UNIT – III

3.2 How to Set Up a Small Scale Industry?

Are you planning to set up a small scale industry. You are in the right place. Here are some steps you
need to follow to set up a small scale industry:- 1. Selection of Product 2. Location of Enterprise 3.
Deciding Organisation Pattern 4. Preparation of Project/Feasibility Report 5. Registration with
Authorities 6. Statutory Licences/Clearances 7. Arranging Finance 8. Obtaining Land and Building and
Few Others.

Step # 1. Selection of Product:

Product selected for manufacturing should have good market potential and profitability. For this purpose
market study is necessary.

Following factors should be considered while selecting a product for manufacturing:

(i) Product should have no or little competition.

(ii) Innovative idea.

(iii) Experience in the line.

(iv) Easy availability of raw material

(v) Government policy about the product.

(vi) Whether it meets the requirement of the society.

(vii) Easy access-ability to market.

(viii) Availability of finances.

(ix) Availability of water and power.

Step # 2. Location of Enterprise:

Location should be decided considering the economy between the raw material, transportation cost and
availability of land at cheaper rates with other facilities nearby.

In this connection facilities offered by various State Governments are also relevant Industrial estates with
pre-built factory sheds/developed plots have been set up in different parts of the country for coordinated,
intensified and integrated development of small scale industries.

State Governments provide a lot of facilities at these estates like subsidy on rent for factory
accommodation, allotment of sheds on hire-purchase basis, subsidised charges for water and power,
exemption of sales tax on certain categories of industries for a given period of time.

Step # 3. Deciding Organisation Pattern:

A small scale can be started in any following organisational patterns:
i) Proprietary.

(ii) Partnership firm.

(iii) Cooperative Society.

(iv) Hindu undivided family.

(v) Company.

Step # 4. Preparation of Project/Feasibility Report:

It is very essential to prepare a project report or feasibility report which theoretically justifies the starting
of a factory profitably. This is also essential for getting loan from the banks and other facilities from
other agencies. It also enables an entrepreneur to assess inputs required to guide for his future activities.

The report should cover the economic and commercial analysis in terms of the following:
(a) Technical feasibility.

(b) Economic viability.

(c) Financial implications.

(d) Managerial competence.

Steps in Making Feasibility Report:

1. Summary of product selected. For the purpose of choosing the product help of Small Industries Service
Institute could be taken and the various reports on various products prepared by them consulted.

2. Market Survey.

3. Technical Study.

(a) Design and drawings of the product.

(b) Preparation of operation sheets for various components.

(c) Material requirements.

(d) Mechanical loading.

(e) Equipment requirements.

(f) Organisational layout.

(g) Personnel requirements.

(h)Floor area requirements and layout with materials handling arrangement.

(i) Quality Control.

4. Costing.

5. Cost analysis. Requirement of Fixed and working capital Controlling project costs over run through
effective project planning, implementation and control.

6. Budgeting.

7. Procurement of Finance.

8. Critical report on feasibility. For this rate of return on the invested capital is taken as the criteria for
analysing the feasibility of the project.

Approval of Scheme:
Once the industry is selected and the scheme is prepared, owner should get this scheme approved.
Approval is given by the Directorate of Industries and Civil Supplies of their respective states.

Although approval of the scheme is not compulsory but it is in the interest of the industries to submit
their schemes for approval. Technical assistance will be provided to only those whose schemes are
approved and registered with it.

The Scheme should be prepared in a prescribed pattern and be submitted to the District Industries
Officer/Assistant Director of Industries in 7 copies if imported raw material is required and in 4 copies if
such raw material is not required. This approval is valid for 12 months only. If the industry is not started
within 12 months of its being approved, scheme is treated as cancelled.

Step # 5. Registration with Authorities:

Small Scale Industries are required to get themselves registered with following authorities:
(a) State Directorate of Industries:
This, although voluntary but for getting various facilities and assistance from Government, small scale
entrepreneurs are advised to get their units registered.

(b) DGS & D:

This has a system of registration of firms as approved contractors in the following categories:
(i) Manufacturers of all stores purchased by DGS&D.

(ii) Sole selling agents/sole distributors/distributors who are registered with DGS & D.

(iii) Stockists of imported and indigenous stores.

(iv) As assemblies for items like diesel generating sets, air-conditioning plants etc.
DGS&D (Director General of Supplies and Disposal) is the Central Purchase Organisation of the
Government of India, who purchases store for most of the Government offices from these registered
units.

(c) Registration under Factories Act

(d) Obtaining Licence from Municipal Authority:
Permission of Municipal/Local authority is required to undertake an industrial work within its limits.

(e) Registration with Reserve Bank of India:

It is compulsory for every exporter to obtain an exporter’s code number from the RBI before engaging in
export.

(f) Registration with Regional Licensing Authorities:

For export or import, a firm is also required to obtain an Importer Exporter Code (IEC) number from the
Director General of Foreign Trade. Customs Authorities allow import or export of goods only when the
firm has a valid IEC number.

(g) Registration with Export Promotion Councils:

In order to enable to obtain benefits/concession under the export-import policy, the firm is required to
register with an appropriate export promotion agency.

(h) Registration with Sales Tax Authorities:

A firm should be registered with the Sales Tax Authority of the State for getting exemption from both
Sales Tax and Central Sales Tax for shipping goods out of the country for export.

Step # 6. Statutory Licences/Clearances:

Depending on the product line chosen, size of the units/workers employed etc. an entrepreneur is required
to seek approval for specific regulations applicable in his case. Depending upon the nature of the activity
a unit has to secure various lincences, clearances, no objection certificates, approvals and registrations
etc. details of which can be obtained from the District Industries Centres.
Some of such commodities are Alcohol based industries, Arms, Boilers, Cigarette, Cold Storage,
Chemical Industry, commercial vehicles, drugs and chemists, explosives, food, furnace oil, fertilisers,
kerosene, LPG, minerals, paper, printing press etc.

Step # 7. Arranging Finance:

A firm is required to explore internal and external sources for raising funds. A judicious mix of funds
should be accorded first preference.

Internal Sources:
(i) Personnel and family savings.

(ii) Loans from LIC. Provident Fund Account.

(iii) Personal loans against assets like land and property.

(iv) Personal loans against shares and debentures.

(v) Personal loans from societies, chit funds etc.

(vi) Loans from relatives and friends.

External Sources:
Banks and other financial institutions grant loans and advances for the purchase of machinery, equipment
and land and buildings etc.

Step # 8. Obtaining Land and Building:

To overcome the problem of availability of land for the construction of factory, the State Department of
Industries have set up Industrial Areas and Industrial Estates in the urban, semi-urban and rural areas.
Land is allotted in Industrial areas on lease for a period of 99 years. Factory accommodations with
facilities of water, electricity, transport, bank, post-office etc., are provided in the Industrial Estates.

