Entrepreneurship Development

Module 2:
Developing Business Model

Aiswarya D Pillai
Entrepreneurship Development 27-01-2023 1

Introduction
• Every business or companies makes a plan for generating profit. They create a
model for identifying products and services to sell, the market they want to
target and also take into account anticipated expenses. This is known as
business models.
• Even if the business is already established or even if it is a new business, plan
needs to be made. Businesses need to regularly update their plans and strategy
as they need to take into accounts the challenges and trends for the future
models.

• A business model is a company's core strategy for profitably doing business.
• Models generally include information like products or services the business
plans to sell, target markets, and any anticipated expenses.
• There are dozens of types of business models including retailers,
manufacturers, fee-for-service, or freemium providers.
• The two levels of a business model are pricing and costs.
• When evaluating a business model as an investor, consider whether the
product being offer matches a true need in the market.

Importance of Business Model
• A business model performs an important role in the success of any

business because it describes how the business will generate
revenue. A business model helps in getting investors and
developing partnerships for entrepreneurs.
• Possessing a clearly designed business model is important because
it serves the following purposes:

• Gives a continuous extension of feasibility analysis (a business
model keeps asking the question, is the business feasible?)
• Concentrates on the way all the elements of a business come
together and how they form a working whole.
• Explains the reason for the network of participants required to
form a business idea viable for working together.
• Demonstrates the core logic of a business to all stakeholders,
including the business’s employees.

Types of Business Model
Business 2 Business Business 2 Subscription Based On Demand
Model Consumer Model Business Model Business Model
• When the dealing • Business to • Any application • Under this type of

or transaction customer business based businesses business model, it
takes place model is a that or software is prepared in such
between two refers to companies have a way where all
companies or the businesses that sell subscription based the questions will
business then thus their services or business models. be answered by
type of business product directly to They offer there just a click way.
model is known as the consumer who product as a
business to are the end users onetime purchases,
business model. of the products or in return company
services. earns monthly or
annual revenues.

Small Scale Industry
• According to the revised classification of MSME act 2006 which came in
force w.e.f. July 2020, manufacturing or service enterprises having investment
of not more than 10 crore in plant and machinery and/or having an annual
turnover of not more than 50 crore will be classified as small enterprises.
• Small Scale Unit refer to an industrial undertaking in which the investment in
plant and machinery, whether held on ownership terms or on lease or on hire-
purchase, does not exceed rupees one crore.
• A unit with an obligation to export at least 30% of its annual production by
the end of the third year from the date of commencement of production and
having investment 1 ceiling as prescribed for small scale undertakings, i.e., up
to Rs. 1 crore in plant and machinery, is termed as export oriented small
scale industrial unit.

• Ancillary Industrial Undertaking refers to an industrial undertaking which is
engaged or is proposed to be engaged in the manufacture or production of
parts, components, sub-assemblies, tooling or intermediaries or the rendering
of services and undertaking supplies or renders or proposes to supply or
render, not more than 50% of its production or services, as the case may be, to
one or more other industrial undertakings and whose investment in plant and
machinery, whether held on ownership terms or on lease or on hire-purchase,
does not exceed rupees one crore.
• Tiny Enterprise refers to an industrial undertaking where the investment in
plant and machinery does not exceed Rs. 25 Lakh, irrespective of its location.

Importance of SSI
• Small is beautiful: Easy to manage and monitor. It helps in utilizing local
labour and resources in a very efficient manner.
• Innovative : New ideas with less investment and with no R&D. It is known
that tiny groups tend to outperform than larger labs with hundreds of people.
• Productive: Productive use of products where products can be made from by
products or recycled items which could be better utilised with innovative
ideas.
• Symbols of National Identity: Small enterprises are almost locally owned
and controlled they can strengthen extended family and other social systems,
values etc.

• Individual taste and Fashion: helps in quickly and easily knowing the
changing trends and fashions of consumers in adjusting production process
and production accordingly.
• Happy work environment: as small enterprises provide happy work
environment with better working facilities.
• Always winners of the Game: SSI has exploited all sectors of market and is
successful in making a benchmark.
• Dispersal over wide Areas: They are dispersed over wide areas by playing a
major role in industrialization of developing countries since they have shorter
gestation and lower investments

Business Model
•A very clear and detailed definition of a business model is given by

Osterwalder, Pigneur and Tucci (2005):
• A business model is a conceptual tool that contains a set of elements and
their relationships and allows expressing the business logic of a specific
firm. It is a description of the value a company offers to one or several
segments of customers and of the architecture of the firm and its network
of partners for creating, marketing, and delivering this value and
relationship capital, to generate profitable and sustainable revenue.

