Entrepreneurship ± Meaning and Concept

‡ Entrepreneurship is the act of being an entrepreneur. ‡French word µEntrependre¶ and German word µuternehmen¶ both referring to individuals who undertakes an µendeavor¶. ‡Hence, anyone who exhibits the characteristics of self-development, creativity, self-decision making and risk taking. ‡ According to oxford dictionary Entrepreneur is µone who organizes and manages enterprise involving high risk¶. But researches indicates that entrepreneurs need not necessarily be high risk takers, however, they reduce risk and increase likelihood of success.

Entrepreneur ± Different Perspective-Nature
‡ An Economist defines an entrepreneur as one who brings resources, labour, material and other assets in to combinations that make their value greater than before and also one who introduces changes, innovations and a new order. ‡A Psychologist defines an entrepreneur as a person who is typically driven by a psychological force, which create a desire to obtain or attain something. ‡As per sociologist a person whose actions would determine social status & contribute to societal dev. ‡As per Management expert a person who has a vision and generates action plan to achieve it.

Concept - Changing Definition
1. Richard Cantillon (1755)
‡ ‡ Entrepreneur is a person bearing risk. First person to recognise the role of entrepreneur in economy as a economic function than social function. Stated farmer as a entrepreneur, who promises to pay fixed sum of money to landowner, with out assurance of the profit he will drive. Function of entrepreneur and not his personality



2. Jean Baptiste Say (1800)
‡ An Agent combining all factors of production. ‡ Special personal qualities ‡Unlike, Cantillon, Say did not emphasize uncertainty in his definition. ‡Analysed central function of the entrepreneur independent of any other social framework

3. Frank Knight (1921)
‡ Recipient of pure profits. Pure profit is bearing the cost of uncertainty. ‡Discusses uncertainty and risk. ‡Involves primary and secondary part : a. Primary problem or function is deciding what to do and how to do b.Doing things and actual execution of activity, becomes in real sense a secondary part.

4. Max Weber (1930)
‡ Innovator with unusual will and energy, charity of vision and ability to act. Ability to identify new opportunities Bearer of the mechanism of change the economy Contributes to movement toward equilibrium by pursuing opportunities. Understanding human actions as active and creative rather than passive, automatic & mechanical.

5. Joseph Schumpter (1934)
‡ ‡ ‡ ‡

6. Kirzner (1973)

7. Mark Casson(1982)
‡ ‡ ‡ ‡ Specialize in making judgmental decisions for coordinating scare resources. Decision making as personal quality. Motivated by self-interest. Relentless pursuit of opportunity without regard to resources currently enrolled. Actions taken to create organisations. Accumulation and deployment of resources and building Org Structure to pursue opportunities.

8. Stevenson and Sahlman (1987).

9. Gartner (1990)
‡ ‡

10. Bygrave and Hofer (1991)
‡As a process involves all functions, activities and actions associated with the perceiving of opportunities and the creation of organizations to pursue them.

11. Recent Trends
‡ Societal and environmental issues ‡As per Global Entrepreneurship Monitor (2005) more mgt qualified and young achievers likely to be into entrepreneurship in comparison to 1998 findings. ‡EDP , Institutes, financing, CVF, separate discipline, institutes, profession ‡Quality, Service, IT as resource, sustainable, strategist, moderate risk, collaborative relationship

Drucker¶s Views on Entrepreneur
³Innovations is the specific tool of entrepreneurs, the means by which they exploit changes as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned and practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and apply the principles of successful innovations.´ ‡ Innovation at work, must be market focused /driven,

Personal attributes of a successful entrepreneur
‡ ³ The five essential entrepreneurial skills for success are concentration, discrimination, organisation, innovation and communication´ Henry Reed As early as1950s, researcher began looking personal attributes common among sucessful entrepreneur. McClelland(1961) found that entrepreneurs have higher need for achievement than nonentrepreneurs. A hreat deal of research in 1990s.





1. 2. 3. 4. 5.