These factory accommodations are available at reasonable rents, on the hire-purchase basis or on outright
purchase. Several state governments allow subsidy on rent for these accommodations, water and
electricity, exemption from sales tax on certain categories for a given period of time, and loans to small
industries in non-confirming areas for shifting to industrial areas.

Step # 9. Procurement of Machinery and Raw Materials:

National Small Industries Corporation Ltd (NSIC) supplies indigenous and imported machinery to small
scale units on hire- purchase basis.

Small Industries Development Organisation (SIDO) maintains close liaison with raw material suppliers
such as primary producers, chanalising agencies like STC (State Trading Corporation), MMTC (Minerals
and Metals Trading Corporation) etc. SIDO assists the state Directors of Industries and Small Scale
Industries (SSI) Corporations in the estimation of raw materials required by the respective Small Scale
industries. State Directorate of Industries fix up specific quotas for industrial units while undertaking
distribution of scarce raw materials.

Step # 10. Connections for Power and Water Supply:

Consumers are allowed L.T. supply for load upto 75 HP, beyond 130 HP loads they are supplied only
II.T. supply. For the load between 75 to 130 IIP consumer has option either to avail L.T. supply or H.T.
supply. For water, entrepreneur should apply to the water department of the municipality or corporation
or make his own arrangement by installing a tube-well.

Step # 11. Recruitment of Staff:

In these days of specialisation and competition, professionals and skilled workers are necessary to be
recruited. After making realistic assessment of the actual manpower requirements of an enterprise,
suitable arrangements should be made for recruitment of personnel. If the entrepreneur himself is not
specialised in the particular field, he should appoint a works manager well-versed in that particular field.

Step # 12. Marketing Management:

Marketing is a two-way exchange process in which the needs and wants of the buyer and seller are
satisfied.
The NSIC provides assistance in marketing the products of SSI sector, both at home and abroad. The
corporation markets products of SSI sector under the Government Stores Purchase Programme to meet
the requirements of departments, Railways, Defence etc.

Other schemes which are providing marketing assistance to small scale units are:
(a) Government’s stores purchase programme through DGS & D.

(b) Supply of stores to state Governments.

(c) Supply of stores to Defence.

(d) Supply of stores to Railways.

(e) Canteen stores department, Mumbai-400 040.

(f) Participation in International Exhibition and Fairs through SSIDO, STC and the Indian Trade
Promotion Organisation.

(g) Trade centres established by Govt. of India of Jaipur, Bangalore, Kanpur, Ludhiana, Hyderabad,
Ahmedabad, Chandigarh, Bhubaneshwar and Cochin.

(h) State emporium and departmental stores.

(i) Export Market through S.T.C, SI SI in the respective states and State Export Promotion corporations.

Step # 13. Quality Gradation and Testing:

Four Regional Testing Centres and 19 Field Testing stations have been set up under SIDO in order
to:
(a) Improve the quality of products being manufactured in the small scale sector, and

(b) To provide requisite testing facilities.

Governments have also introduced a scheme to provide incentives to those small scale undertakings who
acquire ISO-9000 certification or its equivalent.

Step # 14. Training, Research and Design Institutes:

For the success of any industry, proper training is essential in production techniques, management,
marketing and other aspects. Small Industries Service Institute and their extension centres organise
training programmes to improve technical skills of workers and acquainting the entrepreneurs with
advanced production and management techniques.

(i) Management Training by SIDO in industrial management, marketing, financial management, costing,
and production.

(ii) Technical training courses for workers by SISIs.

(iii) Training programmes for engineer entrepreneurs by SISIs and others.

(iv) Entrepreneurial development for non-engineers by SIDO for different category of entrepreneurs.

(v) Central Institute of Tool Design (CITD), Hyderabad for fulfilling the needs of SSI in the fields of tool
design (including jigs, fixtures, dies and moulds), manufacturing and training of technical personnel.

(vi) Central Tool Room and Training Centre, Kolkata for assisting SSI by providing modern tools,
technical consultancy, training of tool makers and tool designers.

(vii) Central Tool Room, Ludhiana for providing services in the area of tooling (tool design and tool
manufacture), precision machining, heat treatment, technical training and the technical consultancy.

(viii) Process-cum-Product Development Centre (PPDC) at Ranchi, Agra, Meerut, Kannauj.

(ix) Indo-German Tool Rooms—Indore, Ahmedabad and Aurangabad.

(x) National Institute for Entrepreneurship and Small Business Development (NIES BUD), New Delhi
conducts training programmes for trainers/motivators and entrepreneurs, prepares model syllabi for
training various targets groups, conducts seminars/ workshops/conferences etc.

(xi) National Institute of Design, Ahmedabad.

(xii) Central Machine Tool Institute, Bangalore.

Guidelines & Procedures for Starting a New Business in India

Once you have decided to start a business, an important consideration to look into is the various
government guidelines for setting up a factory, seeking permits from various departments (including
electricity, water, environment, etc) and filing registrations along with necessary fee, necessary taxation,
etc.

Startup Checklist

Get a Quick Overview of Guidelines and Procedures, Links and Resources for Starting a New Business in
India. Filter out what is not relevant to your needs and circumstances, and Save Time.

Obtain PAN Number from Income Tax Deptt

Open a Current Account
Register for GST
Excise Duty (Check Applicability)
Shop & Establishment Act
Customs Duty
Apply for TAN
File Entrepreneurship Memorendum at DIC (Optional)
Find State Specific Guidelines & Procedures
Permissions Required at the Construction Stage
Post Construction Clearances
Employee's Provident Fund
Employees State Insurance (ESI) Scheme
3.1 Financial Assistance though
Small Industries Development Bank of India (SIDBI)
is a development financial institution in India, headquartered at Lucknow and having its offices all over
the country. Its purpose is to provide refinance facilities and short term lending to industries, and serves as
the principal financial institution in the Micro, Small and Medium Enterprises (MSME) sector. SIDBI also
coordinates the functions of institutions engaged in similar activities SIDBI operates under the Department
of Financial Services, Government of India.
SIDBI is one of the four All India Financial Institutions regulated and supervised by the Reserve Bank;
other three are EXIM Bank, NABARD and NHB. They play a salutary role in the financial markets through
credit extension and refinancing operation activities and cater to the long-term financing needs of the
industrial sector
SIDBI is active in the development of Micro Finance Institutions through SIDBI Foundation for Micro
Credit, and assists in extending microfinance through the Micro Finance Institution (MFI) route. Its
promotion & development program focuses on rural enterprises promotion and entrepreneurship
development.
In order to increase and support money supply to the MSE sector, it operates a refinance program known
as Institutional Finance program. Under this program, SIDBI extends Term Loan assistance to Banks,
Small Finance Banks and Non-Banking Financial Companies. Besides the refinance operations, SIDBI
also lends directly to MSMEs.
State Bank of India is the largest individual shareholder of SIDBI with holding of 16.73% shares, followed
by Government of India and Life Insurance Corporation of India.