Reasons, why a business model is important
• define where the business is in the value chain
• determine what the consumer gets out of it
• determine the future of a business
• whether it succeeds or fails
• achieve success of any business
• create a foundation for optimizing innovative technology
• test out a new idea to see if it holds real promise of success
• create a clear statement of the business mission and vision
• create a set of values that can help to steer business
• create a clear-eyed analysis of the industry, including opportunities and
threats
• create a portrait of potential customers
• create a roadmap and timetable for achieving goals and objectives
• form a description of the products and services that are offered
• form an explanation of marketing strategies
• create a handbook for new employees describing the company and its
activities
• createa résumé that can be used to introduce the business to suppliers,
vendors, or lenders.

Osterwalder Business Model Canvas

• The Business Model Canvas is a strategic management template that helps
businesses to describe, design and analyze their business models.
• The canvas was invented by Alex Osterwalder, a Swiss business theorist and
entrepreneur as a part of his PhD research. The Business Model Canvas was
elaborated in a book called Business Model Generation co-authored with his
graduate supervisor Yves Pigneur, a Belgian computer scientist.
• The model is in the form of a visual chart with various elements that describe
the value proposition of an organisation, its infrastructure, market and
finances. The objective of the model is to assist firms to align their activities
through the illustration of potential trade-offs.

• The first building blocks are customer segments (CS)
• A company serves one or several customer segments – mass market,
market niche, etc.
• E.g.: a group of teenagers buying a specific brand; apple users
• The second building block is value proposition (VP)
• It solves customers’ problems
• E.g.: price, speed of service, design, functionality, etc.
• The third building block are channels (CH)
• Value propositions are delivered to customers through communication,
distribution, sales channels
• E.g.: own stores, online store, agents, wholesalers, etc.
• The fourth building block are customer relationships (CR)
• These are relationships that the company establishes with specific customer
segments
• E.g.: personal sales, self-service, automated services, co-creation, communities,
etc.
• The fifth building block is revenue stream (RS)
• It shows how a company generates cash flow, how it makes money
• E.g.: use of assets, user fee, membership fee, commission, advertising, loaning,
leasing, renting, licensing, etc.
• The sixth building block are key resources (KR)
• They answer the questions of what we need to make a business model work
• E.g.: intellectual capital – know-how, patents, licenses, human, physical and
financial resources
• The seventh building block are key activities (KA)
• They answer the questions of what the company needs to do to make a business
model work
• E.g.: problem-solving, product development, supplier management,
manufacturing, sales, marketing, etc.
• The eighth building block are key partnerships (KP)
• Some activities are ensured through partners (outsourced), some from the
company.
• E.g.: a network of suppliers and partners enabling the functioning of the business
model, e.g. strategic connections between competitors, non-competitive
companies, joint companies – all so as to optimize operations
• The final, ninth, building block is cost structure (CS)
• It describes all costs incurred to operate a business model – from payment for
patents, salaries, payments to suppliers for inventories of material, advertising,
interests onDevelopment
Entrepreneurship loans, rent, etc. 27-01-2023 19
Example of a business model – Apple, iPod/iTunes
• Key partners: record companies
• Key activities: hardware design, marketing
• Key resources: the apple brand, people, iTunes software, iPod hardware,
content and agreements.
• Value proposition: endless music experience
• Customer relationships: love mark
• Channels: retail, apple.com, apple stores
• Customer segments: mass market
• Revenue stream: revenue from hardware sales, revenue from music
• Costs: employees, manufacturing, marketing and sales
The 9 building blocks of the Business Model
Canvas

Desirability Viability Feasibility
Value Propositions Key Resources
Revenue Streams
Customer
Segments
Key Activities
Channels
Cost Structure
Customer Partnerships
Relationships

Business Plan
• A business plan is the blueprint of the step-by-step procedure that would be

followed to convert a business idea into a successful business venture.
•A business plan first of all identifies an innovative idea, researches the
external environment to list the opportunities and threats, identifies internal
strengths and weakness, assesses the feasibility of the idea and then allocates
resources (production/operation, finance, human resources) in the best
possible manner to make the plan successful.