Thomas Begley and David Boyed in mid 1980s have identified five dimentions unique to entrepreneurs: Entrepreneurs are high in need-achievement Entrepreneurs like to think, they pull their own strings(Control their own lives, not luck or fate) Entrepreneurs are willing to take moderate risk. This enable to earn higher returns on assets. Entrepreuners have the ability to tolerate ambiguity, as may be doing certain things for the first time. Entrepreneurs have the drive to get more done in less time and if necessary, despite the objections of others.

‡Timmons(1994) conducted more than 50 studies and found consensus for six general characteristics ± 1.Commitment and determination 2.Leadership 3.Opportunity Obsession 4.Tolerance of Risk, ambiguity and uncertainty 5.Creativity, self-reliance and ability to adapt 6.Motivation to excel

‡Bianchi(1993) review indicates following characterstics: 1.Being an offspring of self-employed 2.Being fired from more than one job 3.Being an immigrant or a child of immigrant 4.Previous employment in a firm with more than 100 people. 5.Being a eldest child in the family. 6.Being a college graduate.

‡ 1. 2. 3. 4. 5. 6. 7. 8.

John Hornday of Bobson College has developed a composite list of entrepreneurial traits: Self Confidence and optimism Positive response to challenges Ability to take calculated risk Flexibility and ability to adapt Knowledge of markets Ability to get along with others better Independent mindedness Versatile knowledge

9. Energy and efficiency 10. Creativity, need to achieve 11. Dynamic leadership 12. Response to suggestions 13. Take initiatives 14. Resourceful and persevering 15. Perceptive and foresight 16. Response to critisism

Entrepreneurial Characteristics ± Indian Perspective
1. Vision : Dream and visualizing the ways and means to achieve, visualizing market demands, socio-economic and technological environment ‡ Without the vision of making a big mark on the mobile industry Dhirubhai and now Anil Ambani could not have made what Reliance Communication (An Anil Dhirubhai Ambani Group) is today. 2. Knowledge : Conceptual knowledge and technicalities of technological, operational, financial & market dynamics. ‡ Without sound knowledge of computers Naryanmurthy could not have made Infosys.

3. Desire to Succeed
‡ ‡ Constantly work to achieve higher goals. Without a desire to succeed constantly Mukesh Ambani would not have planned to ventured into Retail, Real Estates and Biotech. Needs independence in work and decision making without following rules of thumb and make their own rules and destiny. Without a desire for independence, Sabeer Bhatia would not have quit his job to start enterprise own his own and created Hotmail.com and Arzoo.com

4. Independence


5. Optimism
‡ ‡ Highly optimistic about achieving their vision. Without optimism Narayanmurthy (who took loan from his wife as not having enough finances) would not have left a lucrative job and created Infosys. Not rule of thumb , but a constant desire to introduce something new to existing business. Create, innovate or even add value to the existing products. Without alue addition of µlife time free incoming calls¶ Tata Indicom would not have been able to create space in already saturated mobile markets.

6. Value Addition
‡ ‡ ‡


Exhibits qualities of a leader -Good Planners, Organizers, Good Communication Skills, Empathetic toward their employees, good decisionmakers, initiative to implement plans, result oriented

8. Hard working ‡ At time also called as workaholics. ‡ Continuous efforts to achieve success and know that there is no substitute for hard work 9. Desire to control over their own fate ‡ Do not move in herds like sheep but pave own paths. ‡ Do not believe in luck or destiny but create their own destiny.

10. Risk-Taking Ability
‡ Frank Night has identified risk-taking ability as the most integral element in defining entrepreneurial characteristics. ‡View risk as Career risk, financial risk, psychological risk(Stress).

Attributes and Skills
‡ These so called entrepreneurial characteristics can be looked at to determine a set of skills useful for entrepreneur to possess. ‡Group Skills ±work and learn together, task force, project teams ‡Technical Skills ± technological, writing, mgt, organising. ‡Business mgt skills, DM and analytical skills ‡Personal Entrepreneurial Skills- risk, innovative, visionary, persistent, manage change.

‡Behavioral Skills ± Motivation, judgment,. Initiative, confidence, discipline etc. ‡Communication Skills and Listening skills ‡Soft Skills - eg PEOPLE‡Problem solving, ethics, open mindedness, persuasiveness, leadership, educational interest. ‡ After qualitative assessment of the skill-set, entrepreneur may try to access by forming foundation team or by attracting partner or employees. In addition to the skills entrepreneur also make some attitudinal adjustments such as adaptability to lifestyle changes, patience to start from scratch, confrontations, dealing with failure, willingness to learn.

