Entrepreneurship

development
UNIT II

1
Opportunity Identification and
Product Selection

2
Entrepreneurial opportunity search &
identification
• Opportunity identification is central to entrepreneurship
and involves:
• The creative pursuit of ideas
• The innovation process
• The first step for any entrepreneur is the identification of
a “good idea.”
• The search for good ideas is never easy.
• Opportunity recognition can lead to both personal and societal
wealth.

3
Entrepreneurial opportunity search &
identification
• How entrepreneurs do what they do:
• Creative thinking + systematic analysis = success
• Seek out unique opportunities to fill needs and wants
• Turn problems into opportunities
• Recognize that problems are to solutions what demand is to
supply
Ideas are not the same as opportunities
Ideas Opportunities
Last for ever are perishable
Are free require work 4
Entrepreneurial opportunity search &
identification
What is an opportunity??
• An idea that is timely, attractive, durable anchored in a
product or service that creates or adds value for its buyer
and user.
 An opportunity is a favorable set of circumstances that
creates the need for a new product, service, or business
idea.
 An idea, as we defined it, is “Something imagined or
pictured in the mind”. The difference is that an idea may
or may not represent an opportunity. 5
Entrepreneurial opportunity search &
identification
• An opportunity as four essential qualities

6
Entrepreneurial opportunity search &
identification
• Window of Opportunity
 The term “window of opportunity” is a metaphor
describing the time period in which a firm can realistically
enter a new market.
 Once the market for a new product is established, its
window of opportunity opens, and new entrants flow in.
 At some point, the market matures, and the window of
opportunity (for new entrants) closes.

7
Entrepreneurial opportunity search &
identification
• Three Ways to Identify An Opportunity:
• 1. Observing Trends
 The first approach to identifying opportunities is to
observe trends and study how they create opportunities
for entrepreneurs to pursue.
 There are two ways that entrepreneurs can get a handle
on changing environmental trends:
 They can carefully study and observe them.
 They can purchase customized forecasts and market 8
analyses from independent research firms.
Entrepreneurial opportunity search &
identification
• Environmental Trends Suggesting Business or Product
Opportunity Gaps:

9
Entrepreneurial opportunity search &
identification
• Economic Forces
 Economic forces affect consumers’ level of disposable income.
 When studying how economic forces affect opportunities, it is
important to evaluate who has money to spend and who is trying to
cut costs.
 An increase in the number of women in the workforce and their related
increase in disposable income is largely responsible for the number of
boutique clothing stores targeting professional women that have opened in
the past several years.
 Many large firms are trying to cut costs. Entrepreneurs have taken advantage
of this trend by starting firms that help other firms control costs.

10
Entrepreneurial opportunity search &
identification
• Social Forces
 Changes in social trends provide openings for new businesses on an
ongoing basis.
 The continual proliferation of fast-food restaurants, for example, isn’t
happening because people love fast food. It is happening because
people are busy, and have disposable income.
 Similarly, the Sony Walkman was developed not because consumers
wanted smaller radios but because people wanted to listen to music
while on the go.

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Entrepreneurial opportunity search &
identification
• Technological Advances
 Given the rapid pace of technological change, it is vital that
entrepreneurs keep on top of how new technologies affect current
and future business opportunities.
 Entire industries have emerged as the result of technological
advances.
 Examples include the computer industry, the Internet, biotechnology, and
digital photography.
 Once a new technology is created, new businesses form to take the
technology to a higher level.
 For example, RealNetworks was started to add audio capability to the
Internet.
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Entrepreneurial opportunity search &
identification
• Political and Regulatory Changes
 Political and regulatory changes provide the basis for new business
opportunities.
 For example, laws that protect the environment have created opportunities
for entrepreneurs to start firms that help other firms comply with
environmental laws and regulations.
 Similarly, many entrepreneurial firms have been started to help companies
comply with the Sarbanes-Oxley Act of 2002. The act requires certain
companies to keep all their records, including e-mail messages and
electronic documents, for at least five years.

13
 Entrepreneurial opportunity search &
identification
2. Solving a problem

These problems can be

Sometimes identifying
pinpointed through
opportunities simply
Observing trends and
involves noticing a problem
through more simple means,
and finding a way to
such as intuition,
solve it.
or chance.

