Unit-01

Entrepreneurship Development

Entrepreneurship: One who organizes, manages, and assumes the risks of a business or

enterprise

Definition of Entrepreneurship by Different Scholars

These views may be classified as follows:

1. Entrepreneurship as risk-taking capacity.

2. Entrepreneurship as an organization building ability.

3. Entrepreneurship as group level reactiveness.

4. Entrepreneurship as functions of organizations and coordination.

5. Entrepreneurship as managerial skills.

6. Entrepreneurship as the capacity for high achievements.

7. Entrepreneurship as innovative functions and innovative ability, and

8. Entrepreneurship as leadership functions.

Entrepreneurship Development

Entrepreneurial Development Programme means the programme designed to help a person in

strengthening his entrepreneurial motive and in acquiring skills & capabilities necessary for

playing his Entrepreneurial role effectively

Introduction of SSI

Essentially the small scale industries are generally comprised of those industries which

manufacture, produce and render services with the help of small machines and less manpower.

These enterprises must fall under the guidelines, set by the Government of India.

The SSI’s are the lifeline of the economy, especially in developing countries like India. These

industries are generally labour-intensive, and hence they play an important role in the creation of

employment. SSI’s are a crucial sector of the economy both from a financial and social point of

view, as they help with the per capita income and resource utilisation in the economy.

The Growth of Small Scale Industries

Small-scale industries in India and abroad exhibited with proficient lustiness

and Adaptability in maintaining an unswerving rate of growth and employment

accentuation during the global recession and economic slowdown. The Indian economy

during the current fiscal years has shown considerable growth performance by contributing to

creating livelihood facilities to millions of people, in amplifying the export potential and in

enhancing the overall economic growth of the country. As a catalyst to the socio-economic

transformation of the country, the SSI dynamically paramount in addressing the national

objective of bridging the rural-urban divide, alleviate poverty and generating employment for the

deserving community of the country.SSI sector encompasses almost about 80% of the total

industrial units in the country. In India, SSIs occupy 36 million units, contribute to 45% of

industrial production, 40% to the export sector through more than 6000 products ranging
from traditional to high-tech and employs to about 80 million persons. Hence the

small scale industries (SSI) in a developing country like India occupy a distinct place in

the industrial structure. Given the vast potential of small-scale industries, the government has

given this sector a significant place in the framework of Indian economic planning for

economical as well as ideological dimensions.

ROLE AND IMPORTANCE OF SSI

Small scale industries are those industries in which production, manufacturing and providing the

services are executed on a small or micro scale.

In a country like India, the small scale industries play a very important role in generating

employment, improving the financial status of people, development of rural areas and removing

the regional imbalances.

Let us look into the roles and importance of small scale industries in India:

1. Employment generation: Small scale industries are one of the best sources of employment

generation in India. Employment is one of the most important factors that determines the growth

of a nation. Therefore, development of small scale industries should be encouraged for the

development of more employment opportunities in the nation.

2. Less Capital Requirement: Small scale industries are less capital intensive than the large

scale industries. Capital is scarce in developing countries like India and therefore, small scale

industries are most suitable for maintaining the balance.

3. Use of resources and development of entrepreneurial skills: Small scale industries allow

for the development of entrepreneurial skills among the rural population which is not having the

scope of large scale industries. These industries help in the appropriate use of the resources

available in the rural areas, which leads to development of rural areas.

4. Equal income distribution: Small scale industries by generating employment opportunities

create equal income opportunities for the youth of the underdeveloped areas. This leads to the

growth of the nation in terms of employment, human development.

5. Maintains regional balance: It has been seen that large scale industries are mostly

concentrated in the large cities or restricted to areas which leads to migration of people in search

of employment to these cities. The result of such a migration is overcrowding of the city and

damage to the environment. For sustaining a large population, more of natural resources need to

be utilised.

6. Short production time: Small scale industries have a shorter production time than the large

scale industries which results in flow of money in the economy.

7. Supporting the large scale industries: Small scale industries help in the growth of the large

scale industries by producing ancillary products for the large industries or producing small

components that will be useful for the assembling of final products by the large scale industries.

8. Improvement in Export: Small scale industries contribute to around 40% of the total exports

done by India, which forms a significant part of the revenue earned from the exports. Small scale

industries work towards increasing the forex reserves of the country that reduces the load on

balance of payment of the country.