Classification of Entrepreneurs
‡ Entrepreneurs are broadly classified according to the types of business, use of profession skills, motivation, growth and stage of development. ‡Clearence Danhof classifies entrepreneurs on the basis of stage of economic development; some other have classified on the basis of their functions and characteristics. ‡In fact, differentiating between entrepreneurs is to study similarity in grouping, differences in various groups and factors and consequences of entrepreneurship in different population.

1. According to timing of venture creations a. Early Starters
Start venture with little or no full-time work experience Often from family business Suhas Gopinath started his company Gopals Inc. at the age of 14, in USA as Indian laws do not permit a minor to run a company. b. Experienced ‡ Spent a few yrs in family business or a large company. ‡ ‡ ‡

‡ ‡

Usually, the venture is related to the same business as previously engaged in. Narayan Murthy together with his like minded professionals started Infosys at the age of 35 years

c. Mature ‡ Very senior professionals, some at the level of CEO ‡ Very high confidence and desire to do things in a way that may not be totally acceptable to their earstwhile employers. ‡ Ashok Soota and Subroto Bagchi quit Wipro to start Mindtree. ‡ BVR Subbu, ex-CEO of Hyundai India, recently started a venture that brought the plant of Daewoo in India.

2. According to type of business a. Business Entrepreneurs : ‡ Conceive an idea for a new product/service and then create business to materialise idea in reality. ‡ Tap both production and material resources to develop new business opportunity. ‡ Oftenly small business entrepreneurs with small business units eg. Printing press, advertising agency, textile processing house, readymade garments or confectionary.

b. Trading entrepreneur ‡ Trading Activities not manufacturing work ‡ Identifies potential markets, stimulates demand and creates interest and demand among buyers to go in for his product. ‡ Can be engaged in both domestic &overseas trade. ‡ Whole sale trade, retail trade, Mall trading, exporters, importers, stock trading, real estate. c. Industrial Entrepreneur ‡ Ability to convert economic resources and technology into profitable venture ‡ Essentially a manufacturer, identifies potential needs and starts industrial units for new products.

d. Corporate Entrepreneur ‡ Individual who plans, develops & manages a corporate body. ‡ Corporate body is a form of business organisation, one body of many individuals, large corporations, which are registered as separate legal entity under some statute or act eg. Company regd under companies act, or trust under trust act. e. Agricultural entrepreneur ‡ Agricultural activities such as raising & marketing of crops, fertilizers and other inputs of agriculture. ‡ Motivated to raise the productivity through mechanization and technology.


Plantation, horticulture, dairy, forestry, floriculture, animal husbandry, poultry, seeds.

3. According to use of technology
a. Technical Entrepreneur ‡ Essentially an entrepreneur of craftsman type, develops high quality goods due to craftsmanship. ‡ Concentrates more on production than marketing. ‡ Introduction techniques, innovations for production. b. Non-technical Entrepreneur ‡ Not concerned with technical aspect of production, but developing alternative distribution strategies to promote their business.

c. Professional Entrepreneur ‡ Interested in establishing a business but does not have interest in managing or operating once it established. ‡ Professional entrepreneur sells out running business and starts another venture with the sales proceeds. ‡ Such an Entrepreneur is dynamic who conceives new ideas to develop new projects.

4. According to Motivation a. Pure Entrepreneur ‡ Motivated by psychological and economic rewards. ‡ Undertakes entrepreneurial activities for personal; satisfaction in work, ego or status. b. Induced Entrepreneur ‡ Induced to take entrepreneurship due to policy measures of the govt that provides assistance, incentives, concessions and overhead facilities to start ventures.

c. Motivated Entrepreneur ‡ Desire for self-fulfillment is the motivation ‡ Making and marketing new products for consumers ‡ If successful, further motivated by reward in term of profit. d. Spontaneous Entrepreneurs ‡ Start business out of their natural talents ‡ Initiative, boldness and confidence as motivation ‡ Strong conviction and confidence in their ability.

