Entrepreneurship and Leadership

Lecture Notes and Course Contents

Compiled by
Engr. Agha Shiraz A. Khan
[email protected]

Dept of Computer Systems Engineering

QUEST, Nawabshah
Books

• Robert Hisrich and Michael Peters, Entrepreneurship, Tata Mc Graw– Hill

• Vasant Desai, Entrepreneurship

• Marc J Dollinger, Entrepreneurship – Strategies and Resources, Pearson Education

Syllabus

• I – Entrepreneurial Perspective

• II – Entrepreneurial Environment

• III – Launching an Enterprise

• Entrepreneurial Perspective

• Concepts of entrepreneur, entrepreneurship and enterprise

• Advantages of entrepreneurship

• Nature and development of entrepreneurship

• Gender issues in entrepreneurship
• Dynamic role of small businesses in economic development

• Personality of entrepreneurs and of intrapreneurs

• Innovation and entrepreneurship

• Entrepreneurial Environment

• Policy perspectives to promote entrepreneurship and enterprises

• Analysis of business opportunities in different sectors of economy at national and

global levels

• Quick– start routes to enterprises (franchises, ancillaries and acquisitions)

• Support organizations for entrepreneurs and their role

• Legal framework for starting a business in India

• Launching Enterprises

• Product and project identification

 • Developing a project report or business plan
• Business financing including VC finance
• Managing early growth

• Business incubation

• New venture expansion – strategies and issues

Definitions

Entrepreneur (Oxford Dictionary) – Person who undertakes an enterprise with chances of

profit or loss. (As I have understood, Entrepreneur is a person who undertakes a business activity of which he
has no background and faces considerable risks in the process. If either of the two elements, i.e., “no
background” or “considerable risk” is missing in the venture, it is no entrepreneurship).

Enterprise (Oxford Dictionary) – Bold Undertaking

Entrepreneur – (New Encyclopaedia Britannica) – An individual who bears the risk of

operating a business in the face of uncertainty about the future conditions.

Common Meaning – one who starts his own, new and small business

Entrepreneurship – It is a philosophy or process through which an entrepreneur seeks

innovation and employment.

Entrepreneur Entrepreneurship Entreprise

Person Process or Philosophy Object

Dissecting the word we get

Entre – Enter Pre – Before Neur – Nerve Centre

Entrepreneurship can also be described as a creative and innovative response to the

environment.
Entrepreneurship Theories

1600 – French verb – Entreprendre – to undertake.

1700 – Person bearing Risk or Profit in a fixed price contract (Risk)

1725 – Richard Cantillon – Person bearing risks is different from Capital Supplier (Risk)

1803 – J. B. Say – Shifts economic resources out from an area of lower to higher productivity
& greater yields (Value Addition)

1934 – Joseph Schumpeter – Innovator and develops untried technology (Productivity &
Innovation)

1961 – David McClelland – Highly motivated, energetic, moderate risk taker (Need for
achievement)

1964 – Peter Drucker – Searches for change, responds to it & exploits as opportunity
(Opportunity Focused)

1980 – Karl Vesper – Behaviour Perceptions– Economists, Psychologists, Businessmen,

Politicians (Environment)

1983 – Gifford Pinchot – Intrapreneur

1985 – Robert Hisrich – Creating something different with value, devoting time & effort,
assuming risks (FPS); results– rewards and satisfaction (Leadership & Vision)

Please note that key word in Entrepreneurship is RISK. Any venture where risk is mitigated
due to any reason does not qualify to be called entrepreneurship.

Entrepreneurs are people who create new business activity in the economy and bear
considerable business risk in the process. This is often done by starting new companies. But
they can also create new business activity by introducing a new product or creating a new
market

Some other related facts about Entrepreneurship

• Entrepreneurs are made; they aren’t born. (This statement is more of public posturing than fact.
Essential characteristics of an entrepreneur, i.e., ambitiousness, capacity to take moderate risks, organizing
ability, persistence, vision, etc, can not be taught in any school. These are inborn characteristics of a person.
Know this fact but don’t write it in the answer sheet).
• Incubator organization is an organization that supports entrepreneurs

• Venture Capitalists – VCs are like bankers, but since they aren’t subject to strict regulations
as bankers, they take greater risks in making investments – organized as formal businesses,
they expect to reap 25– 30% annually and get more actively involved in the ventures than
bankers do.