Business Planning
• Business Planning is the first step towards a successful enterprise. Business

Planning includes deciding what products or services you would like to offer,
the place where you would like to start the business, analyzing competition,
estimating demand and creating the financial model.
• Business planning is an ongoing activity and should be updated whenever
internal or external factors change.

Objectives of a Business Plan
• To give directions to the vision formulated by entrepreneur.
• To objectively evaluate the prospects of business.
• To monitor the progress after implementing the plan.
• To persuade others to join the business.
• To seek loans from financial institutions.
• To visualize the concept in terms of market availability, organizational, operational and
financial feasibility.
• To guide the entrepreneur in the actual implementation of the plan.
• To identify the strengths and weakness of the plan.
• To identify challenges in terms of opportunities and threats from the external markets.
• To clarify ideas and identify gaps in management information about their business,
competitors and the market.
• To identify the resources that would be required to implement the plan.
• To document ownership arrangements, future prospects and projected growths of the
Preparing a Business Plan:
•A plan, which looks very lucrative/ feasible at the first instance, might
actually not be when the details are drawn. Hence documenting the business
plan is one of the early steps that an entrepreneur should take.
• The various steps involved in preparing a business plan are:
(a) Preliminary Investigation
(b) Business Planning Process

Steps in Business Planning Process
Preliminary Idea Environmental

Investigation Generation Scanning
Evaluation,
Project Report Feasibility
Control and
Preparation Analysis
Review

ENVIRONMENTAL SCANNING
• Socio-Cultural
• Technological
External • Economic
• Demographic
• Governmental
• Raw Material
• Production/ Operation
• Finance
Internal
• Market
• Human Resources

Advantages of Business Planning:
• Business Planning helps the Company to formulate objectives and goals
clearly. The company formulates objectives after discussing thoroughly with
superiors, colleagues and sub-ordinates. These objectives help the company to
achieve stability of business and maximize profits.
• Business planning helps to avoid piece-meal approach and to have integrative
approach.
• Business planning helps to view the organization in total rather than
department-wise.
• Business plan aims at the long-range plan rather than short-range plan.
• Business plan integrates the company plan with the national plans and
priorities.

• Business plan takes into consideration the environmental factors.
Technological factors influence the business plan significantly. Technology
has been upgraded continuously. The changes in technology are pivotal,
resulting in high technology.
• A good business plan helps an organization to be aware of the changes in
political trends and their impact in business at national and international
levels.
• Effective business plan helps the company to achieve its objectives and goals.
• Effective business plan certainly contributes for the achievement of high rate
of profits and increases in earning per share.
• Business plan helps to determine potential growth and profit.

Final Project Report with Feasibility Study
- Preparing a Model Project Report for starting a New
Venture:
PROJECT REPORT PREPARATION:
• A 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.
• It helps him to monitor whether the business is growing as was projected in the
business plan or not.
• It helps in documenting the cost estimates of the business. It can be used as a handy
tool to persuade investors and financial institution to fund the project.
• It can help in proper utilization of all the resources. It can keep the morale of
employees, owners and investors up.
• It can finally lead to a sustainable development of the organization.
Essentials of a Project Report
• The project report should be sequentially arranged.
• The project report should be exhaustive (covering all the details about the proposed
project).
• The project report should not be very lengthy and subjective.
• The project report should logically and objectively explain the projections.
• The projections should be appropriately be made from two to ten years.
• The project report should be professionally made to demonstrate that the promoters
possess entrepreneurial acumen and sound experience.
• The project report should justify the financial needs and financial projections.
• The project report should also justify market prospects and demands.
• The project report should be attractive to the financial agencies and investors.
• The project report should also have a high aesthetic value.

PREPARING A PROJECT REPORT
• Cover Sheet: Cover sheet is like the cover page of the book. It mentions the
name of the project, address of the headquarters (if any) and name and
address of the promoters.
• Table of Contents: Again, the table of contents is like the table of contents of
a book; it guides the person reviewing the project report to the desired section
quickly. A good methodology would be to divide the project report into
sections and number or label the sections like 1, 2, 3 or I, II, III or A, B, C and
then divide each section into subsections by using numerals after the decimal
like 1.1, 1.2, 1.3 or I-1, II-2, III-3 or A-a, B-b, C-c. No matter which method
is used for classification, once a method is picked up the entire report should
uniformly adopt the same procedure.