5. a. ‡ ‡

According to Growth Growth Entrepreneur Takes up a high growth industry Chooses an industry which has sustained growth prospects. b. Super-Growth Entrepreneur ‡ Those entrepreneur who have shown enormous growth of performance in their venture. ‡ The growth performance is identified by the profitability and liquidity of funds.

6. a. ‡ ‡

According to stage of development First-generation Entrepreneur One who starts not from family business Innovator, combining different skills and technologies to produce marketable products or service. b. Modern Entrepreneur ‡ One who undertakes those ventures which go well along with changing demand and suit in the current marketing needs.

c. Classical Entrepreneur ‡ Concerned with customer and marketing needs through the development of self-supporting ventures. ‡ Stereotype who aims to maximize economic returns at a consistent level with the survival of the firm with or without the element of the growth.

7. Classification based on Socio-cultural Variables
a. Entrepreneurs from business family ‡ Few socio-cultural groups have dominated business scene in India, prominently , Marwadi, Gugrati, Parsee, Sindhi communities. Tatas, Birlas, Wadias and Singhanias are all from business community. ‡ Entrepreneurship is easier for someone from business family or business community as having solid support structure.

b. Women entrepreneurs ‡ Progressive laws & incentives have boosted women
presence in entrepreneurial activities in diverse fields. ‡ Kiran Majumdar Shaw founded Biocon, which is now a leading Biotech firm in India. c. Social Entrepreneurs ‡ As per Ashoka ± Innovators, a global non-profit organization, a social entrepreneur is one who recognizes the part of society which is stuck and provides new ways to get it unstuck.- child upliftment, environment, women empowerment, blind, social unprivileged. ‡ Verghese kurien of Amul, Rippan Kapur of CRY, Jeroo Billimoria of childline(toll free help)

8. Other Categories
a. Innovative Entrepreneurs ‡ Aggressive assemblage of information and analysis of results from combination of factors. ‡ Aggressive in experimentations and one who see and explore opportunity. b. Adoptive or Imitating Entrepreneurs ‡ Readiness to adopt successful innovation. ‡ Follow innovators,imitate techniq & technologies. c. Fabian Entrepreneurs ‡ Great caution and scepticism in practicing change. ‡ Shy & lazy, no will to introduce change or new method.

d. Drone Entrepreneurs ‡ Refusal to adopt and use new opportunities to make changes in production methods. ‡ Traditional ways, products losses its marketability and operations becomes uneconomical. e. Aspiring Entrepreneurs ‡ Have dream of starting a business, yet not made the leap from their current employment into the uncertainty of a startup.

f. Lifestyle Entrepreneurs ‡ Develop an enterprise that fits their individual circumstances and style. ‡ Basic intention is to earn an income for themselves & their families. g. Mompreneurs ‡ Homemaker entrepreneur h. IT Entrepreneurs ‡ DBMS, WWW, hotmail, kundli, portals, KIOSKs. i. Entrepreneurs - intra+entrepreneur
‡ Person within large corporations who takes direct resp -onsibility for turning an idea into profitable finished products through innovations & assertive risk taking

Business Plan
‡ Blueprint of step-by-step procedure

to convert business idea into a business venture. ‡ First of all Identify an innovative idea, researches external environment to list O&T, identifies internal strength and weakness, assesses feasibility of the idea and than allocate resources( production /operation, finance, HRs)

followed successful

‡A business plan is a written description of the goals and objectives of the business and how they are going to be achieved. It includes the mission of the business along with the production, organizing, marketing, and financing intentions ±
‡Is it feasible to operate my own business? ‡Is my business idea feasible?

Why Develop a Business Plan? Or objectives of a business plan 
A business plan is a very important tool if you are starting a new business or expanding an existing one.  The business plan communicates to others how successful you are

going to be.  Lending institutions require them to support loan applications. Experience shows that successful businesses have a plan; the majority that fail do not. A good business plan is your road map to success!  Implementing the plan Objective evaluate the prospects of the business - TOWS Resource requirement for implementation To document owenership arrangement, future prospects, and projected growth rate.