Finance Facilities Offered by SIDBI

Small Industries Development Bank of India, offers the following facilities to its customers:

1. Direct Finance
SIDBI offers Working Capital Assistance, Term Loan Assistance, Foreign Currency Loan, Support
against Receivables, equity support, Energy Saving scheme for the MSME sector, etc.
2. Indirect Finance
SIDBI offers indirect assistance by providing Refinance to PLIs (Primary Lending Institutions),
comprising of banks, State Level Financial Institutions, etc. with an extensive branch network across the
country. The key objective of the refinancing scheme is to raise the resource position of Primary Lending
Institutions that would ultimately enable the flow of credit to the MSME sector.

3. Micro Finance
Small Industries Development Bank of India offers microfinance to small businessmen and entrepreneurs
for establishing their business.

Functions of SIDBI (Small Industries Development Bank of India)

1. Small Industries Development Bank of India refinances loans that are extended by the PLIs to the
small-scale industrial units and also offers resources assistance to them
2. It discounts and rediscounts bills
3. It also helps in expanding marketing channels for the products of SSI (Small Scale Industries) sector
both in the domestic as well as international markets
4. It offers services like factoring, leasing etc. to the industrial concerns in the small-scale sector
5. It promotes employment oriented industries particularly in semi-urban areas for creating employment
opportunities and thus checking relocation of people to the urban areas
6. It also initiates steps for modernisation and technological up-gradation of current units
7. It also enables the timely flow of credit for working capital as well as term loans to Small Scale
Industries in cooperation with commercial banks
8. It also co-promotes state level venture funds

Benefits of SIDBI

1. Custom-made
SIDBI policies loans as per the requirements of your businesses. If your requirement doesn’t fall into the
ordinary and usual category, Small Industries Development Bank of India would assist funding you in the
right way.

2. Dedicated Size
Credit and loans are modified as per the size of the business. So, MSMEs could avail different types of
loans custom-made for suiting their business requirement.

3. Attractive Interest Rates

It has a tie-up with several banks and financial institutions world over and could offer concessional
interest rates. The SIDBI has tie-ups with World Bank and the Japan International Cooperation Agency.
4. Assistance
It not just give provides a loan, it also offers assistance and much-required advice. It’s relationship
managers assist entrepreneurs in making the right decisions and offering assistance till loan process ends.

5. Security Free
Businesspersons could get up to INR 100 lakhs without providing security.

6. Capital Growth
Without tempering the ownership of a company, the entrepreneurs could acquire adequate capital for
meeting their growth requirements.

7. Equity and Venture Funding

It has a subsidiary known as SIDBI Venture Capital Limited which is wholly owned that offers growth
capital as equity through the venture capital funds which focusses on MSMEs.

8. Subsidies
SIDBI offers various schemes which have concessional interest rates and comfortable terms. SIDBI has
an in-depth knowledge and a wider understanding of schemes and loans available and could help
enterprises in making the best decision for their businesses.

9. Transparency
Its processes and the rate structure are transparent. There aren’t any hidden charges.

How to apply for loan through SIDBI

For processing a loan through Small Industries Development Bank of India, an entrepreneur would have
to go through the below-mentioned process:
Step 1: Recognized consultants empanelled with the SIDBI would prepare the documents needed.
Depending on the requirements and information specified by the MSMEs, the consultants would prepare
a BIM (Basic Information Memorandum). This document would include all the information related to the
rating agencies and banks.
Step 2: The Basic Information Memorandum is approved by MSME entrepreneur. The accredited
consultants would then submit the Basic Information Memorandum to Small Industries Development
Bank of India.
Step 3: In case required, the proposal would be rated by the rating agency which is approved by the
Reserve Bank of India.
Step 4: SIDBI would directly handle the below-mentioned cases:
i. SIDBI would offer equity or quasi-equity to the existing units that are growth-oriented
ii. The bank would finance units which are in the service sector
iii. It would offer credit to MSMEs for Cleaner Production Processes and Energy Efficient.
Step 5: For other cases, the application for the loan would be submitted to the Public-Sector Banks.
SIDBI (Small Industries Development Bank of India) has an MOU (memorandum of understanding)with
the public-sector banks for the issuing loans. Small Industries Development Bank of India would help the
entrepreneur at each stage until the loan is finally processed. MSMEs stands a better chance of availing
the loan in time and also could avoid needless delays.
State Financial Corporation’s (SFCs)
There are 18 SFCs across the country mandated to serve as Regional Development Banks for promoting
industrial growth. These corporations were envisaged to function as Development Financial Institutions
(DFIs) mainly for SSIs. Besides term loans for setting up new units, expansion, modernization, etc., of
industrial units; they are also mandated to provide equity support wherever needed.

The SFCs set up under the State Financial Corporation’s (SFCs) Act, 1951 have made significant
contributions in developing industrial sector including the Small Scale Industry (SSI) Sector in India for
well over past five decades. Over the years their activities have expanded considerably. However, with
the passage of time, several problems connected with the structure, management and resources have
confronted the SFCs.
As such, their overall financial health has reached a critical state, with many of the SFCs having eroded
their net worth. With the introduction of financial sector reforms, the business environment for SFCs, as
also other players in the financial system became increasingly competitive.
To enable SFCs to adapt themselves to the emerging environment and promote the growth of the small
scale and tiny industries sector in the desired manner, the Government of India (Gol) had enacted
amendments to the SFCs in the year 2000 with a view to enlarging their shareholders base, providing
them with greater functional autonomy and operational flexibility and enabling them to respond to the
needs of the changing financial system.

Alongside the amendments to SFCs Act, a need was also felt to restructure the SFCs for strengthening
and revitalizing them. The financial assistance provided by the SFCs is by way of term loan, debentures,
etc. Their main resource is refinance provided by SIDBI (earlier IDBI).

Schemes for artisans and specific target groups are formulated which are tailor-made to suit different
categories. Under the single window concept, working capital finance is also sanctioned. A study of some
of the SFCs revealed huge portfolio of non-performing assets, even though the powers for recovery of
dues under section 29 of the SFCs Act empowers them to seize and auction defaulters’ assets.

Since FY 2004, SIDBI with the support and guidance of the Government of India has taken several steps
for revival of these corporations through a tripartite Memorandum, wherein, the concerned State
Governments were also made a party, besides SIDBI and the SFC concerned.

The MoU envisaged reschedulement of refinance, cheaper resources support, reduction in interest rate on
refinance outstanding, reduction of NPAs, recapitalization, professionalisation, capacity building
assistance, risk management, etc.

MoUs were executed with 11 SFCs, majority of which have shown marked improvement in the
performance. With the buoyancy in SME sector, these corporations are expected to improve their
operations and provide another window of assistance to SMEs in their areas of operations. Out of the
remaining corporations, those which are potentially viable are in the process of revival and others have
suspended their operations.