• Executive Summary: Executive summary is the first impression about the
business proposal. As the saying goes, the first impression is the last
impression. A careful presentation of information should be done to attract the
attention of the evaluators. It should be in brief (not more than two or three
pages) yet it should have all the factual details about the project that can
improve its marketability. It should briefly describe the company; mention
some financial figures and some salient features of the project. Generating
interest in the minds of the readers is the prime motive of the executive
summary.
• The Business: This will give details about the business concept. It will
discuss the objective of the business, a brief history about the past
performance of the company (if it is an old company), what would be the
form of ownership (whether it would be a single proprietor, partnership, co-
operative society or a company under company law). It would also label the
address of the proposed headquarters.
• Funding Requirement: Since the investors and financial institutions are one
of the key bodies examining the project report and it is one of the primary
objectives of preparing the project report, a careful, well-planned funding
requirement should be documented. It is also necessary to project how these
requirements would be fulfilled. Debt equity ratio should be prepared, which
can give an indication about how much finance would the company require
and how it would like to fund the project.
• The Product or Services: A brief description of product/services is given in
this subsection. It includes the key features of the product, the product range
that would be provided to the customers and the advantages that the product
holds over and above the similar products/ substitute products available in the
market. It also gives details about the patents, trademarks, copyrights,
franchises, and licensing agreements.

• The Plan: Now the functional plans for marketing, finance, human resources and
operations are to be drawn.
• Marketing Plan: Marketing mix strategies are to be drawn, based on the market
research. The market research will provide information about the following
parameters:
• Market demography like profiles of customers and end-users; preferences and
needs of the customers
• Strengths and weaknesses of competitors
• SWOT analysis of the market: A thorough market research is the backbone of
success and failure of any product in the market. Based on the information
collected through market research, marketing mix strategies for product/services,
price, promotion and distribution are presented meticulously and reasons are
displayed in relation to why the targeted market is so attractive. How can the
market provide gains to the organization? What marketing strategies would
ultimately lead to the success of the organization? The budgets for the marketing
plan are drawn at the end. 36
Entrepreneurship Development 27-01-2023
• Operational Plan: The operational plan would give information about Plant
location: why was a particular location chosen: Is it in the vicinity of the market,
suppliers, labour or does it have an advantage of government subsidies for that
particular location or are there any other specific reasons for choosing the particular
location. ii) Plant layout is also at times mentioned in the project report to provide a
pattern of arrangement of the organization and would indicate the exhaustive
planning for the business iii) Plan for material requirements, inventory management
and quality control are also drawn for identifying further costs and intricacies of the
business. Finally, the budget for operational plan is also drawn.
• Organizational Plan: The organizational plan indicates the pattern of flow of
responsibilities and duties amongst people in the organization, it provides details
about the board of directors, it can also enlist the manpower plan that would be
required to put life into the company and it would also enlist the details about the
laws that would be governed in managing the employees of the organization. In the
end the organizational plan is also budgeted.

• Financial Plan: The financial plan is usually drawn for two to five years for an
existing company. A summary of previous financial data is given, whereas for a new
organization the following projections are drawn:
• Projected Sales
• Projected Income and Expenditure Statement
• Projected Break Even Point
• Projected Profit and Loss Statement
• Projected Balance Sheet
• Projected Cash Flows
• Projected Funds Flow
• Projected Ratios

• Critical Risks: The investors are interested in knowing the tentative risks to
evaluate the viability of the project and to measure the risks involved in the
business. This can further give confidence to the investors as they can
calculate the risks involved in the business from their perspectives as well.
• Exit Strategy: The exit strategies would provide details about how the
organization would be dissolved, what would be the share of each stakeholder
in case of winding-up of the organization. It further helps in measuring the
risks involved in investing.
• Appendix: The appendix can provide information about the Curriculum Vitae
of the owners, Ownership Agreement, Certificate from Pollution Board,
Memorandum of Understanding, Articles of Association and all the
supporting agreements/documents that can help in marketing the project
viability at large.

FEASIBILITY STUDY
• As the name implies, a feasibility study is an analysis of the viability of an

idea. The feasibility study focuses on helping answer the essential question of
“should we proceed with the proposed project idea?” All activities of the
study are directed toward helping answer this question.
• Feasibility studies can be used in many ways but primarily focus on proposed
business ventures. Farmers and others with a business idea should conduct a
feasibility study to determine the viability of their idea before proceeding with
the development of a business. Determining early that a business idea will not
work saves time, money and heartache later.