• Angels are private individuals who invest directly in firms and receive equity stake in return –
they act as advisers to founders.

• Don’t confuse entrepreneurship with running a business. Every person launching a business is
not an entrepreneur. A businessman’s son taking over his established family business or
starting another factory in neighbouring town is no entrepreneur because he is well trained in
matters of that business by virtue of constant exposure since childhood. He has support of
family and friends in terms of finance and advice should going gets tough. With his training,
professional and personal contacts and financial backing, risk element and uncertainty are
almost missing in such business. Whereas, a farmer’s son, venturing to open a grocery or even
‘pan shop’ is an entrepreneur because he is stepping into uncharted territory of which he has
little/no training and therefore bears considerable risk.

How do you define an entrepreneur in the 21st Century?

An entrepreneur of the 21st century is a customer focused innovator. He uses e– knowledge.

Advantage is speed. He is a global thinker even though he may not necessarily be a global
player.

Standard (New) Definition

Entrepreneurship is the process of creating something different with value by devoting the
necessary time and effort, assuming the accompanying financial, psychic, social risks and
receiving the resulting rewards of monetary and personal satisfaction and independence.

Word “Entrepreneur” stems from French Verb Entreprendre – means between; take or go
between

New Definition involves four aspects –

(a) The creation process

(b) Devotion of time and efforts

(c) Assumption of risks

 (d) Rewards of independence, satisfaction, money.

Advantages of Entrepreneurship

To an Individual

(a) Provides Self Employment for the entrepreneur

(b) Entrepreneur can provide employment for near & dear one as well

(c) Entrepreneurship often provides an employment and livelihood for the next
generations as well.

(d) Freedom to use own ideas – Innovation and creativity

(e) Unlimited income / higher retained income – Bill Gates has risen to become
richest in the world in a single life time through entrepreneurship
(f) Independence
(g) Satisfaction

To the nation

(a) Provides larger employment – Entrepreneurs provide employment for self as

well as other people and is a source of employment creation.

(b) Results in wider distribution of wealth – This is a logical sequel of above

issue. Higher the employment, the greater the distribution of wealth

(c) Mobilizes local resources, skills and savings

(d) Accelerates the pace of economic development – Entrepreneurship is the govt’s one
of the most trusted vehicles for economic development

(e) Stimulates innovation & efficiency

Factors Favouring Entrepreneurship

1. Developed Infrastructure Facilities – Availability of infrastructure reduces the cost

& efforts and improves viability of projects through higher profit margins.

2. Financial Assistance – Easy availability of cheap funds is vital for promoting

entrepreneurship.

3. Protective and Promotional Policies – Most of the entrepreneurship projects start very small and
have no resilience. They are extremely vulnerable to competitors, market, money markets, etc, for
considerable time. Favourable Govt policies shelter them from such vagaries.

4. Growth of Education – Science, Technology & Management – Growth of education is believed

to be promoting entrepreneurship. However, there are enough examples to suggest otherwise. A
very large proportion of first generation entrepreneurs are low educated. Take the case of Microsoft
Chairman Mr Bill Gates or Apple Founder Mr Steve Jobs..

5. Risk Taking Abilities – Risk taking ability is one of the pillars of entrepreneurial
spirits.

6. Hunger for Success (Capitalistic View) – Fire in the belly and dreams of riches is what drives
most entrepreneurs on this risky path. Any person content with what he has would take the easier
route of salaries job.

7. Environment/Culture Impact – Entrepreneurship is contagious. Communities like Punjabies and

Marwaries are historically entrepreneurial. They are known for seeking and exploiting business
opportunities in most remote areas. It is a culture that propels them. (see Pull Factors).