Reserve bank of India

In a country’s credit system, the central bank plays a very important role. This is especially so in
developing countries, where the role of a central bank is not merely that of regulation of credit, but also
one of establishment of an adequate institutional machinery for the provision of credit to the various
sectors of the economy. The Reserve Bank of India also played an active role in the establishment of
institutions which provide credit to agriculture and industry. In the field of credit for industry, the bank
played a vital role in the establishment of the Industrial Finance Corporation of India in 1948, the State
Financial Corporation in 1952 and the Industrial Development Bank of India in 1964. In all these
institutions, the bank’s contribution has been in the form of share capital, loans and management.

An important development which has assisted in the expansion of the flow of credit to small-scale
industries was the institution of Credit Guarantee Scheme in July 1960, for loans advanced by banks and
other credit institutions. While the risk was borne by the Central Government, the formulation of the
scheme and its administration was responsibility of the Reserve Bank of India. The Reserve Bank of
India monitors the advances to the priority sector (agriculture, small-scale industries and small road and
water transport operators, retail trade and small business, education housing and export) and issues policy
guidelines regarding this from time to time.

Industrial Finance Corporation of India Limited (IFCI)

The Industrial Finance Corporation of India Limited (IFCI), the first development finance institution set
up in 1948 and since July 1, 1993, it has been brought under companies Act, 1956. The IFCI extends
financial assistance to the industrial sector through rupee and foreign currency loans, under writing/direct
subscription to shares/debentures. It guarantees and also offers financial services through its facilities for
equipment procurement, equipment leasing and finance to leasing and hire-purchase companies. It also
provides merchant banking.

The IFCI has started new promotional schemes, such as (a) interest subsidy schemes for women
entrepreneurs (b) consultancy fee subsidy schemes for providing marketing assistance to small-scale
industry and (c) encouraging the modernization of tiny, small-scale industries. The IFCI has also taken in
the development of backward districts, throughout the country.

As part of promotional activities IFCI technical assistance for ancillary and small scale industries. The
main objective of the scheme is to encourage the growth of ancillary and small-scale industries which
manufacture intermediate goods and components or provide services to units in the medium and large-
scale sector according to designs specification and quality standards given to them by such larger units.

Financing of SSI by commercial banks

Until the 1970’s conventional Development Finance Corporations were considered as a main vehicles for
channeling loan funds to small industries. But these institutions were found to be too centralized, the
access to finance on a widely dispersed basis from commercial banks, with their vast network of
branches, naturally emerged as an important alternate institutional source of SSI financing. The
commercial banks are able to attract local domestic saving and respond quickly to the demand of the SSI
units by offering greater variety of services. However, with the strengthening of capital base of
development financial institution by the government, commercial banks started referring long term loans
to them and remained content in financing working capital needs.

For a long period, commercial banks did not come forward to extend financial assistance to the small-
scale industries because of the SSIs weak economic base. The first lead in this regard was taken by the
State Bank of India, in consultation with the Reserve Bank of India in March 1956 by setting up a pilot
scheme for the provision of credit for small-scale industries. In the beginning, the scheme was confined
to 9 branches of the SBI, which was later extended to all the branches of the SBI. The commercial banks
started taking initiation in financing SSI’s in a greater way only after the bank nationalization in July
1969.

Normally, the commercial banks provide assistance for working capital requirements of the SSI’s over
the years. They have also started providing ‘term’ finance as is indicated by the data complied by the RBI
that of all the advances given to the SSI’s by the commercial banks, the share of the term loan accounted
for nearly 30 per cent. A notable feature in the financing of SSI’s has been the introduction of the “Lead
Bank Scheme”, by the RBI. Under this scheme each district has been allotted to one scheduled
commercial bank for the intensive development of banking facilities. The introduction of “Credit
Guarantee Scheme”, in 1960, was a big fillip in the filed of commercial banks’ financing to SSI’s
initially, this scheme was introduced in 22 district on an experimental basis. Latter, it was extended to all
over the country.

The availability of credit to the SSI sector improved further with the stipulation on foreign banks to
extend at least 10 per cent of their net bank credit to the SSI sector and to deposit the shortfall, if any,
with the small industries development bank of India (SIDBI).

The small-scale industry is considered to be one of the priority sectors. Banks are expected to lend small-
scale industries just as they finance agriculture. Over the period of years, the share of advance to small
scale industries in total priority sector advances has been on the increase.

Small Industries Service Institutes (SISI’s)

The small industries service institutes (SISI’s) are set-up one in each state to provide consultancy and
training to small and prospective entrepreneurs. The activities of SISs are co-ordinate by the industrial
management training division of the DC, SSI office (New Delhi). In all there are 28 SISI’s and 30 Branch
SISI’s set up in state capitals and other places all over the country.

SISI has wide spectrum of technological, management and administrative tasks to perform.
Functions of SISI
1. To assist existing and prospective entrepreneurs through technical and managerial counseling such as
help in selecting the appropriate machinery and equipment, adoption of recognized standards of testing,
quality performance etc;

2. Conducting EDPs all over the country;

3. To advise the Central and State governments on policy matters relating to small industry development;

4. To assist in testing of raw materials and products of SSIs, their inspection and quality control;

5. To provide market information to the SISI’s;

6. To recommend SSI’s for financial assistance from financial institutions;

7. To enlist entrepreneurs for partition in Government stores purchase programme;

8. Conduct economic and technical surveys and prepare techno-economic feasible reports for selected areas
and industries.

District Industrial Centre (DIC)

In India a large number of institution and programmes were developed to promote small enterprises.
There was hardly any coordination among the various agencies. The schemes are very often overlapped.
The entrepreneurs had to knock at several doors for necessary guidance and assistance consequently in
1977, industrial Policy Resolution emphasized on providing all assistance to the small industries under
one roof. The government as a result introduced the scheme of the District Industries Centre (DIC) in
May 1978. The DIC programme was significant step towards rural industrialization. The DIC started
actual operation from August 1978.

The DIC consists of one general manager and four functional managers. Out of whom three functional
manages will be in the field of economic investigation, credit and village industries respectively. In
respect of the fourth functional managers, state government would be free to choose from any of the
training programmers, depending on specific requirements of each district [8].

The DICs were established to promote SSI and cottage industries beyond big cities and to generate
employment opportunists among rural and backward areas. DICs, presently operating under respective
state budgetary provisions extend the following services;

 Economic investigation of local resources

 Supply of machinery and equipment
 Provision of raw materials
 Arrangements of raw materials
  Marketing
 Quality inputs and
 Consultancy and extension services [9].

The DIC has adopted district planning as an internal tool of management. Lead bank has already prepared
district plans for each district, which may be rephrased and implemented by DICs.

As for household industries, artisans and other unorganized sectors of the economy, more detailed case
studies will have to be undertaken to assess the problems assessing their economic viability and indicate
the lines along which co-ordinate action should be taken by different agencies for the supply of inputs or
for improvements in marketing arrangement. Such studies should also suggest how these sectors of the
economy may be rendered viable and indicate the institutional arrangements which are necessary for this
purpose. These studies, moreover, should be fairly comprehensive and should be undertaken in
collaboration with all the agencies which are associated with the development of a particular sector
official or no-official

Role of DIC for the promotion of Small Scale & Cottage Industries. (SEE DOWN)
1. Technical support for preparation of Project Report.