9. Reduce the dependence of agriculture: Most of the rural population will be dependent on

agriculture and this creates a burden on the agricultural sector. Small scale industries by

providing employment opportunities to the rural population provides more avenues for growth

and also paves way for a more arranged distribution of occupation

Characteristics of SSI

❖ Ownership SSI’s generally are under single ownership. So it can either be a sole

proprietorship or sometimes a partnership firm.

❖ Management Generally, both the management and the control is with the owner/owners.

Hence the owner is actively involved in the day-to-day activities of the business.

❖ Labor Intensive SSI’s dependence on technology is pretty limited. Hence they tend to

use labour and manpower for their production activities.

❖ Flexibility SSI’s are more adaptable to their changing business environment. So in case

of amendments or unexpected developments, they are flexible enough to adapt and carry

on, unlike large industries.

❖ Limited Reach Small scale industries have a restricted zone of operations. Hence, they

can meet their local and regional demand.

❖ Resources Utilisation They use local and readily available resources which help the

economy fully utilise natural resources with minimum wastage.

 Role in the Indian Economy

Employment SSI’s are a major source of employment for developing countries like India.

Because of the limited technology and resource availability, they tend to use labour and

manpower for their production activities.

Total Production These enterprises account for almost 40% of the total production of goods and

services in India. They are one of the main reasons for the growth and strengthening of the

economy.

Make in India SSI’s are the best examples for the Make in India initiative. They focus on the

mission to manufacture in India and sell the products worldwide. This also helps create more

demands from all over the world.

Export Contribution India’s export industry majorly relies on these small industries for their

growth and development. Nearly half of the goods that are exported from India are manufactured

or produced by these industries.

Public Welfare These industries have an opportunity to earn wealth and create employment.

SSIs are also important for the social growth and development of our country.

Seedbed for Large Scale Industries

SSI acts as the seedbed for Large Scale Industries (LSI) as it provides conducive conditions for

the development and growth of entrepreneurs. Small enterprises require low investment and
simple technology and use local resources to meet local demands through personal contacts.

Thus, it creates scope for the growth and development of LSI.

Objectives of SSI

The objectives of the small scale industries are:

❖ To create more employment opportunities.

❖ To help develop the rural and less developed regions of the economy.

❖ To reduce regional imbalances.

❖ To ensure optimum utilisation of unexploited resources of the country.

❖ To improve the standard of living of people.

❖ To ensure equal distribution of income and wealth.

❖ To solve the unemployment problem.

❖ To attain self-reliance.

❖ To adopt the latest technology aimed at producing better quality products at lower costs.

Types of SSI

SSI are primarily categorised into 3 types, based on the nature of work carried out, which are as

follows:

Manufacturing Industries The manufacturing industries manufacture finished goods for

consumption or used further in processing. Some examples of such SSIs are food processing

units, power looms, engineering units, etc.

Ancillary Industries Ancillary industries manufacture components for other manufacturers.

These manufacturers then assemble the final product. Big companies manufacture finished

goods, but they do not generally make all the parts themselves. The vendors of such big

companies are ancillary industries.

Service Industries Service-based industries are not involved in any kind of manufacturing

products. They provide services such as repair, maintenance and upkeep of the products after-

sales.

Other types of SSIs are as follows:

Export Units

An SSI is considered as an export unit when the exporting is more than 50% of its production.

Cottage Units

The cottage units are considered as SSIs when they do not involve a dedicated facility and are

carried out within living spaces or houses of the owners.

Village Industries
An SSI is considered village industries when they are established in rural areas and are not part

of the organised sector. Typically, these industries solely depend on human labour for

production.

Examples and Ideas of SSIs in India

➢ Bakeries

➢ School stationeries

➢ Water bottles

➢ Leather belt

➢ Small toys

➢ Paper Bags

➢ Honey processing

➢ Slippers making

➢ Detergent powder making

➢ Spices making

➢ Chocolate making

Pre-requisites for Establishing SSI

An entrepreneur should pass through the following stages for the establishment of an SSI:

Decision on the Ownership

An entrepreneur wishing to establish an SSI must first decide on the ownership structure of the

SSI. The SSI can be established as a sole proprietorship firm, partnership or company.

Product Selection

Next, entrepreneurs must decide whether the SSI will venture into manufacturing or provide

service, the product/product range that needs to be manufactured and the quantity of production

of products or the service that will be provided.

Location

The location must be selected where the unit is to be established. The size of the plot, exact site,

covered and open area must be decided. Once the location is finalised, the SSI unit should be

established in that location and the business operation can start. The location of the established

unit will be the registered address/primary address of the SSI unit.