For example, Symantec

Some business ideas are
Corp. created Norton
Clearly initiated to solve a
Antivirus software to guard
problem. 14
Computers against viruses.
Entrepreneurial opportunity search &
identification
3. Finding gaps in the market place
 A third approach to identifying opportunities is to find a gap in the
marketplace.
 A gap in the marketplace is often created when a product or service
is needed by a specific group of people but doesn’t represent a large
enough market to be of interest to mainstream retailers or
manufacturers.
 This is the reason that small clothing boutiques and specialty shops exist.
 The small boutiques, which often sell designer clothes or clothing for hard-
to-fit people, are willing to carry merchandise that doesn’t sell in large
enough quantities for Wal-Mart, GAP, or JC Penney to carry.

15
Criteria to select a product

• Undertaking a business venture is a big

investment requiring adequate planning. Just
as investment opportunities are many and diverse,
products or services options for an entrepreneur are
uncountable. However, the selection of required product
or service is the first step towards success.
• product is anything that can be offered to a marketer
for acquisition, use or consumption.
• products provide the business with the most important
and visible contact with buyers i.e. consumers. Products
to the consumers represent psychological symbols of
personal attributes, goal and social patterns 16
Criteria to select a product

• In selecting product for a business venture, the following factors

must be taken into consideration:
• Supply-gap: The size of the unsatisfied market demand which
constitute a source of business opportunity will dictate, to a great
extent the need to select a particular product. The product with the
highest chances of success as reflected in its demand will be
selected. In essence, there must be existing obvious demand for the
selected product.
• Fund: The size of the funds that can be mobilized is another
important factor. Adequate fund is needed to develop, produce,
promote, sell and distribute the product selected.

17
Criteria to select a product

• Availability of and Access to Raw Materials: Different

products require different raw materials. The source quality and
quantity of the raw materials needed are factors to be seriously
considered, Are the raw materials available in sufficient quantities?
Where are the sources of raw materials located? Are they
accessible? Could they be sources locally or imported? Satisfactory
answers should be provided to these and many other relevant
questions.
• Technical Implications: The production process for the product
needs to be considered. There is need to know the technical
implications of the selected product on the existing production line,
available technology and even the labour force. The choice of a
particular product may require either acquisition of the machineries
18
or refurbishing of the old ones. The product itself must be
technically satisfactory and acceptable to the user.
Criteria to select a product

• Profitability/Marketability: Most often, the product

that has the highest profit potential is often selected.
However, a product may be selected on the basis of its
ability to utilize idle capacity or complement the sale of
the existing products. The product must be marketable.
• Availability of Qualified Personnel: Qualified
personnel to handle the production and marketing of the
product must be available. The cost of producing the
product must be kept to the minimum by reducing
wastages. This is achievable through competent hands.
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Criteria to select a product

• Government Policies: This is quite often an

uncontrollable factor. The focuses of government policies
can significantly influence the selection of product. For
instance, a package of incentives from government for a
product with 100% local input contents can change the
direction of the business’s R & D and hence the product
selected.
• Government objectives: The contributions of the
product to the realization of the company’s short and
long range objectives must be considered before
selection. For instance, the company goal maybe the
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achievement of sale growth, sales stability or
enhancement of the company’s social value.
Feasibility Studies
• A feasibility study is an evaluation of a proposal designed to
determine the difficulty in carrying out a designated task.

• Generally, a feasibility study precedes technical development

and project implementation.

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Definition of Feasibility Studies
• A feasibility study looks at the viability of an idea with an
emphasis on identifying potential problems and attempts to
answer one main question: Will the idea work and should you
proceed with it?

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Objective of feasibility study
• The feasibility study answers the basic questions:
Is it realistic to address the problem or the opportunity under
consideration?

• And it produce a final proposal for the management.

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Conducting Feasibility studies

 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 -
1. Market Analysis
2. Technical/Operational Analysis
3. Financial feasibility
4. Drawing functional plan
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Conducting Feasibility studies

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.
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Conducting Feasibility studies

2. Technical/ Operational Analysis

 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 :
a) Material availability & requirement planning
b) Plant location
c) Plant capacity
d) Machinery and equipment
e) Plant layout
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Conducting Feasibility studies

3. Financial Analysis
 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.
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Conducting Feasibility studies

3. Financial Analysis
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.
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Conducting Feasibility studies

3. Financial Analysis
viii 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

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Conducting Feasibility studies

4. 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.