2. Information on sources of machinery & Equipment.

3. Priority in Power supply/ Telephone connection.

4. Promotion of new Industrial Estates/ Growth Centres.

5. Land/ Shed in Industrial Estate.

6. Approval of Project Reports of special types.

7. Promotion of Electronic Industries.

8. Govt. Margin Money Loan under Additional Employment Programme.

9. Training through Entrepreneurship Development Programme.

10. Assistance under State Incentives Scheme.

11. Allotment of Raw Materials.

12. Financial Assistance under Self Employment Schemes.

13. Financial assistance through Bank/ WBFC/ WBSIC/NSIC.

14. Assistance under Equipment Leasing Scheme through NSIC.

15. Marketing linkage with Central Govt./ State Govt. organisations/ undertakings.

16. Marketing assistance through WBSIC/NSIC/CEO.

17. Ancillary Industry tie-up with Govt. undertakings.

18. Marketing information.

19. Marketing assistance through participation in Exhibitions/ Trade Fairs/ Buyers-Sellers

Meet etc.

20. Marketing assistance to Handicrafts Artisans through participation in Handicrafts Expo

and Exhibition inside/ outside of the state.

21. Linkage with organisations like WBHDC/ WB State Handicrafts Co-operative Society
Ltd./Development Commissioners ( Handicrafts ).

22. Attending problems related to SSI Registration/ Bank loan/ Marketing of production etc
 Association of Women Entrepreneurs of Karnataka

AWAKE – A step in the right direction

Recognizing the immense potential of women entrepreneurs, seven successful women entrepreneurs from
India formed a not-for-profit, non-governmental (NGO) organization called AWAKE short for Association
of Women Entrepreneurs of Karnataka with a vision to build a strong force of female entrepreneurs.
Based out of state capital Bangalore, the organization started off by supporting women to establish
themselves as successful entrepreneurs and join the economic mainstream. Its purpose was to promote
entrepreneurship among women as a means to achieve self-reliance and economic independence.
Who benefits from AWAKE?
Aspiring women entrepreneurs from different backgrounds can benefit from the support provided by
AWAKE. Women of all ages, academic, social, and economic backgrounds are welcome to request support
and guidance from AWAKE.
In addition to that, AWAKE also extends its support to women self help groups (SHGs), NGOs, and other
agencies engaged in income generation activities and entrepreneurship development.
How does it work?
AWAKE works on the Entrepreneur guiding Entrepreneur approach, which means the organization
comprises a pool of women entrepreneurs from various sectors as its members who contribute their time
and expertise to support women entrepreneurs.
The organization runs awareness programs, business counseling, trainings, skill development, mentoring,
business incubation, information sharing and networking, marketing assistance, credit referral, and policy
advocacy.
To help with its entrepreneurship development endeavours, AWAKE has built a strong network of support
with government, non-government, corporate, developmental agencies, as well as funding and finance
agencies.
It has developed a unique 4S module encompassing all programs conducted to support entrepreneurs at
different stages of enterprise development. The module looks something like this:
Stimulus
 Business Counseling
 Entrepreneurship Awareness Programs
Startup
 Entrepreneurship Development Program
 Skill Development Program
 Business Incubator
 Trainer’s Training Program
 Vocational Training Program
Sustenance
 Marketing Support
 Management Development Program
 Credit Referrals
Support
 Research and Resource Center
 Membership Service
Khadi and Village Industries Commission
The Khadi and Village Industries Commission (KVIC) is a statutory body formed by the Government
of India, under the Act of Parliament, 'Khadi and Village Industries Commission Act of 1956'. It is an apex
organisation under the Ministry of Micro, Small and Medium Enterprises, with regard to khadi and village
industries within India, which seeks to - "plan, promote, facilitate, organise and assist in the establishment
and development of khadi and village industries in the rural areas in coordination with other agencies
engaged in rural development wherever necessary."[1] In April 1957, it took over the work of former All
India Khadi and Village Industries Board.[2] The First Director of KVIC was Late Sardar KA
Venkataramaiya, a veteran freedom fighter from Karnataka. Its head office is based in Mumbai but
challenged by Naresh Kadyan, Secretary General, National KVIB Employees
Khadi[edit]
"The livery of freedom" – Mahatma Gandhi[3]
Khadi, (pronounced Khādī) refers to hand-spun and hand-woven cloth. The raw materials may be cotton,
silk, or wool, which are spun into threads on a charkha (a traditional spinning implement).
Khadi was launched in 1920 as a political weapon in the Swadeshi movement of Mahatma Gandhi.
Khadi is sourced from different parts of India, depending upon its raw materials - While the silk variety is
sourced from West Bengal, Bihar, Odisha and North Eastern states, the cotton variety comes
from Andhra Pradesh, Uttar Pradesh, Bihar and West Bengal. Khadi poly is spun
in Gujarat and Rajasthan while Haryana, Himachal Pradesh and Jammu and Kashmir karnataka are
known for the woolen variety.
There are a wide range of Khadi personal care products manufactured in Uttarakhand Khadi Products -
Handmade and Natural
Village Industry[edit]
Any Industry that is located within a rural area, where the Fixed Capital Investment per Artisan (weaver)
does not exceed Rupees One hundred thousand[4] The Fixed Capital Investment can be changed by the
Central Government of India whenever it so requires.

Relevance of Khadi and Village Industries

The common characteristic found in both - Khadi and Village Industries is that they are labour
intensive in nature. In the wake of industrialisation, and the mechanisation of almost all processes, Khadi
and Village industries are suited like no other to a labour surplus country like India.
Another advantage of Khadi and Village Industries is that they require little or no capital to set up,
thereby making them an economically viable option for the rural poor. This is an important point with
reference to India in view of its stark income, regional and rural/urban inequalities.

Objectives of the Commission

The Commission has three main objectives[5] which guide its functioning. These are -

 The Social Objective - Providing employment in rural areas

 The Economic Objective - Providing saleable articles
 The Wider Objective - Creating self-reliance amongst people and building up a strong rural
community spirit.
The commission seeks to achieve these objectives by implementing and monitoring various schemes and
programs.
Implementation of Schemes and Programs
The process of Implementation of schemes and programs starts at the Ministry of Micro, Small and
Medium Enterprises which is the administrative head of the programs. The Ministry receives funds from
the Central Government of India, and routes these to the Khadi and Village Industries Commission for
the implementation of programs and schemes related to Khadi and Village Industries.[6]
The Khadi and Village Industries Commission then uses these funds to implement its programs either
directly - Through its 29[7] state offices, by directly funding Khadi and Village institutions and co-
operatives, or indirectly through 33[8] Khadi and Village Industries Boards, which are statutory bodies
formed by the state governments within India, set up for the purpose of promoting Khadi and Village
Industries in their respective states. The Khadi and Village Industries Boards, in turn, fund Khadi and
Village Institutions/Co-operatives/Entrepreneurs.
At present the developmental programmes of the commission are executed through, 5600 registered
institutions, 30,138 Cooperative societies[9] and about 9485,000 people.[10]

Unit - IV
How to Write a Business Plan
Introduction: There are many reasons to write a business plan—it’s not solely the domain of
entrepreneurs who want to secure funding to start or grow their business.