8. Social Security – Social security acts as a safety net against failure of enterprise. Social security
guarantees basic ‘roti, kapada aur makan’ in case of failure. Entrepreneurial spirit of United States
is born partly out of this security.
9. Technical/Industrial Training Facilities – Industrial Training facilities on one hand generate
skilled manpower so vitally required for setting up enterprises while on the other hand they are also
nursery for future entrepreneurs. Among the educated entrepreneurs, a majority is product of
technical institutes from IIT to ITI (Tier I to Tier III institutes).

10. Globalization – Globalization has provided another avenue for business. Many dare devils have
taken a head– along plunge into this uncharted water and have written new success stories.
(Think of numerous other factors)

What makes a Successful Entrepreneur?

1. The urge for achievement (most often monetary ambitions) – Most Important

2. Willingness to take moderate risks – (High risk takers are not entrepreneurs but gamblers).
3. Determination to win
4. Win– Win Personality

5. Ability to identify & explore opportunities

6. Analytical ability to take strategic decisions

7. Perseverance

8. Flexibility

9. Capacity to plan and organize

10. Preparedness to undergo physical and emotional stress

11. Positive self concept/Self Belief

12. Future orientation – Vision

13. Ethics and Values – Mission

Who can be an Entrepreneur?

1. Who feels the need for achievement

2. Who can take moderate risks

3. Who possess skills in organizing

4. Who can capitalize on opportunities

5. Who has some financial strength – On his own or borrowed

6. Who has ability to work hard

7. Who has desire for responsibility

8. Who has a clear perception of probability of success

9. Who gets stimulation by feedback

10. Anyone – He can be male, female or even a Eunuch

11. Who does not have previous experience

Characteristics of an Entrepreneur

1. Mental ability

2. Clear objectives

3. Business secrecy

4. H.R. ability

5. Communication ability

6. Technical knowledge

7. Achievement– oriented

8. Perseverance

9. Ethical

10. Motivator

11. Self– confident

12. Long term involvement

13. High energy level

14. Problem solver

15. Initiator

16. Goal setter

17. Risk taker

(Please note that all the three headings are necessarily the same)

Key Elements of Entrepreneur

1. Need for Achievement

2. Risk taking

3. Organizing Skills

4. Ethics & Values

5. Vision

6. Innovation

Above is the list of key elements as per the professor, Mr JC Saboo. Individual opinions may vary.
In my own assessment, the last three do not form the part of key elements of entrepreneur.

Justification is as follows –

Ethics and Values – Almost every entrepreneur is raw and weak at the time of start. He has little
knowledge and even meagre resources. He is pitted against heavy odds like established players in
the market who usually have little respect for ethics. There is no denying that Ethics will win in long
term; provided you survive that long to benefit from that win. For short and medium term, it is
“hook or crook” attitude which brings business success. Remember Sania Mirza’s Tee Shirt! – Nice
girls don’t win matches. The wisdom in the market place is – Pyar aur jung mein sab kuchh jaaiz
hai. There is no denying the fact that there are Ford, Apple and Microsoft business empires where
almost every brick is a hallmark of ethics, but the list is probably not very long. The list of unethical,
and yet successful, companies is rather long. We don’t have any system of rating companies on
ethical scale, else, the issue would have never arisen.

Vision – Rarely does an entrepreneur start with a 10 year vision. Almost every entrepreneur,
including Elon Musk, starts small with basic survival or “little riches” as the aim. The vision,
mission and all such management jargons erupt only after a reasonable level of success is attained.

Innovation – I personally consider Innovation fairly low in the entrepreneurial element basket.
Innovation helps in achieving success in business whether it is 10 generations old business or an
entrepreneur’s new enterprise. An entrepreneur is one who starts a business enterprise of which he
had no previous experience. Most entrepreneurs start with a routine business activity without any
innovative idea. It may be as common a business as a pan shop. So, if a farmer’s son opens a pan
shop, there is no innovation but it is entrepreneurship. Whereas, if a panwalla’s son opens a new pan
shop away from his father’s shop, it is not even an entrepreneurship. But yes, if he later finds a way
to export his pan to some foreign country, there is innovation of finding a new market for his
product and it is entrepreneurship. He has gone into a territory which was new to him and probably
even to his trade.