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Conducting Feasibility studies

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

31
Conducting Feasibility studies

c) Organisational Plan : Defines the type of ownership,

organization structure and proposes HRM practices
that would govern the successful running of proposed
business enterprise.

c) 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 32
includes cost of compensation to employees.
Conducting Feasibility studies

2. Projected cash flows.

3. Projected income statement
4. Projected break-even point
5. Projected ratios.
6. Projected Balance sheet.

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34
SME: Registration
 There are two stages of registration-provincial and permanent (final).
 An enterprise is granted provisional registration when it is at a pre-investment
stage. After getting provisionally registered, an enterprise can apply for
permanent registration just before launching its production facilities.

 Enterprises falling under the three categories (micro, small and medium) are
further categorized into two types of industries:- manufacturing industry and
service industry.
• The main purpose of Registration is to maintain statistics and maintain a roll of
such units for the purposes of providing incentives and support services.
• States have generally adopted the uniform registration procedures as per the
guidelines. It must be noted that small industries is basically a state subject.
• States use the same registration scheme for implementing their own policies. It
is possible that some states may have a Small Industry Development
Organization (SIDO) registration scheme' and a 'State registration scheme'.

35
SME: Registration

Objectives of the Registration Scheme

They are summarised as follows:
• To enumerate and maintain a roll of small industries to which the package of
incentives and support are targeted.
• To provide a certificate enabling the units to avail statutory benefits mainly in terms
of protection.
• To serve the purpose of collection of statistics.
• To create nodal centres at the Centre, State and District levels to promote SSI.

Procedure for Registration

Features of the present procedures are as follows:
• A unit can apply for PRC (Provisional Registration Certificate) for any item that does
not require industrial license which means items listed in Schedule-III and items not
listed in Schedule-I or Schedule-II of the licencing Exemption Notification. Units
employing less than 50/100 workers with/without power can apply for registration
even for those items included in Schedule-II.

36
SME: Registration
Procedure for Registration
Features of the present procedures are as follows:
• Unit applies for PRC in prescribed application form. No field enquiry is done and PRC
is issued.
• PRC is valid for five years. If the entrepreneur is unable to set up the unit in this
period, he can apply afresh at the end of five years period.
• Once the unit commences production, it has to apply for permanent registration on
the prescribed form.
The following form basis of evaluation:
• The unit has obtained all necessary clearances whether statutory or administrative.
e.g. drug license under drug control order, NOC from Pollution Control Board, if
required etc.
• Unit does not violate any locational restrictions in force, at the time of evaluation.
• Value of plant and machinery is within prescribed limits.
• Unit is not owned, controlled or subsidiary of any other industrial undertaking as per
notification.
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NOC from Pollution BOARD
FUNCTIONS OF THE BOARD :
• Issue of No Objection Certificates from the environmental pollution point of view
including adequacy of the site from the environmental angle.
• Issue of Consent under provisions of section 25/26 of the Water (Prevention and
Control of Pollution) Act, 1974.
• Issue of Consent under provisions of section-21 of the Air (Prevention and Control of
Pollution) Act, 1981.
• Assessment and collection of Water Cess, under provision of Water (Prevention and
Control of Pollution) Cess Act, 1977.
• Identification and assessment of industrial and municipal pollution sources and
control thereof.
• Assessment of ambient air quality.
• Assessment of quality of inland surface waters.
• Mass awareness programmes.
• Notification of effluent and emission standards.
• Development of Pollution Control technologies.
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NOC from Pollution BOARD

FUNCTIONS OF THE BOARD :

• Instituting legal action against defaulters.
• Issue of Authorization under the Hazardous Waste Management Rule, 1989.
• Identification of isolated storages, onsite crisis management plans etc. under the
Manufacture, Storage and Import of Hazardous Chemicals Rules, 1989.
• Implementation of Biomedical Waste Rules, 1998.

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Machinery and Equipment Selection

• The equipment selected should possess certain desirable characteristics or meet

certain criteria to be best suited to the desired task. Some of these criteria are:
(a) Fit into the system;
(b) Be as simple as possible;
(c) Require minimum space;
(d) Be flexible and adaptable;
(e) Require minimum of loading, unloading and rehandling;
(f) Call for as little maintenance, repair, power and fuel as possible;
(g) Have a long useful life;
(h) Capable of higher capacity utilization;
(i) Perform the operation efficiently and economically.

