterprise. In fact, he is one who has the initiative, skill f

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innovation and who looks for high achievements. He is a catalytic agent of change and works for th

good of people. He puts up new green-field projects that create wealth, open up many employme

opportunities and leads to the growth of other sectors. The entrepreneur displays courage to take risk o

putting his money into an idea, courage to face the competition and courage to take a leap into unknow

future and create new enterprises/ business. This creative process is the life blood of the stron

enterprise that leads to the growth and contributes to the national development.

The entrepreneur will always work towards the creation and enhancement of entrepreneurial society.

Unit IV

Business Plan Preparation Procedure & Steps, Market Survey & Demand Analysis, Growt

Modernization & Expansion of Enterprise

Business Plan Preaparation

A business plan is a written description of your business's future, a document that tells what you plan t

do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing you

business strategy, you've written a plan, or at least the germ of a plan.

Procedure & Steps of Preparing Business Plan

1. Research: Get as much information on your proposed business as possible. Talk to those already

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business, visit the library, learn all you can from trade associations and trade publications, condu

research on-line and find out what help is available from local and federal government agencies.

2. Make your projections: The more you know about your business, the more accurately you ca

make intelligent projections of sales and potential profits for the first few years. This knowledge invaluable.

3. Capital: Money. Accept the fact that it always requires more money than youve anticipated to star

or improve your business. Have enough working capital on hand and back-up resources just in case th

new business does not prosper as you had anticipated.

4. Competition: Know thy enemy. Study your competition carefully; theyve been in the trenches an

have already experienced what you are abut to discover. Read their literature. There is a reason youcompetitor is in business, and youd better find out what it is and how you can turn their customer

into your customers.

5. Location: Location. Location. If you cant go to your customer, your customer must come to you

so make it easy. Pick a prime location or invest in targeted advertising.

6. Image: What kind of public image do you want to create with your service, merchandise, qualit

dcor, packaging, personnel vehicles, advertising and pricing? How does that image correspond wi

the customer you are trying to attract?

7. Keep Records: Complete, accurate records are needed to file taxes, to properly manage your ban

accounts and most importantly, to give you guidance. Always know where your business stand

financially.

8. Professional Help: In addition to professional and confidential SCORE counseling, rely on

competent lawyer, accountant, banker and insurance broker to fulfill your business needs. A marketin

professional in you corner may also be needed.

9. Purchasing: Knowing what, when and where to buy and how to gauge inventory can make or brea

you. It allows you to conserve working capital, reduce obsolescence and meet and beat the competitio

Know what sells.

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10. Profits: This is the bottom line for which you are going into business. Make sure that all expense

are accounted for, including your own living costs, possible losses, shrinkage, unseen costs such a

fringe benefits and taxes. Then add a legitimate profit to your risk. If the profit does not come out righ

perhaps you should rethink your idea. Make sure you consult a SCORE counselor for guidance.

Market Survey and Demand Analysis

Traditional marketing strategy consists of three components, known as the three Cs:

Company: Know the strengths and weakness of your firm.

Competition: Know the same about your competitors.

Customer: Know who they are and what they want.

Analyze the Competition

Of the three Cs, the competitor analysis may give you the toughest time, especially if you a

new to the marketplace. First, you should look at your direct competitors. Take, for example,

McDonalds restaurant in a busy downtown area. Its direct competitors would be any nearb

Burger King or Wendys restaurants. Its indirect competitors would be other restaurants in th

same downtown area, even upscale ones. Customers eat lunch just once a day, and all thesrestaurants are fighting for this finite group of customers.

Examine any substitutes. Instead of going out for lunch, some people may opt to bring lunc

from home, or skip lunch entirely. These are both factors McDonalds would need to examin

when analyzing a locations competitive position.