A business plan can help you clarify your strategy, identify potential roadblocks, decide what you’ll need
in the way of resources, and evaluate the viability of your idea or your growth plans before you get
started.

Whatever your reason for writing a business plan, the task will probably still feel like a homework
assignment. When you’re start a business, your to-do list is a mile long and filled with more immediately
rewarding tasks, like taking product photos, creating ad campaigns, and opening social media accounts.

Not every business launches with a formal business plan, but many founders find value in taking time to
step back, research their idea and the market they’re looking to enter, and understand the scope and the
strategy behind their tactics.

That's where writing a business plan comes in.

What is a business plan?

A business plan is a document describing a business, its products or services, how it earns (or will earn)
money, its leadership and staffing, its financing, its operations model, and many other details essential to
its success.
 Why to write a business plan?

Investors rely on business plans to evaluate the feasibility of a business before funding it, which is why
business plans commonly are associated with getting a loan. But there are several compelling reasons to
consider writing a business plan, even if you don’t need funding.

 Planning. Writing out your plan is an invaluable exercise for clarifying your ideas and can help you
understand the scope of your business, as well as the amount of time, money, and resources you’ll need
to get started.

 Evaluating ideas. If you’ve got multiple ideas in mind, a rough business plan for each can help you
focus your time and energy on the ones with the highest chance of success.

 Research. To write a business plan, you’ll need to research your ideal customer and your competitors—
information that will help you make more strategic decisions.

 Recruiting. Your business plan is one of the easiest ways to communicate your vision to potential new
hires and can help build their confidence in the venture, especially if you’re in the early stages of growth.

 Partnerships. If you plan to approach other companies to collaborate, having a clear overview of your
vision, your audience, and your growth strategy will make it much easier for them to identify whether
your business is a good fit for theirs—especially if they’re further along than you in their growth
trajectory.

 Competitions. There are many business plan competitions offering prizes such as mentorships, grants, or
investment capital. To find relevant competitions in your industry and area, try Googling “business plan
competition + [your location]” and “business plan competition + [your industry].”

If you’re looking for a structured way to lay out your thoughts and ideas, and to share those ideas with
people who can have a big impact on your success, a business plan is an excellent starting point. Here’s
what a couple of entrepreneurs said when we asked them how useful writing a business plan was for their
business.

“We had a marketing background, but not much experience in the other functions needed to run a fashion
ecommerce business, like operations, finance, production, and tech. Laying out a business plan helped us
identify the ‘unknowns,’ and made it easier to spot the gaps where we’d need help or, at the very least, to
skill up ourselves.”

“We own a bricks-and-mortar and ecommerce jewellery business that moved from Magento over to
Shopify. We created a business plan for the move, just as we did with our original website and
ecommerce business. Our business plan included an overview on why we were making the move, the
issues with the current business, the benefits of moving to a new platform, the potential issues during the
 move, the main task, added costs, and a timeline. It really covered everything we felt was the most
important. This business plan was given to everyone working on the project, from the photographers to
the marketing team to the developers. This way we were all on the same page. It worked pretty well the
first time, and even better this time around.”

—Jeff Moriarty, Tanzanite Jewelry Designs

How to write a business plan

There are a few key things to keep in mind to help you write an effective business plan.

 Know your audience. When you know who will be reading your plan—even if you’re just writing it for
yourself, to clarify your ideas—you can tailor the language and level of detail to them. This can also help
you make sure you’re including the most relevant information and figure out when to omit sections that
aren’t as impactful.

 Have a clear goal. You’ll need to put in more work, and deliver a more thorough plan, if your goal is to
secure funding for your business versus working through a plan for yourself or even your team.

 Invest time in research. Sections of your business plan will primarily be informed by your ideas and
vision, but some of the most crucial information you’ll need to include relies on research from
independent sources. This is where you can invest time in understanding who you’re selling to, whether
there’s demand for your products, and who else is selling similar products or services.

 Keep it short and to the point. No matter who you’re writing for, your business plan should be short
and readable—generally, no longer than 15 to 20 pages. If you do have additional documents you think
may be valuable to your audience and your goals, consider adding them as appendices.

 Keep the tone, style, and voice consistent. This is best managed by having a single person write the
plan or allowing time for the plan to be properly edited before distributing it.

How to create a business plan outline

Few things are more intimidating than a blank page. Starting your business plan with a structured outline
and key details about what you’ll include in each section is the best first step you can take.

Since an outline is such an important step in the process of writing a business plan, we’ve put together a
high-level overview you can copy into your blank document to get you started (and avoid the terror of
facing a blank page).
 Here’s a sample business plan outline:

1. Executive summary

2. Company overview

3. Market analysis

4. Products and services

5. Marketing plan

6. Logistics and operations plan

7. Financial plan

What to include in each section of your business plan

Now that you’ve got an outline in place, it’s time to fill it in. We’ve broken the outline down by section
to help you build your plan step-by-step.

Executive summary

A good executive summary is one of the most crucial sections of your plan—it’s also the last section you
should write.

The executive summary’s purpose is to distill everything that follows and give time-crunched reviewers
(e.g., potential investors) a high-level overview of your business that persuades them to read further.
Again, it’s a summary, so highlight the key points you’ve uncovered while writing your plan. If you’re
writing for your own planning purposes, you can skip the summary altogether—although you might want
to give it a try anyways, just for practice.

An executive summary shouldn’t exceed one page. Admittedly, that space constraint can make squeezing
in all of the salient information a bit stressful—but it’s not impossible. Here’s what your business plan’s
executive summary should include:

 Business concept. What does your business do?

 Business goals and vision. What does your business want to do?

 Product description and differentiation. What do you sell, and why is it different?
 Target market. Who do you sell to?

 Marketing plan. How do you plan on reaching your customers?

 Current financial state. What do you currently earn in revenue?

 Projected financial state. What do you foresee earning in revenue?

 The ask. How much money are you asking for?

 The team. Who’s involved in the business?

Company overview

This section of your business plan should answer two fundamental questions: Who are you, and what do
you plan to do? Answering these questions provides an introduction to why you’re in business, why
you’re different, what you have going for you, and why you’re a good investment bet.

Clarifying these details is still a useful exercise even if you’re the only person who’s going to see them.
It's an opportunity to put to paper some of the more intangible facets of your business, like your
principles, ideals, and cultural philosophies. Here are some of the components you should include in your
company overview:

 Your business structure (Are you a sole proprietorship, general partnership, limited partnership, or an
incorporated company?)