BP Process
Preliminary Investigation Idea Generation Environmental Scanning Feasibility Analysis Project Report Preparation Evaluation Control and Review

1. Idea Generation
‡ Innovative idea, new concept, product or service also incremental value addition. ‡Sources of new ideas ± consumers, existind companies, R&D, employees, dealers, retailers. ‡Methods of generating new ideas ± brain storming, GD, data collections, feedback, invitation of ideas through advertisements, mails or internet, market research, commercializing inventions, business contests, fests, business bazigar on Star TV- contest business plans

2. Environmental Scanning
‡After idea generation, next phase, ‡Environment scanning - both external and internal that includes analysis of perspective TOWS of business enterprise. ‡Sources of information can be both informal(family, friends and colleagues) and formal(bankers, magazines, newspapers, govt deptts, seminars, suppliers, competitors, dealers. ‡Environment scanning focus on maximizing information because more supportive the information, greater is the confidence regarding the success of the business.

External Environment
1. Socio-cultural Appraisal : Social and cultural norms, beliefs, value system, open or close culture, level of rigidity/flexibility of a society toward product /service/concept. Eg Americans are experimenting and adventurous whereas Arabs are conservative. For a innovative product like Bungee jumping acceptability would be more in USA than UAE. 2. Technological know-how to convert the idea into a product, modern technologies expected in the future. Eg. Idea of manufacturing tobacco-free cigarettes, technological appraisal can assess whether this kind of a product is possible or not.

3. Economic Appraisal : Assessment of economy in a given society in terms of inflation, per capita income and consumption pattern, balance of payment, consumer price index etc. Healthy economy offers greater opportunities for growth and development of industry together with confidence to the entrepreneur about the success of his business venture. 4. Demographic Appraisal : OA population pattern in a given geographical region. It includes variables like age, profile, distribution, sex, education profile, income distribution etc. Demographic appraisal help in identifying size of target market

5. Government Appraisal : Assessment of legislation, policies, incentives, subsidies, grants, procedures etc. formulated by government for a particular industry. For eg. Government policies of subcidised electricity in Uttranchal is an added advantage for setting up industry due to its heavy dependence on power. Whereas in UP, electricity is not only expensive but is also of acute shortage, which led entrepreneurs to depend on personal generators, increases cost of the product. Uttranchal is a proffered state for setting up manufacturing units in comparison to UP. ‡ Outcome of the other policies too be taken in to consideration while conducting govt appraisal.

Internal Environment
‡ Raw Material : Assess availability of raw material at present and future, if not adequate/ shortage, serious concern, where is the nearest source and cost involved therein. Production/Operation : Availability of machineries, equipments, tools and techniques required for production/ operations. Finance : Assessment of total requirement of finances in terms of start-up expanses, fixed expanses and running expanses. It also indicates source of finance that can be approached for funding



‡ ‡

Market : It asses the present, potential and future demands of the market. Human Resource : Assessment of the kind of the human resources required and its demand and supply in the market. This helps in estimating the cost and level of competition in hiring and retaining the human resources. Objective of the environment scanning should be Maximizing information from maximum sources for enhanced possibility of success in the business.


3. Feasibility Analysis
‡ Feasibility study is done to find whether the proposed project (considering the above discussed environment appraisal) would be feasible or not. Feasibility study is dependent on environment appraisal yet it is far more descriptive. The variable/dimensions of feasibility analysis Market Analysis Technical/Operational Analysis Financial feasibility Drawing functional plan

‡ ‡ 1. 2. 3. 4.

1. Market Analysis
‡M A is conducted to estimate the demand and market share of the proposed product/service in future. ‡Demand analysis and market share is based on number of factors - consumption pattern, availability of substitute goods/service, competition etc. ‡A preliminary discussions with consumers, retailers, distributors, competitors, suppliers is carried to understand consumer preferences, existing and potential demands, strategy of competitors, and practices of distributors, retailers etc., present and prospective consumers, geographic and seasonality distribution of the demand, marketing mix of competitors, accepted marketing mix of consumers.