Registration

After the unit is established at the decided location, the SSI must obtain the Shop and

Establishment Act registration, company registration, or partnership firm registration, as

applicable. Once the registration is obtained, the establishment can start its business.

SSI Registration

SSI/MSME registration can be applied at any time after the unit obtains the Shop and

Establishment Act registration, company registration, or partnership firm registration. If SSI

registration is applied before production, the turnover and investment details must be mentioned

as zero in the registration application.

If SSI registration is applied after the SSI units start production, then the turnover and investment

details will be automatically filled in the registration application from the ITR of the unit.

Machinery and Equipment

The machinery and equipment required for manufacturing the chosen products or providing

services have to be decided. The machinery and equipment with the latest technology must be

procured and installed in the SSI unit.

Power and Water Connection

The plot where the enterprise is located or SSI unit is established should have adequate power

and water connections. If pollution board permissions are required, all such permissions from the

respective authorities must be obtained for the SSI unit.

Recruitment of Manpower

Once the machines and equipment are installed on the unit and the required permissions are

obtained, the need for manpower arises to run them. The required manpower must be employed

for starting and running the business unit.

Power and Water Connection

The plot where the enterprise is located or SSI unit is established should have adequate power

and water connections. If pollution board permissions are required, all such permissions from the

respective authorities must be obtained for the SSI unit.

Recruitment of Manpower

Once the machines and equipment are installed on the unit and the required permissions are

obtained, the need for manpower arises to run them. The required manpower must be employed

for starting and running the business unit.

PROJECT IDENTIFICATION

DEFINITION

Project identification is a process to assess each project idea and select the project with the

highest priority. It is concerned with collection, compilation and analysis of economic data for

the eventual purpose of locating possible opportunities for investment.

STEPS

Step 1: Defining the goal of a project. Step

2: Individual brainstorm – Identification of the involved Step

3: Group brainstorm: Identification of the involved based on roles.

Step 4: Group brainstorm: Phasing the involvement.

PROJECT CLASSIFICATION

Classification of the project are as following:

1.Quantifiable and Non-quantifiable Projects can be divided into two broader categories namely

quantifiable and non-quantifiable.In a quantifiable project, it is possible to measure the end

benefits or outcomes of the end benefits or outcomes of the project. Whereas in non-quantifiable

end result cannot be calculated properly.

2 .Sector Project The Planning Committee of India has classified projects for various sectors.

❖ Agriculture sector.

❖ Irrigation & Power.

❖ Transport & Communication.

❖ Social Services.

3. Techno-Economic Project

Here project is classified on the basis of technology & Economic Characteristics.

a) Factor intensity oriented classification In this category, projects are either capital intensive

or labor-intensive depending upon their size & investment pattern. For eg: IT project or

service rendering project is labor-intensive depending on their size and investment pattern.

b) b Cause-oriented In this category, projects are based on either the availability of raw material

or demand for that project. For egPower project required, abundant water, steel plant

required iron ore as raw material.

c) Magnitude oriented classification Here the size of an investment is considered depending on

the investment. A project can be classified as a tiny unit investment to 25 lakhs Small-scale

unit investment up to 1 crore. medium scale enterprise investment up to 5 crores or more.

PROJECT LIFE CYCLE

Although projects are unique and highly unpredictable, their standard framework consists of

same generic lifecycle structure, consisting of following phases:

The Initiation Phase: Starting of the project.

The Planning Phase: Organizing and Preparing.

The Execution Phase: Carrying out the project.

The Termination Phase: Closing the project

Project Report

Meaning Project Report is a written document relating to any investment. It contains data on

the basis of which the project has been appraised and found feasible. It consists of

information on economic, technical, financial, managerial and production aspects. It enables

the entrepreneur to know the inputs and helps him to obtain loans from banks or financial

Institutions. The project report contains detailed information about Land and buildings

required, Manufacturing Capacity per annum, Manufacturing Process, Machinery &

equipment along with their prices and specifications, Requirements of raw materials,

Requirements of Power & Water, Manpower needs, Marketing Cost of the project,

production, financial analyses and economic viability of the project.

Contents of a Project Report Following are the contents of a project report.

.1 General Information A project report must provide information about the details of the

industry to which the project belongs to. It must give information about the past experience,

present status, problems and future prospects of the industry. It must give information about

the product to be manufactured and the reasons for selecting the product if the proposed

business is a manufacturing unit. It must spell out the demand for the product in the local,
national and the global market. It should clearly identify the alternatives of business and

should clarify the reasons for starting the business.