 The nature of your business (What are you selling?)

 Your industry

 Your business’s vision, mission, and values

 Background information on your business or its history

 Business objectives, both short and long term

 Your team, including key personnel and their salaries

Some of these points are statements of fact, but others will require a bit more thought to define,
especially when it comes to your business’s vision, mission, and values. This is where you start getting to
the core of why your business exists, what you hope to accomplish, and what you stand for.
 To define your values, think about all the people your company is accountable to, including owners,
employees, suppliers, customers, and investors. Now consider how you’d like to conduct business with
each of them. As you make a list, your core values should start to emerge.

Once you know your values, you can pen a mission statement. Your statement should explain, in a
convincing manner, why your business exists, and should be no longer than a single sentence.

As an example, Shopify’s mission statement is “Make commerce better for everyone.” It’s the “why”
behind everything we do and clear enough that it needs no further explanation.

Next, craft your vision statement: what impact do you envision your business having on the world once
you’ve achieved your vision? Phrase that impact as an assertion—begin the statement with “We will” and
you’ll be off to a great start. Your vision statement, unlike your mission statement, can be longer than a
single sentence, but try to keep it to three at most. The best vision statements are concise.

Finally, your company overview should include both short- and long-term goals. Short-term goals,
generally, should be achievable within the next year, while one to five years is a good window for long-
term goals. Make sure all your goals are S.M.A.R.T.: specific, measurable, attainable, realistic, and time-
bound.

Market analysis

It’s no exaggeration to say your market can make or break your business. Choose the right market for
your products—one with plenty of customers who understand and need your product—and you’ll have a
head start on success. If you choose the wrong market, or the right market at the wrong time, you may
find yourself struggling for each sale.

This is why market analysis is a key section of your business plan, whether or not you ever intend for
anyone else to read it. It should include an overview of how big you estimate the market is for your
products, an analysis of your business’s position in the market, and an overview of the competitive
landscape. Thorough research supporting your conclusions is important both to persuade investors and to
validate your own assumptions as you work through your plan.

How big is your potential market?

Potential market is an estimate of how many people potentially could buy your product. While it’s
exciting to imagine sky-high sales figures, you’ll want to use as much relevant independent data as
possible to validate your estimated potential market. Since this can be a daunting process, here are some
general tips to help you begin your research:

 Understand your ideal customer profile, especially as it relates to demographics. If you’re targeting
millennial consumers in the US, you first can look for government data about the size of that group. You
 also could look at projected changes to the number of people in your target age range over the next few
years.

 Research relevant industry trends and trajectory. If your product serves retirees, try to find data about
how many people will be retiring in the next five years, as well as any information you can find about
consumption patterns among that group. If you’re selling fitness equipment, you could look at trends in
gym memberships and overall health and fitness among your target audience or the population at large.
Finally, look for information on whether your general industry is projected to grow or decline over the
next few years.

 Make informed guesses. You’ll never have perfect, complete information about the size of your total
addressable market. Your goal is to base your estimates on as many verifiable data points as necessary
for a confident guess.

Some sources to consult for market data include government statistics offices, industry associations,
academic research, and respected news outlets covering your industry.

SWOT analysis

A SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. What are the best
things about your company? What are you not so good at? What market or industry shifts can you take
advantage of and turn into opportunities? Are there external factors threatening your ability to succeed?

These breakdowns often are presented as a grid, with bullet points in each section breaking down the
most relevant information—so you can probably skip writing full paragraphs here. Strengths and
weaknesses—both internal company factors—are listed first, with opportunities and threats following in
the next row. With this visual presentation, your reader quickly can see the positive and negative internal
and external factors that may impact your business.

Here’s an example.

Strengths Weaknesses

 Previous experience scaling ecommerce  No team management experience

business
 Breakable product, making shipping more
 Strong ad management experience expensive
  Patented product

 Exclusive deal with manufacturing company

Opportunities Threats

 Strong growth in product category sales  Regulation pending for product category in
international markets
 No “market leader” in category; many smaller
firms

Competitive analysis

There are three overarching factors you can use to differentiate your business in the face of competition:

 Cost leadership. You have capacity to maximize profits by offering lower prices than the majority of
your competitors to maximize profits. Examples include companies like Mejuri and Endy.

 Differentiation. Your product or service offers something distinct from the current cost leaders in your
industry and banks on standing out based on your uniqueness. Think of companies like Knix and Qalo.

 Segmentation. You focus on a very specific or “niche” target market and focus on building traction with
a smaller audience before moving on to a broader market. Companies like TomboyX and Heyday
Footwear are great examples of this strategy.

To understand which is the best fit, you’ll need to understand your business as well as the competitive
landscape.

You’ll always have competition in the market, even with an innovative product, so it’s important to
include a competitive overview in your business plan. If you’re entering an established market, include a
list of a few companies you consider direct competitors and how you plan to differentiate your products
and business from theirs.
 For example, if you’re selling jewelry, your competitive differentiation could be that, unlike many high-
end competitors, you donate a percentage of your profits to a notable charity or pass savings on to your
customers.

If you’re entering a market where you can’t easily identify direct competitors, consider your indirect
competitors—companies offering products that are substitutes for yours. For example, if you’re selling an
innovative new piece of kitchen equipment, it’s too easy to say that because your product is new you
have no competition. Consider what your potential customers are doing to solve the same problems your
product solves.

Products and services

Your products or services will feature prominently in most areas of your business plan, but it’s important
to provide a section that outlines key details about them for interested readers. If you sell many items,
you can include more general information on each of your product lines; if you only sell a few, provide
more detailed information on each.

Customer segmentation

Your ideal customer, also known as your target market, is the foundation of your marketing plan, if not
your business plan as a whole. You’ll want to keep this person in mind as you make strategic decisions,
which is why an overview of who they are is important to understand and include in your plan.

To give a holistic overview of your ideal customer, describe a number of general and specific
demographic characteristics. Customer segmentation often includes:

 Where they live

 Their age range

 Their level of education

 Some common behavior patterns

 How they spend their free time

 Where they work

 What technology they use

 How much they earn

 Where they’re commonly employed

 Their values, beliefs, or opinions

This information will vary based on what you’re selling, but you should be specific enough that it’s
unquestionably clear who you’re trying to reach—and more importantly, why you’ve made the choices
you have based on who your customers are and what they value.

For example, a college student has different interests, shopping habits, and price sensitivity than a 50-
year old executive at a Fortune 500 company. Your business plan and decisions would look very different
based on which one was your ideal customer.

Marketing plan

Your marketing efforts are directly informed by your ideal customer. Your plan should outline your
current decisions and your future strategy, with a focus on how your ideas are a fit for that ideal
customer. If you’re planning to invest heavily in ads on Instagram, for example, it might make sense to
include whether Instagram is a leading platform for your audience—if it’s not, it might be a sign to
rethink your marketing plan.