Assess the Marketplace

Once youve identified your direct and indirect rivals, as well as substitute competitors, you

want to gauge your potential fit in the marketplace. Some issues to consider:

o Competitor strengths and weaknesses

o Whether new competitors are entering the marketplace, or existing ones are leaving

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o The product or products that your competitors rely on for most of their revenue

o Ways to overcome the threat of substitute goods

Develop a Marketing Program

After you have addressed the three Cs, you can move on to developing a marketin

program, which involves analyzing the four Ps, collectively known as the marketin

mix:

Product: What you are selling

Price: How much you will charge

Place: Where you will sell your product

Promotion: Special incentives you will use to get people to try your product

Craft a Market Development Plan

Youre now ready for the final phase of your marketing analysis crafting

market development plan. The information you provide here likely wont com

into play until youve established your company and have been running for a feyears, but investors will find it helpful to see how you envision your compan

evolving. Your market development plan should address such questions as:

Does recent data show the market for your product is growing?

Do you have a plan to offer new products or line extensions in the fir

few years?

Are there other ways to position your company more competitively in th

marketplace?

Does your marketing plan offer ways to grow overall demand within you

industry sector?

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These marketing and competitive analyses are vital parts of your business plan and will likely be th

most extensive portion of it. Take the time to do thorough research on your competitors and how th

market has behaved in recent years. A disorganized marketing strategy can ruin even the best o

products, simply because your target customers will never hear of them.

Modernisation & Expansion of Enterprise

Modernization is distinguished by a high degree of effectiveness. If the production capacities o

operating enterprises are increased by the introduction of advanced production methods or by th

modernization and replacement of obsolete and worn-out equipment, it is possible, as a rule, to increa

product output without expanding the production area and in a shorter time and with fewer expenditur

than are required for the construction of new facilities. For example, between 1965 and 1974 th

modernization of enterprises in the building materials industry of the Ukrainian SSR required three t

four times less in expenditures than would have been required to build new enterprises of the sam

capacity.

Enterprises are modernized in conformity with a plan for a number of purposes, including raising th

technological level of production by replacing obsolete and worn-out equipment. (In such instances, th

assortment and volume of product output remain the same.) In addition, modernization may be aimed

raising the organizational and technological level of an enterprise, thereby increasing the volume o

output by eliminating bottlenecks, systematizing production, and improving managemen

Modernization may be intended to change the production structure of the enterprise (throug

specialization, for example) or to improve product quality by converting to a new production method o

by improving the comprehensiveness of the use of raw materials. (As a rule, this type of modernizatio

necessitates the rebuilding of enterprises.) Social results may also be among the purposes

modernization (for example, ecological measures such as the establishment of purification facilities, o

measures related to industrial aesthetics).

In terms of the volume of work it involves, modernization is classified as minor, moderate (or average

or complete, with replacement factors for fixed capital stock of less than 0.2, 0. 20.4, and 0.4

respectively. The replacement factor for the active portion of the capital (machinery and equipmen

may even equal 1, but for the passive portion (buildings and installations) the replacement factor w

not exceed 0.40.5. (See Table 1.)

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Table 1. Proportion of the total volume of centralized capital investments used for t

modernization, expansion, and technical reequipping of operating enterprises (in percent)

1970 1973

Total for industrial projects ................... 58 65

Electric power ........................... 20 25

Ferrous metallurgy ........................ 60 72

Chemical and petrochemical industries ........... 45 49

Machine building and metalworking.............. 63 70

Lumber, wood products, and pulp and paper industries . . 57 63

Light industry............................ 40 48

Food processing.......................... 66 60

The decision to modernize is made by the leadership of an enterprise (association) or by the relevan

ministry (department). Modernization measures are financed from the state budget (in conformity wi

the plan for centralized capital investments) and from the production development fund of th

enterprise. When an enterprise is modernized, the necessity of maintaining the skills of the workers

taken into account, as is the possibility of retraining them, if there are to be changes in th

specialization of the production units that are being modernized. At the same time, modernization plan

often envisage significant capital investments to demolish old production buildings and installation

auxiliary facilities, and administrative buildings and build new ones. Such plans are associated with

decline in economic efficiency indicators.

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