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Project Report Preparation

• Establishing a small scale enterprise requires detailed

project report so that promoters can understand that in
how many years the endowments can be forfeited.
• Project Report for Small Scale Industry helps in
identifying the product line and target market of the
sector, besides evaluating the level of skill and accuracy.
• Hence, a small scale industry project report must contain
5-7 years evaluations in context of revenues,
expenditures, cash flows and outflows, balance sheet of
legal responsibilities and assets in hand, and
reimbursement agendas of working capital and long-
term loans, etc. 41
Project Report Preparation

• While preparing the project report for small scale industry, the
statistical figures are not discouraging for the promoters. The
project valuation should encourage a sense of practicality among
them.
• The other users who could require the project reports are
industrialists, Financiers, banks, Financial Analysts, merchants,
clients, certifying authorities, Management Accountants, etc

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Specimen of Project Report
• The standard format for preparing a project report for small
scale industry is listed in broad segments as below:
Executive Summary
Existing company details (if any)
Operational details of the existing company (if existing)
Project Details
The company vis-a-vis related industry
Conclusion
References/Bibliography
Annexures

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Project Planning and Scheduling using Networking
Techniques of PERT / CPM

• CPM (Critical Path Method) and PERT (Programme

Evaluation Review Technique) are project management
techniques, which have been created out of the need of
Western industrial and military establishments to plan,
schedule and control complex projects.
• Planning, Scheduling (or organising) and Control are
considered to be basic Managerial functions, and
CPM/PERT has been rightfully accorded.
• Far more than the technical benefits, it was found that
PERT/CPM provided a focus around which managers
could brain-storm and put their ideas together.
44
Project Planning and Scheduling using Networking
Techniques of PERT / CPM

There are many variations of CPM/PERT which have been useful in

planning costs, scheduling manpower and machine time.
CPM/PERT can answer the following important questions:
• How long will the entire project take to be completed? What
are the risks involved?
• Which are the critical activities or tasks in the project which
could delay the entire project if they were not completed on
time?
• Is the project on schedule, behind schedule or ahead of
schedule?
• If the project has to be finished earlier than planned, what is
the best way to do this at the least cost? 45
Project Planning and Scheduling using Networking
Techniques of PERT / CPM
Essentially, there are six steps which are common to both the
techniques. The procedure is listed below:
1. Define the Project and all of it’s significant activities or tasks. The
Project (made up of several tasks) should have only a single start
activity and a single finish activity.
2. Develop the relationships among the activities. Decide which
activities must precede and which must follow others.
3. Draw the "Network" connecting all the activities. Each Activity
should have unique event numbers. Dummy arrows are used where
required to avoid giving the same numbering to two activities.
4. Assign time and/or cost estimates to each activity
5. Compute the longest time path through the network. This is called
the critical path.
6. Use the Network to help plan, schedule, monitor and control the 46
project.
 Project Planning and Scheduling using Networking
Techniques of PERT / CPM
• The Key Concept used by CPM/PERT is that a small set of activities,
which make up the longest path through the activity network
control the entire project.

• If these "critical" activities could be identified and assigned to

responsible persons, management resources could be optimally
used by concentrating on the few activities which determine the
fate of the entire project.

• Non-critical activities can be re-planned, rescheduled and resources

for them can be reallocated flexibly, without affecting the whole
project. 47
Project Planning and Scheduling using
Networking Techniques of PERT / CPM
Five useful questions to ask when preparing an activity network are:
• Is this a Start Activity?
• Is this a Finish Activity?
• What Activity Precedes this?
• What Activity Follows this?
• What Activity is Concurrent with this?
• Some activities are serially linked. The second activity can begin only after the
first activity is completed. In certain cases, the activities are concurrent,
because they are independent of each other and can start simultaneously. This
is especially the case in organisations which have supervisory resources so that
work can be delegated to various departments which will be responsible for
the activities and their completion as planned.
• When work is delegated like this, the need for constant feedback and 48 co-
ordination becomes an important senior management pre-occupation.
PROJECT APPRAISAL

• Project appraisal means a pre-investment analysis of project to

determine whether the project should be implemented or not.

• It is the analysis of costs and benefits of a proposed project with a

goal of assuring a rational allocation of limited financial resources
amongst alternate goal of Investment opportunities with the
objective of achieving specific goals.

49
Project Appraisal Analyses
It includes the following Analyses:
• Economic Analysis
• Financial Analysis
• Market Analysis
• Technical Analysis
• Managerial Competence

50
Economic Analysis
 Employment Effect

 Net Foreign Exchange Earnings

 Contribution of the project to welfare (well being) of the

country or region

Financial Analysis
 What is the project’s commercial profitability?