Most marketing plans include information on four key subjects. How much detail you present on each
will depend on both your business and your plan’s audience.

 Price. How much do your products cost, and why have you made that decision?

 Product. What are you selling, and how do you differentiate it in the market?

 Promotion. How will you get your products in front of your ideal customer?

 Place. Where will you sell your products?

Promotion may be the bulk of your plan, since you can more readily dive into tactical details, but the
other three areas should be covered at least briefly—each is an important strategic lever in your
marketing mix.

Logistics and operations plan

Logistics and operations are the workflows you’ll implement to make your ideas a reality. If you’re
writing a business plan for your own planning purposes, this is still an important section to consider, even
though you might not need to include the same level of detail as if you were seeking investment.
 Cover all parts of your planned operations, including:

 Suppliers. Where do you get the raw materials you need for production, or where are your products
produced?

 Production. How long does it take to produce your products and get them shipped to you? How will you
handle a busy season or an unexpected spike in demand?

 Facilities. Where will you and any team members work? Do you plan to have physical retail space? If
yes, where?

 Equipment. What tools and technology do you require to be up and running? This includes everything
from computers to lightbulbs and everything in between.

 Shipping and fulfillment. Will you be handling all the fulfillment tasks in-house, or will you use a third-
party fulfillment partner?

 Inventory. How much will you keep on hand, and where will it be stored? How will you ship it to
partners if required, and how will you keep track of incoming and outgoing inventory?

This section should signal to your reader that you’ve got a solid understanding of your supply chain, and
strong contingency plans in place to cover potential uncertainty. If your reader is you, it should give you
a basis to make other important decisions, like how to price your products to cover your estimated costs,
and at what point you plan to break even on your initial spending.

Bottom of Form

Financial plan

No matter how great your idea is, and regardless of the effort, time, and money you invest, a business
lives or dies based on its financial feasibility. At the end of the day, people want to work with a business
they expect to be viable for the foreseeable future.

The level of detail required in your financial plan will depend on your audience and goals, but typically
you’ll want to include three major views of your financials: an income statement, a balance sheet, and a
cash-flow statement. It also may be appropriate to include financial projections.

Income statement

Your income statement is designed to give readers a look at your revenue sources and expenses over a
given time period. With those two pieces of information, they can see the all-important bottom line, or
the profit or loss your business experienced during that time. If you haven’t launched your business yet,
you can put together a forecast of the same information.

Balance sheet

Your balance sheet offers a look at how much equity you have in your business. On one side, you list all
your business assets (what you own) and, on the other side, all your liabilities (what you owe). This
provides a snapshot of your business’s shareholder equity, which is calculated as

Assets - Liabilities = Equity

Cash-flow statement

Your cash-flow statement is similar to your income statement, with one important difference: it takes into
account when revenues are collected and when expenses are paid.

When the cash you have coming in is greater than the cash you have going out, your cash flow is
positive. When the opposite scenario is true, your cash flow is negative. Ideally, your cash-flow statement
will help you see when cash is low, when you might have a surplus, and where you might need to have a
contingency plan to access funding to keep your business solvent.

It can be especially helpful to forecast your cash-flow statement to identify gaps or negative cash flow
and adjust operations as required. Here’s a full guide to working through cash-flow projections for your
business.

Planning gives you a solid foundation for growth

A business plan can help you identify clear, deliberate next steps for your business, even if you never
plan to pitch investors—and it can help you see gaps in your plan before they become issues. Whether
you’ve written a business plan for a new business or for growing your current company, you now have a
comprehensive guide and the information you need to help you start working on the next phase of your
business.

Pitfalls to be avoided :

To help you craft a plan that hits all the right notes, here's a list of some of the more common business
planning mistakes you should avoid:

1. Don't put off writing a plan. Don't wait until you have enough time, don't wait until you have the
right people, and definitely don't wait until there's an urgent reason you suddenly need a plan. Instead,
just do it now. Recognize that you need a business plan and that your first step is to prepare your first
plan. Get a draft up and running and then continue updating it to keep it current with your business. Of
course, you'll soon realize that your plan may never be done, but the important thing is, you're planning.
You should always be planning your business.

2. Don't confuse cash with profits. There's a huge difference between the two. Waiting for customers to
pay can cripple your financial situation without affecting your profits. Loading your inventory absorbs
money without changing profits. Spending most of your money buying inventory doesn't affect profits,
but cash flow is much more important than profits because profits are an accounting concept and cash is
money in the bank--you don't pay your bills with profits.

3. Don't dilute your priorities. A plan that stresses three or four main priorities is a plan with focus and
power. People can understand three or four main points. A plan that lists 20 priorities doesn't really have
any.

4. Don't overvalue the business idea. What gives an idea business value is not the idea itself but a
business that's already built on top of it. It takes employees having shown up every morning, phone calls
being answered, products being built, ordered and shipped, services being rendered, and customers
paying their bills to make an idea a business. Either write a business plan that shows you building a
business around that great idea, or forget it. An idea alone does not a great business make.

5. Don't confuse a plan with the act of planning. You need both to succeed. And your planning process
doesn't end when your plan is done. The value of a plan is in the implementation it causes, and
implementation starts the day you settle on the main points of your plan. Understand that your business
plan is never really done-you're always revising it, or should be, because reality is always pressing
forward. Without a plan setting markers, you'll never know the difference between plan and reality. Work
your plan; don't just write it.

6. Don't fudge the details in the first 12 months. By details, I mean your financials, milestones, dates,
responsibilities and deadlines. Cash flow is the most important, but you also need lots of details when it
comes to assigning tasks to people, setting activity dates and specifying what's supposed to happen and
who's supposed to make it happen. These details really matter. A business plan is wasted without it.

7. Don't sweat the details for the later years. This is about planning, not accounting, and you're only
guessing the future in a system full of uncertainties. As important as monthly details are in the beginning,
they become a waste of time later on. How can you project monthly cash for three years from now, when
your sales forecast is so uncertain? Sure, you can plan in five, 10 or even 20-year horizons in the major
conceptual text, but you can't plan in monthly detail past the first year. Nobody expects it, and nobody
believes it.

8. Don't create absurdly optimistic "hockey stick projections" of sales taking off in the near
future. Yes, it happens about once a generation, but nobody believes it in a business plan because they
all say that. No investor is going to tell you they believe that even though your sales have been flat up to
this point, once you have their money, your sales are going to go through the roof. If you've really created
that once-in-a-generation business whose sales will take off, then you'd better build so much bottom-up
detail into that forecast that even the most jaded investor will believe it.
9. Don't write too much. Keep your business plan short and focused on your main priorities. It's a
business plan, not a doctoral thesis. Stick to the main points, and use bullet points to keep the main points
highlighted and simple.

10. Don't sweat the formatting details. No business plan has ever failed because the page headers
weren't color-coded. Don't dress up your plan with multiple fonts, too many colors or complex page
layouts. Don't hide the important information. Keep it simple, and don't sweat the small stuff.