As per my assessment, three qualities that replace above qualities are –

4. Perseverance – The start is tough and initial failures are common phenomenon. If the person does
not have a steely resolve and perseverance to keep going against all odds, his failure is almost
certain. In the US, only one out of 10 new businesses survive beyond 2nd year.

5. Hard Working – The initial years are sweat and sweat and even more sweat. Resources are
scarce, finances are scanty, knowledge is sketchy and goodwill is zero. Untiring work bordering on
the madness is common element in every successful entrepreneur’s story. Almost every entrepreneur
packs a 48 hrs work schedule in his 24 hour day.

6. Self Confidence – They all have the confidence to overcome every odd.

Study the Profile of a Successful Entrepreneur and identify six key elements in order of
priority

ENTREPRENEUR’S BACKGROUND & CHARACTERISTICS

1. Family Environment – In most cases, people follow the footstep of father. A businessman’s
son takes up business and a salaried person’s son tries to find a job. So, if a family has had a
tradition of entrepreneurship, later generations also follow the step of their ancestors, like the
Gujaraties and Marwaries. Conversely, if a family has had a bad experience with
entrepreneurship, it is unlikely that next generation will be very entrepreneurial.

2. Education – Education has no correlation with entrepreneurial spirit. If at all there is one, it
seems to be inverse. Most of the entrepreneurs come from low education background.
Educated people who get decent job rarely prefer comfort of salaried job. It is only those who
are unable to find a living for themselves eventually try their hands at new business. For long
long years, due to problems of licence, quota and inspector raj, most educated people preferred
govt job, for it symbolized power, comfort, social status and for the people with low scruples,
money too. However, trend is slowly changing. With business environment becoming easier
and govt officials’ powers being on the wane, many educated people are also beginning to
venture into entrepreneurship

3. Age – There are people who start as early as probably 10 and some others after their
retirement. Harland David Sanders, better known as Colonel Sanders (not a Army Colonel
but an honorary one) started his famous Kentucky Fried Chicken business quite late in his
varied career. But commonly, men are often in the age group of 25 – 35 and women in the age
group of 30– 45.

4. Physical Attributes – Have absolutely no correlation with entrepreneurial spirit.

5. Marital Status – No direct correlation but going by the age group, most entrepreneurs are
married.

6. Working History – Entrepreneurs quite often have some working experience as a salaried
employee in the field of their venture. It always helps to learn a little about business before
putting your money in. Sindhi community follows this practice assiduously.

7. Family Contacts – Family contacts in business world reduce the risks and help the
entrepreneur.

8. Professional Contacts – Professional contacts again help. IIT and IIM graduates
venturing into entrepreneurship often get help from their peer and seniors.

9. Personal values

10. Lifestyle – Most entrepreneurs are fond of good things in life but are willing to wait
till they strike rich. In the interim they are willing to rough it out.

What is a job competency?

It is knowledge, skills and attitude related to a particular job. Performance emerges from the
combination of knowledge, skills and attitude. A perfect balance of all the three is required.
They can not compensate each other. Mathematically, competency is not sum total of
knowledge, skill and attitude but their product. If one of the factors is zero, ourpur is zero
irrespective of how high are the other two. So, very high knowledge and skill can not
compensate absence of right attitude.

Some Definitions and Explanations

1. Knowledge – Collection and retention of information in a form that it can be

effectively used.

2. Skill is the physical or mental ability to do something well (hard and soft skills)

3. Motives are reasons for doing something (need)

4. Traits – Characteristical way in which a person behaves or responds to a particular

situation.

5. Attitude reflects the way of thinking and acting

(Self and others determine the attitude)

6. Initiative – Willingness to take action solely on demand of the occasion without being
asked/prompted/forced by others. Taking actions to start the business and expand into new
areas, products and services.