 What amount of finance is needed and how will the

project be financed?
 Cost of Project and Sources of Finance

 Financial Projections 51

 Will the project be financially sustainable?

Market Analysis
 Target market for the product
 Potential customer

Technical Analysis
 Capacity of the plant
 Evaluation of technology
 Inputs like water, power, transport, communication
facilities etc.
 Location

Managerial Competence
52
 Talent of the promoter and employees
 Conclusion
Project appraisal is necessary for knowing project is viable or not?
It is vary useful for entrepreneur.
Various methods to calculate project is viable or not entrepreneur
use the suitable one.
Contents of a Project Report
 Executive Summary
- Introduction
- Financial Performance
- Balance sheet analysis
- Proposed Project
- Project profitability & analysis
- SWOT Analysis
 Existing company details (if any)
- History
- Manufacturing Facilities
- Promoters
- Shareholding Pattern
- Board of Directors
- Key Executives
- Major Products
- Major Customers 54
- Details of divisions, Group Units
 Operational details of the existing company (if existing)
- Capacity and utilisation
- P & L account
- Balance sheet
- Term loans and advances
- Working capital loans
- SDM
- Marketing Strategy
- Export Sales
- Trends in selling process

 Project Details
- Proposed project
- Orders and Enquiries
- Location
- Manufacturing Process
- Techincal Feasibilty
- Inputs for production
- Manpower
- Power
- Water
- Auxilary Services

55
 Project Cost
- Land
- Building and civil work
- Plant & Machinery
- Operating Expenses

 Means of Finance
 Equity share capital
 Internal accruals
 Deposits
 Debt
 Other Sources

 Project Status
- Implementation Schedule
- PERT/CPM analysis
- Current Status
- Government Approvals 56
Profitability and Risk Analysis
- Financials of the project
- Financials of the company
- Break even point analysis, ROI, Payback period etc
- Major Risk Factor
- SWOT
The company vis-a-vis related industry
- General Analysis
- Competing Industries
- Competitive Advantage to the company
Employment Generation- Direct/Indirect
Conclusion
References/Bibliography
Annexures
57
Annexures
- Promoters Bio-data
- Organisation chart
- Details of group units
- Statutory Sanctions/approvals
- Process chart
- Any other details