‡ ‡

Technical/Operational Analysis

‡ a) b) c) d) e)

Done to assess operational ability of the proposed business enterprise. Key questions to be answered are- what are the technological and equipments needs, from where this technology and equipments be obtained, from where the raw material be obtained. T/O analysis collects information about : Material availability & requirement planning Plant location Plant capacity Machinery and equipment Plant layout

a) Material availability & requirement Planning
‡ ‡ ‡ ‡ ‡ ‡ Assessment of the raw material required for production of goods/service. Quality and quantity of raw material Factors influencing availability of raw material Price sensitivity of raw material Perishable time of raw material Material Requirement Planning i.e. quantity of material required to let the production run smoothly.

b) Analysis of choice of technology
‡Identify whether product developed at the idea generation stage is technologically feasible or not. ‡ Answers whether a technology for the product exists or not, if exists in more than one form, which one would be more profitable to the company. ‡Choice of the technology would be affected by ; capacity of the plant, amount of investment, production cost, latest development, quantity of planned production, impact of environment.

b) Analysis of choice of technology
‡ ‡ Identify whether product developed at the idea generation stage is technologically feasible or not. Answers whether a technology for the product exists or not, if exists in more than one form, which one would be more profitable to the company. Choice of the technology would be affected by ; capacity of the plant, amount of investment, production cost, latest development, quantity of planned production, impact of environment.



Plant location : Area(broad) where the enterprise is to be established, like city, industrial zone or coastal area. Plant location is the physical layout of the business and is affected by process of production, safety of personnel, minimum production cost, scope of expansion, proper space utilization etc. Location choice is influenced by following factors : i) Proximity to raw material and markets ii) Availability of infrastructure like power, transportation, water, communication means. iii) Favorable government policies

i) ‡

Other factors like climate conditions, availability of manpower etc. Machinery and equipment : Machinery and equipment is dependent on production technology, plant capacity, investment cost of buying, , maintenance and running cost.

Financial Feasibility
‡ Financial feasibility is done for financial assessment of the proposed business venture. Following cost estimates have to be carried out : i) Cost of land and building ± depending upon the requirement and availability of funds, the land and building can be hired, taken on lease or purchased. ii) Cost of plant & machinery-estimating cost of plants & machineries and their running & maintenance. iii) Preliminary cost estimation ± cost required for conducting market survey, preparing feasibility report, registration expenses, expenses involved in raising capital from public & other misc expanses.

Financial Feasibility
‡ Financial feasibility is done for financial assessment of the proposed business venture. Following cost estimates have to be carried out : i) Cost of land and building ± depending upon the requirement and availability of funds, the land and building can be hired, taken on lease or purchased. ii) Cost of plant & machinery-estimating cost of plants & machineries and their running & maintenance. iii) Preliminary cost estimation ± cost required for conducting market survey, preparing feasibility report, registration expenses, expenses involved in raising capital from public & other misc expanses.

iv) Provision of Contingencies : Needs to be made to cover certain unexpected expanses which can emerge due to change in external environment like increase in the price of the raw material, petrol price, transportation costs. v) Working capital estimates for running the business are also made. vi) Cost of Production ± It include raw material cost, labour cost, overhead expanses, utilities like power, water, fuel etc. vii) Sales and Production estimates : Based on the plant capacity the production and sales estimates are made which help in estimating profitability.

vii) Profitability projections are made on the following parameters a. Cost of production b. Sale expenses c. Administrative expanses d. Expected sales e. Calculation of the above gives gross profit

Drawing Functional Plan
‡ After feasibility study, functional plans are drawn which means developing plans and strategies for all operational areas : marketing, finance, HR and production. a) Marketing Plan : MP lays down the strategies of marketing (Marketing mix) which can lead to success of business. From the market feasibility study and marketing research, potential/present demand of customers, which helps in laying down the strategies for market segmentation, identification of target market and laying down strategies for the target market.

b) Production/operation Plan : Production plans are drawn for manufacturing whereas operational plans are for service sector. It includes strategies for following parameters : 1. Location and reasons for selecting the locations 2. Physical layout 3. Cost & availability of machinery, equipments, raw material 4. List of suppliers and if possible, distributors. 5. Cost of manufacturing / running operations 6. Quality management 7. Production scheduling, capacity mgt,inventory mgt

c) Organisational Plan : Defines the type of ownership, organization structure and proposes HRM practices that would govern the successful running of proposed business enterprise. d) Financial Plan : Financial Plan indicates the financial requirement of the proposed business 1. Cost incurred in smooth running of all the plans ± financial, marketing, operations and HRs. For eg. Cost incurred in the marketing plan would include forecasting sales, for production plan it includes cost of goods, for organizational plans it includes cost of compensation to employees.