7. Persistence – Repeated attempts to overcome obstacles despite failures. But a successful

entrepreneur analyses reasons for his failure, learns and modifies his methods every time. But
wisdom of knowing when to abandon attempts is more important that capacity to persevere in
the face of obstacles.

8. Information Seeking – Information is power. Right information at the right time makes the
job easier. Knowing that flight has got cancelled before you leave home will save you time,
money and spare frustration. A successful entrepreneur invests in establishing information
channels.

9. Concern for High Quality of Work – Quality has no set standards. Eventually, it settles
down to price – performance ratio. Whether a company follows Cost Leadership or
Differentiation strategy, it is value that customer perceives in product which will sell the
product in the market. Therefore, a entrepreneur has to be conscious of delivering value.

10. Efficiency Orientation – Constantly looking for ways to do things faster or with
fewer resources or at a lesser cost.

11. Systematic Planning

(a) Breaking a large task into several sub tasks.

(b) Developing and using logical steps to analyse past events and forecast future
developments. (c) Developing plans after duly anticipating obstacles and
opportunities. (d) Evaluating alternatives on merits and demerits.

12. Problem Solving

(a) Identifying the root cause of the problem. (b) Developing strategies in the light of
objectives, resources, and constraints.

(c) Generating new ideas or innovative solutions. (d) Identifying

the best idea and applying to reach the goals.

13. Persuasion – Persuasive ability is another key to success in entrepreneurial success. Right
from the time of arranging finances to the point where people are cajoled to abandon a trusted
product/brand and try out a new product, there are 100s or 1000s of people whose cooperation
has to be sought. Persuasive skills make the job much easier and faster.

14. Use of Influence Strategies – Using influence to get your job done is often at cross roads
with ethics. But every use of influence may not be unethical. If some one is creating hurdles
just because he is expecting bribe or simply being lazy, use of little influence to get your job is
done is definitely not unethical. However, if influence is used to jump a queue and deny or
delay a genuine claimant in the process is definitely unethical.

15. Assertiveness

(a) Confronting problems and issues with other directly (b) Be

polite but firm.

(c) Telling others clearly what they have to do. (d) Reprimanding those who fail to
perform as expected however close they
may be.

16. Concern for Other’s Welfare – It is an important quality for team building which is
necessary if the initial success is to be translated into a larger success.

Entrepreneurship and Management Students

1. A Management Graduate is a person trained in necessary skills and knowledge to

manage an enterprise.

2. A Management Graduate is best placed to be an entrepreneur. With his knowledge of

business domain, his chances of launching a successful entrepreneurial venture are much
higher than any one else. It will benefit the Management Graduate as well as the country.

3. Experience even from Harvard Business School confirms that more Management Graduates
take Entrepreneurial Role (after gaining some experience) and the average income of
entrepreneurs is higher by almost 2.5 times compared to their friends who are in job.

4. A Management Graduate should therefore not be just a Job Seeker. He can and
should take the role of Job Provider.

5. Enterprises in protected economy can sustain mismanagement because the markets are
assured under quota and license raj. In the ensuing monopoly or monopolistic market, there is a
demand supply mismatch and therefore profit margins are high. Therefore, there is enough
resilience to sustain errors and consequential losses in an entrepreneurial venture once the
license was obtained.

6. Enterprises in competitive environment are essentially to be well managed. In the resulting

perfect or near perfect market, profits are thin and any losses due to errors can not be passed on
to the consumer. Therefore, entrepreneurial ventures have to be well managed.
7. Even in his employment in a company, he needs to become an INTRAPRENEUR
in order to deliver maximum to his employer and increase his own stock in return.

8. Therefore, either way, Entrepreneurship Management becomes an essential part of

curriculum of management studies.

Entrepreneurial Decision Process

A person decides to do something either because something in that activity lures him or he he
takes it as option in lieu of something else, ie, he is forced to do it by people or circumstances.
The factors which lure a person to become entrepreneur are called Pull factors and the factors
that compel him are called Push factors.