58
Feasibility Analysis

59
 The Business Plan:
Creating and starting the
Venture

Source: Entrepreneurship 9e by Hisrich, Manimala, Peter & Shepward, Mc Graw Hill

What is the Business Plan?
• Prepared by the entrepreneur in consultation with others
• Requires objective assessment of individual skills
Table 1 - Skills Assessment
Scope and Value of the Business
Plan—Who Reads the Plan?
• Scope
• Determined by who is expected to read the plan
• A plan should consider the:
• Entrepreneur’s perspective
• Marketing perspective
• Investor's perspective
Scope and Value of the Business
Plan—Who Reads the Plan?
• Depth and detail in the business plan depends on:
• Size and scope of the proposed new venture
• Size of the market
• Competition
• Potential growth
Scope and Value of the Business
Plan—Who Reads the Plan?
• Business plan is valuable because it:
• Helps determine the viability of the venture in a designated
market
• Guides the entrepreneur in organizing planning activities
• Serves as an important tool in helping to obtain financing
How do Potential Lenders and
Investors Evaluate the Plan?
• The business plan must reflect:
• Strengths of the management and personnel
• Product/service
• Available resources
• Lenders
• Interested in the venture’s ability to pay back the debt
• Focus on the four Cs of credit - Character, cash flow, collateral,
and equity contribution
How do Potential Lenders and
Investors Evaluate the Plan?
• Banks - Interested in analysis of the business opportunity and
risks
• Investors
• Emphasize on the entrepreneur’s character
• Conduct background checks
• Demand high rates of return
• Focus on market and financial projections
Presenting the Plan
• An entrepreneur should:
• Focus on why this is a good opportunity
• Provide an overview of the marketing program
• Address risks and how to overcome them
• Investors describe these presentations as elevator pitches
Information Needs
• Establish well-defined goals and objectives
• Undertake a feasibility study
• Information for a feasibility study should focus on marketing,
finance, and production
An Upside-Down Pyramid Approach to
Gathering Market Information
• General environmental and demographic trends
• National food industry trends
• Local environmental and demographic trends
• Local food industry trends
• Local competition strengths and weaknesses
Operations Information Needs
• Location
• Manufacturing operations
• Raw materials
• Equipment
• Labor skills
• Space
• Overhead
Financial Information Needs
• Prepare a budget listing all possible expenditures
• Forecast sales revenue on the basis of market data
• Identify industry benchmarks to prepare the final pro forma
statements
Using the Internet as a Resource Tool
• Provides information for:
• Industry analysis
• Competitor analysis
• Measurement of market potential
• Is useful for:
• Later-stage planning and decision making
• Provides opportunities for marketing strategy
Writing the Business Plan
• Introductory page
- Name and address of business/company
- Name of the entrepreneur(s)
- Nature of business
- Statement of financing needed
- Statement of the confidentiality of the report
Writing the Business Plan
• Executive summary
2 to 3 pages summarizing the complete business plan.
• Environmental and industrial analysis
• Environmental analysis: Assessment of external uncontrollable
variables that may impact the business plan
• Industrial analysis: Reviews industry trends and competitive
strategy
Writing the Business Plan
• Description of venture: Complete overview of the products,
services, and operations
Table 2 - Critical Issues for
Environmental and Industry Analysis
Table 3 - Describing the Venture
Writing the Business Plan
• Production plan: Details of how product will be manufactured
• Operations plan:
• Description of company’s operation.
• Flow of orders for goods & services.
• Technology utilization
• Marketing plan: Describes market conditions and strategy related
to:
• How the product and service will be distributed, priced, and promoted
Writing the Business Plan
• Organizational plan: Describes:
• Form of ownership
• Lines of authority and responsibility
• Assessment of risk
• Identifies potential hazards and alternative strategies to meet
goals and objectives
Writing the Business Plan
• Financial plan: Projection of key financial data that determine:
• Economic feasibility
• Necessary financial investment commitment
• Appendix
Measuring Plan Progress
• Determines whether the goals or objectives are on schedule
• Reviews
• Profit and loss statement
• Cash flow projections
• Inventory control
Measuring Plan Progress
• Production control
• Quality control
• Sales control
• Disbursements
• Web site control
Using and Implementing the Business
Plan
• Updating the plan
• Monitor changes in the company, industry, and market
• Determine what revisions are needed if changes are likely to
affect the business plan
• Advantages
• Helps maintain reasonable targets and goals
• Increases the probability of success for a new venture
Why Some Business Plans Fail
• Unreasonable goals
• Non measurable objectives
• Lack of commitment to the business or to the family
• Lack of experience in the planned business
Why Some Business Plans Fail
• No sense of potential threats or weaknesses to the business
• No customer need was established for the proposed product
or service
 Market Survey and
Project Report Writing

Source: NIESBUD
 SELECTION

CONCEPTION/
IDENTIFICATION PLANNING

FORMULATION
EVALUATION PROJECT
CYCLE
OPERATION
APPRAISAL

IMPLEMENTATION
 FORMULATION OF A
PROJECT REPORT

 WHAT IS A PROJECT REPORT?

 WHY PROJECT REPORT?
 HOW TO START MAKING A PROJECT REPORT?
 Determine type and level of activity
 Estimate financial requirements/resources
 Prepare
WHY TO PREPARE A PROJECT
REPORT
• To setup the enterprises in planned way
• To submit the proposal in government department
• For taking loan from banks direct or indirect.
• It is mandatory to submit the project report under government
schemes like PMEGP, Hill policy, 4% interest subsidy schemes and
Tourism Department etc
  (MSME)DI
 WHO CAN HELP?  MSME INSTITUTE
 STATE GOV. DEP.