2. 3. 4. 5. 6.

Projected cash flows. Projected income statement Projected break-even point Projected ratios. Projected Balance sheet.

Project Report Preparation
‡Written document that describes sep-by-step, strategies involved in starting and running a business. ‡Project report helps to understand the opportunities, problems and weakness of the business. ‡ It guides the entrepreneur in actually starting up and running the business venture. ‡ Helps to monitor whether the business is going to be as projected in the business plan or not. ‡ Helps in documenting cost estimates of the business. ‡Handy tool to persuade investors and financial institutions to fund a project.

Essentials of a Project Report
1. 2. 3. 4. 5.
6. 7. 8. 9.

The project report should be sequentially arranged. It should be exhaustive(covering all the details). Should logically & objectively explain projections Projections should be appropriately for 2 to 10 yrs Should professionally made to demonstrate that
promoters posses entrepreneurial acumen, experience. Should justify financial needs & financial positions Should also justify market prospects and demands Should be attractive to the financial agencies and investors. Should also have a high aesthetic value.

Preparing a Project Report
1. Cover Sheet : It mentions the name of the project, address of the headquarters (if any) and name and address of the promoters. 2. Table of Contents : A Good Project report should be divided in to sections eg. 1,2,3 or I, II, III or A,B,C and each section into subsections eg. 1.1, 1.2, 1.3 or I-i, I-ii,I-iii or A-a.A-b,A-c. No matter which method is used for classification but once a method is selected than uniformly adopted for entire project report.

3. Executive Summary : A brief summary should about 2 to 3 pages. Briefly describe the company, mention some financial figure and some salient figures of the project. Generating interest in the minds of the readers is the prime motive of the executive summary. 4. The Business : This will give the details about the business concept. It will discuss the objective of the business, brief history about the past performance, form of ownership along with the proposed headquarters.

5. Funding Requirement : To address to the investors and financial institutions, a careful, well planned, funding requirement should be documented. It is also necessary to project how these requirements would be fulfilled. Debt equity ratio can give an indication about how much finance would company require and how it would like to fund the project. 6. The Product/Services : Description of product/ service, features, product range, and advantages in comparison to available product in market.It also give details about patents, trademarks, copyrights, franchise & licensing agreements.

7. Function plans : Functional plans for Marketing, finance, human resources, and operations. a. Marketing Plan : Marketing mix strategies on the basis of MR MR ± market characteristics and demography, SWOT of market and competitors. Marketing mix strategies for product/service, price, promotion, distribution. The budget for the marketing plan are drawn at an end.

b. Operational plan : Give information about i) plan location, reason for the selection thereof ± vicinity of the market, suppliers, labour, availability of raw material, machinery, or does it have advantages of the govt. subsidies or any other. ii) Plant layout to provide a pattern of arrangement of the organisation and would indicate exhaustive planning of the business. iii) Plan for material requirement, inventory management and quality quality control are drawn for identifying further costs and intricacies of the business. Finally the budget for operational plan is also drawn.

c. Organisational Plan : The organisationa plan indicates the pattern of flow of responsibilities and duties amongst people in the org. Detail about the BOD, it can also enlist the manpower plan that would be required to put life into the company and it will also enlist laws that would be governed in managing the employees of the org. In the end the org plan is also budgeted. d. Financial Plan : Usually drawn for 2 to 5 years for a existing company. A summary of financial data is given, whereas for new org, the following projections are drawn ;

i) Projected sales ii) Projected Income and expenditure statement. iii) Projected break even point iv) Projected profit and loss statement. v) Projected Balance sheet. vi) Projected cash flows. vii) Projected fund flow. viii)Projected ratios.

8. Critical Risks : The investors are interested in knowing the tentative risks to evaluate the viability of the project and to measure the risk involved in the business. 9. Exit Strategy : Details about how the organization would be dissolved, what would be the share of the each stakeholder in case of winding-up of the organization. It further help in measuring the risk involved in investing. 10. Appendix : Information about the CV of the owners, ownership agreement, certificate from pollution board, MOU, AOA and all other supporting agreements/documents that can help in marketing the project viability at large.