2 Executive Summary A project report must state the objectives of the business and the

methods through which the business can attain success. The overall picture of the business

with regard to capital, operations, methods of functioning and execution of the business must

be stated in the project report. It must mention the assumptions and the risks generally

involved in the business.

3 Organization Summary The project report should indicate the organization structure and

pattern proposed for the unit. It must state whether the ownership is based on sole

proprietorship, partnership or joint stock company. It must provide information about the bio

data of the promoters including financial soundness. The name, address, age qualification

and experience of the proprietors or promoters of the proposed business must be stated in the

project report

4. Project Description A brief description of the project must be stated and must give

details about the following:

• Location of the site,

• Raw material requirements,

• Target of production,

• Area required for the workshed,

• Power requirements,

• Fuel requirements,

• Water requirements,

• Employment requirements of skilled and unskilled labour,

• Technology selected for the project,

• Production process,

• Projected production volumes, unit prices,

5. Marketing Plan The project report must clearly state the total expected demand for the

product. It must state the price at which the product can be sold in the market. It must also

mention the strategies to be employed to capture the market. If any, after sale service is

provided that must also be stated in the project. It must describe the mode of distribution of

the product from the production unit to the market.

Project report must state the following:

• Type of customers,

• Target markets,

• Nature of market

, • Market segmentation,

• Future prospects of the market,

• Sales objectives,

• Marketing Cost of the project,

• Market share of proposed venture,

• Demand for the product in the local, national and the global market,

• It must indicate potential users of products and distribution channels to be used for

distributing the product.

6 Capital Structure and operating cost The project report must describe the total capital

requirements of the project. It must state the source of finance, it must also indicate the

extent of owners funds and borrowed funds. Working capital requirements must be stated
and the source of supply should also be indicated in the project. Estimate of total project

cost, must be broken down into land, construction of buildings and civil works, plant and

machinery, miscellaneous fixed assets, preliminary and preoperative expenses and working

capital. Proposed financial structure of venture must indicate the expected sources and terms

of equity and debt financing. This section must also spell out the operating cost.

7. Management Plan The project report should state the following.

• Business experience of the promoters of the business,

• Details about the management team,

• Duties and responsibilities of team members,

• Current personnel needs of the organization,

• Methods of managing the business,

• Plans for hiring and training personnel,

• Programmes and policies of the management.

8. Financial Aspects In order to judge the profitability of the business a projected profit and

loss account and balance sheet must be presented in the project report. It must show the

estimated sales revenue, cost of production, gross profit and net profit likely to be earned by

the proposed unit. In addition to the above, a projected balance sheet, cash flow statement

and funds flow statement must be prepared every year and at least for a period of 3 to 5

years.

The income statement and cash flow projections should include a three-year summary,

detail by month for the first year, and detail by quarter for the second and third years. Break

even point and rate of return on investment must be stated in the project report. The

accounting system and the inventory control system will be used is generally addressed in
this section of the project report. The project report must state whether the business is

financially and economically viable.

9. Technical Aspects Project report provides information about the technology and technical

aspects of a project. It covers information on Technology selected for the project, Production

process, capacity of machinery, pollution control plants etc.

10. Project Implementation Every proposed business unit must draw a time table for the

project. It must indicate the time within the activities involved in establishing the enterprise

can be completed. Implementation schemes show the timetable envisaged for project

preparation and completion.

11. Social responsibility The proposed units draws inputs from the society. Hence its

contribution to the society in the form of employment, income, exports and infrastructure.

The output of the business must be indicated in the project report.

Project formulation and evaluation

A process is a collection of interrelated actions and activities that take place in order to

achieve a set of previously specified products, results or services. The project team is in

charge of executing the formulation, evaluation and project management processes. The

processes (tasks and activities) have clear dependencies and are done following the same

sequence in each project. They are independent from the area of application approaches.

These groups of processes consider the multidimensional nature of formulation, evaluation

and project management.

The project formulation & evaluation process can be defined as a system that manages

information, very complex in some cases, with a systematic approach of interrelated phases,
and applying different planning instruments that allow to execute the project design’s

concrete tasks. These processes are formed by five phases or stages that incorporate the main

activity areas; from initial debates about the idea of the engineering project, to the

presentation of a complex plan that has to be managed and executed. The activities respond

to a logical structure according to the formulation and evaluation phases of the project. The

development of the Project subjects is basically a learning process directed to show

methodologies that consist of organic processes in which phases and concepts are linked to

one another.