• A feasible business venture is one where the business will generate adequate
cash-flow and profits, withstand the risks it will encounter, remain viable in
the long-term and meet the goals of the founders. The venture can be either a
start-up business, the purchase of an existing business, an expansion of
current business operations or a new enterprise for an existing business. A
feasibility study is only one step in the business idea assessment and business
development process.
• Importance of feasibility study:
• Conducting a feasibility study is a good business practice. If you examine
successful businesses, you will find that they did not go into a new business
venture without first thoroughly examining all of the issues and assessing the
probability of business success.

Below are other reasons to conduct a feasibility study.
• Gives focus to the project and outline alternatives.
• Narrows business alternatives
• Identifies new opportunities through the investigative process.
• Identifies reasons not to proceed.
• Enhances the probability of success by addressing and mitigating factors early
on that could affect the project.
• Provides quality information for decision making.
• Provides documentation that the business venture was thoroughly
investigated.
• Helps in securing funding from lending institutions and other monetary
sources.
• Helps to attract equity investment.
Types of feasibility study:
• Technical feasibility
• Managerial feasibility
• Economic feasibility
• Financial feasibility
• Cultural feasibility
• Social feasibility
• Safety feasibility
• Political feasibility
• Environmental feasibility
• Market feasibility
Format of A Project Report
• Cover Sheet (name of company, address, promoters)
• Table of Contents
• Executive Summary (2-3 pages)
• The Business
• Objective for setting up business
• Brief history of past performance (if any.)
• Form of ownership
• Name, qualification of the owners
• Proposed/actual headquarters
• Proposed/actual capital structure

• The Funding Requirements
• Debt
• Equity
• The Product/Service
• Description of product/service
• Comparative analysis with similar products/ substitute products
• Patents, trademarks, copyrights, franchises, and licensing agreements

• The Plan
• Marketing plan
• Market demography, like profiles of customers and end-users; preferences
and needs
• Strengths and weaknesses of competitors
• SWOT Analysis of the market
• Marketing Mix Strategy
• Product Mix Strategy
• Promotion Mix Strategy
• Pricing Mix Strategy
• Distribution Mix Strategy
• Operational Plan
• Plant Location
• Plant Layout
• Material Requirement
• Inventory Management
• Quality Control
• Organizational Plan
• Organizational Chart
• Details About the Board Of Directors
• Manpower Planning
• Legal Aspects of Labour

• Financial Plan For Two-Five years
• For existing companies, a summary of previous financial data
• Projected Sales
• Projected Income and Expenditure Statement
• Projected Break Even Point
• Projected Profit and Loss Statement
• Projected Balance Sheet
• Projected Cash Flows
• Projected Funds Flow
• Projected Ratios
• Critical Risks
• Exit Strategy
• Appendix
• Curriculum Vitae of the owners
• Ownership Agreement
• Certificate from pollution board
• Memorandum of Understanding
• Articles of Association
• Other documents that help in marketing the project viability.

THANK YOU

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Module 2:

Developing Business Model

Entrepreneurship Development 27-01-2023 1

Entrepreneurship Development 27-01-2023 2

Entrepreneurship Development 27-01-2023 3

• A business model performs an important role in the success of any

Entrepreneurship Development 27-01-2023 5

Entrepreneurship Development 27-01-2023 6

• When the dealing • Business to • Any application • Under this type of

Entrepreneurship Development 27-01-2023 7

Entrepreneurship Development 27-01-2023 8

Entrepreneurship Development 27-01-2023 9

Entrepreneurship Development 27-01-2023 10

Entrepreneurship Development 27-01-2023 11

•A very clear and detailed definition of a business model is given by

Entrepreneurship Development 27-01-2023 12

Entrepreneurship Development 27-01-2023 14

Entrepreneurship Development 27-01-2023 15

Entrepreneurship Development 27-01-2023 16

Entrepreneurship Development 27-01-2023 21

Entrepreneurship Development 27-01-2023 22

• A business plan is the blueprint of the step-by-step procedure that would be

Entrepreneurship Development 27-01-2023 23

• Business Planning is the first step towards a successful enterprise. Business

Entrepreneurship Development 27-01-2023 24

Entrepreneurship Development 27-01-2023 26

Preliminary Idea Environmental

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• As the name implies, a feasibility study is an analysis of the viability of an

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