Key Components of a Business Plan

The business plan covers six key areas:
The Industry, the Company, and the Products Market Research and Analysis Marketing Plan Operating Plan Management Team Financial Plan

The Industry, the Company, and the Products
This section of the business plan describes the business venture in a detailed but concise manner. You must clearly describe: 

The nature of the industry  The proposed business  The product the business plans to offer

The Industry

Present the current status and outlook for the industry in which the business will operate.  New products and developments  New markets and customers  General trends affecting the business  Identify sources of information used to describe trends

The Company

Write a detailed description of the proposed business venture, the products and services it will offer, and the principal customers.  Mission statement with goals and objectives  Ownership and legal form of the company  Reasons why the business will be successful

The Products or Services

Describe in detail the products or services to be sold, as well as the application of the product or service. Benefits to the customers Competitive advantages Unique features Current state of development

Market Research and Analysis
This section of the business plan presents enough facts obtained through market research and analysis to determine if the product or service has a substantial market in a growing industry despite a competitive market.  Customers  Market Size and Trends  Competition  Market Share and Sales

Types of Market Research
PRIMARY RESEARCH = DO IT YOURSELF:  Observation  Surveys  Interviews SECONDARY RESEARCH = USE EXISTING DATA:         Public Library College or Universities Chamber of Commerce Business Publications Trade Shows The Internet Census Information Sales Tax Data

Types of Market Analyses
The information obtained through primary and secondary research techniques can be analyzed in a variety of ways.  Economic Trend Analysis  Political and Social Analysis  Customer Analysis  Market Potential Analysis  Competitive Analysis

Identify your target market and develop a customer profile. Demographic profile Lifestyle patterns Expectations

Customer Profile
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Age Income Education Gender Stage of business Type of business Size of business Location Behavior patterns Customer expectations Other ??? 

Who is your target audience?  How will you reach this audience?

Market Size and Trends
Describe the primary market for the product, both geographically and in terms of sales volume.  Describe seasonal fluctuations  Discuss potential for growth  Discuss factors affecting growth


List the strengths and weaknesses of competitive products and services and list the companies that supply them.  Identify and list current and future competitors  Assess the competition on the basis of price, quality, performance, service, etc.  Discuss advantages and disadvantages of competing products or services

Market Share and Sales

Summarize what it is about your product or service that will make it sell in the face of current and future competition.  Identify and list major customers and estimate potential sales  Estimate share of the market  Estimate sales in units and dollars for the next two to five years

Marketing Plan
This section of the business plan describes the company¶s marketing goals and objectives and how they will be achieved.  Overall Market Strategy  Pricing  Sales Tactics  Advertising and Promotion  Packaging  Marketing Plan Outline

Overall Market Strategy

Describe the general marketing philosophy and strategy of the company. 4 Derived from market research and analysis results 4 Include discussion of markets targeted for sales promotions 4 List short-term and long-term marketing objectives 4 Discuss specific marketing tactics

The pricing strategy selected can mean the difference between success and failure.  Provide a detailed description of the pricing strategy for each product or service  Outline factors considered in developing pricing strategies  Discuss wholesale vs. retail pricing strategies  Discuss price levels, geographic terms, discount policies, etc.

Sales Tactics

Describe specific actions that will be taken to generate sales and distribute the product or service to customers.  Analyze effectiveness of everything available within the sales system  List channels such as salespeople, agents, dealers, and direct mail services  Describe methods that will be used to distribute products to customers  Describe merchandising techniques

Advertising and Promotion

Describe approaches the company will use to bring the product or service to the attention of the target market. List advertising methods along with benefits and costs Discuss promotional efforts and strategies Publicity


Describe how the product will be packaged for the target market.

Package design Package labeling Packaging materials

Marketing Plan Outline
A marketing plan outline is a useful tool for pulling together information related to the marketing plan. The marketing plan outline should include information on the following:  Marketing situation  Marketing objectives  Marketing Strategies  Budget  Action plan  Evaluation

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