 SIZE OF  BANKS
 TCOs
PROJECT REPORT
 DICs
 KVIB
 CONTENTS  KVIC
 EDCs
 NGOs
 Pvt Consultants
 factors to considered
while formulating
project report
Decision Making

Market Surveys
MARKET SURVEY
IN SIMPLE WAY WE CAN SAY MARKET SURVEY IS A TOOL OR

A TECHNIQUE WHICH REDUCES THE RISK OF A

ENTRPREPRENEUR.
 CONTENTS

3.MARKET POTENTIAL

2.
2.PROJECT DESCRIPTION

1.GENERAL INFORMATION
 7. ECONOMIC & SOCIAL
VARIABLE

6. OTHER FINANCIAL
ASPECTS

5. ASSESSMENT OF
WORKING CAPITAL
REQUIREMENTS
4. CAPITAL COST OF
PROJECT & SOURCES OF
FINANCE
 GENERAL INFORMATION
Promoter/s Qualifications, experience, family

Bio-data background/connections,
achievements
Industry Profile Origin, Past Performance, Present
Status, Future Potential
Constitution Proprietorship/Partnership etc.,
registration
DI Regn. & No. ----
MARKET SURVEYS
MARKET/
BUYER

COMPITETOR BUSINESS SUBSTTUTES

SUPPLIER
MARKET/ BUYERS
HIGH CLASS
SOCIETY

MEDIUM CLASS

LOWER CLASS
TARGET CUSTOMER

COST OF PROJECT

LOCATION

QUALITY AND QUANTITY

PRICING OF THE PRODUCT

FACILITIES
STEPS IN PREPARING
PROJECT REPORT
1. NAME OF THE PROJECT

2. A GLANCE OF PROJECT

3. INTRODUCTION OF PROJECT

• MARKET POTENTIAL

• BASIS & PRESUMPTION

• IMPLEMENTATION SCHEDULE
TECHNICAL ASPECTS
• PROCESS OF MANUFACTURING

• SEQUENCE OF OPERATION

• PRODUCTION CAPACITY (Quantity & Value)

• POWER REQUIREMENT

• POLLUTION CONTROL
FINANCIAL ASPECTS

THERE ARE TWO TYPES OF CAPITAL REQUIRED IN A

BUSINESS.

1. FIXED CAPITAL

2. WORKING CAPITAL
FIXED CAPITAL

 LAND & BUILDING

 MACHINERY AND EQUIPMENTS

 FURNITURE AND FIXTURES
 PRELIMINARY & PRE-OPERATIVE EXPANSES
WORKING CAPITAL

 RAW MATERIAL

 SALARY &WAGES

 UTILITY

 MISC. OR OTHER EXPENSES

Total Cost of the Project

Fixed Capital + Working Capital for 2 Month

MEANS OF FINANCE

 Bank (90%)

 Own Contribution (10%)

ASSUMED PROFIT ANALAYSIS
PERYEAR
Assumed total Expenditure per year

Assumed total Sales Revenue Generated per year

PROFIT PER MONTH

 PROFIT PER YEAR / 12

 ANNEXURE-
DEPERICIATION SCHEDULE @ 20% PER ANNUM

ITEM/YEAR 01 02 03 04 05

OPENING
BALANCE 1,00,000.00 80,000.00 64,000.00 51,200.00 40,960.00

DEPRECIATIO 20,000.00 16,000.00 12,800.00 10,240.00 8192.00

N

CLOSING
BALANCE
80,000.00 64,000.00 51,200.00 40,960.00 32,768.00
 ANNEXURE:-
REPAYMENT SHEDULE @ 10% PER ANNUM

ITEM/YEAR 01 02 03 04 05

OPENING
BALANCE 1,00,000.00 80,000.00 60,000.00 40,000.00 20,000.00

REPAYMENT 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00

PRINCIPAL

INTEREST 10,000.00 8,000.00 6,000.00 4,000.00 2,000.00

CLOSING
BALANCE 80,000.00 60,000.00 40,000.00 20,000.00 -
 BREAK EVEN POINT
(BASED ON FIRST YEAR OF OPERATION)

FIXED COST:
1. Interest on loan
2. Depreciation
3. Man power expenses (40%)
4. Operating expenses (40%)
: 38,077.50
: 14,050.00
: 67,200.00
: 4,70,880.00

TOTAL : 5,90,207.50
Fixed cost x 100
BEP = -------------------------------------
Fixed cost + Net profit

5,90,207.50 x 100
= -------------------------------------
5,90,207.50 + 1,22,675.50
= 82.79%
PERCENTAGE OF PROFIT

RETURN ON INVESTMENT (1ST YEAR)

Percentage of profit on investment

Profit x 100 1,22,675.50 x 100

= ------------------------ = --------------------------
Investment 5,07,700.00

= 24.16%
RETURN ON SALES (1ST YEAR)

Percentage of profit on sales

Profit x 100 1,22,675.50 x 100

= -------------------------- = -----------------------
Sales 16,00,000.00

= 7.66%
Thank you