Pull Factors

(a) Perception of Advantages – If a person feels that he can earn better or

overall gains in terms of money. Status, security, future, etc as an entrepreneur

are better than working as an employee, he tends to turn an entrepreneur.

(b) Spotting an Opportunity – Many employees spot a business opportunity in the

course of their work and decide to exploit that opportunity rather than pass it on to their
employer. Many employees buy unsuccessful businesses at throw away prices from
their former employers and turn them around.

(c) Government Policies – Govts very often formulate policies to promote certain
business activity or backward areas which offer tax concessions/holidays, cash
subsidies, cheap land, etc, which improve success and profit prospects.

(d) Motivation from biographies or success stories.

(e) Influenced by Culture, Community, Family Background, Teachers, Peers,

etc. – (Refer page 5 para 7) Go to Environment_Impact

Push Factors

(a) Job Dissatisfaction – Many people start their own venture because they feel
dissatisfied with their existing jobs/boss/work environment.
 (b) Relocation – Repeated or especially unhappy relocation some times prompts
some people to entrepreneurship.

(c) Joblessness – This is the biggest source of micro level entrepreneurships. Many
parents help their academically poor children, who fail to find a job, to start their own
micro ventures. But success rate in such ventures is poor. The very traits responsible for
their academic failure lead to business failure.

(d) Lay off – Lay offs often lower the market value of an employee to half. Thus, if a
person is laid off and he is unable to find a suitable job for him, he might think of
starting his own business.

(e) Retirement – Many retired, but physically and mentally fit, people start their own
business either to supplement their pension/savings or just to keep themselves gainfully
occupied.

(f) Boredom – This is applicable to many ladies from well to do families. With their
army of servants to take care of home, they find an avenue to keep the boredom away
and start ventures like boutiques, fashion designing, etc.

Entrepreneurship and Economic Development

Entrepreneurial spirit of people is greatly responsible for economic development of any

country. There is no resource including diamond mines as valuable as human resource. South
Africa and a few other African countries despite their fertile gold and diamond mines have
remained poor/relatively poor, where as Japan with literally no natural resources and having
suffered devastation during WW–II became a developed country in just three decades.
Therefore, if a country allows its human resources to be unutilized/underutilized
(unemployment/disguised unemployment), its economic development would be severely
hampered.

Failure of communism worldwide and our own harrowing experience with socialism has
shown that “Govt has no business to be in Business”. Govt should only govern. Business
activity should be left to people. And this is where entrepreneurs enter the picture. (a)

Entrepreneurs set up enterprises which provide employment not only to themselves but to
many others directly and indirectly and thereby put into utilization Human Resource of the
country.

(b) Entrepreneurs combine resources, put their time and efforts and produce goods or
 services. The Value Addition that they do to the resources brings prosperity to the
country.

(c) What they contribute – productivity, output, value addition, income and
employment

(d) Entrepreneurship is a “Low Cost Strategy”. An entrepreneur works with maximum

financial efficiency in order to maximize his profits. Entrepreneurs rarely indulge
themselves in luxury of Business Class travel and 5 Star Hotel comforts which the
managers avail without fail. Thus, many such costs are either avoided or kept in check.
Entrepreneurs perform the crucial role themselves.

(e) The spirit of Entrepreneurship – Drive, achieving higher goals, creativity,

innovative attitude.

(f) A dynamic society emerges and the spirit spreads like a chain reaction – Many
entrepreneurs have proved to be catalyst for growth of a bevy of smaller entrepreneurs.
Jamshedpur was a small town before Tata Steel Plant was set up. Once the plant came
up in the place, many people set up their small enterprises to cater to the needs of the
growing population.
Product Evolution Process
Fundamentals of Science
The Evolution Process
(a) Intersection of knowledge and a recognized social need (b) Initiation of technological
innovation
(c) Iterative Synthesis (d) Development Phase
(e) Industrial Phase
The Product Planning and Development Process
(a) Idea Stage – Idea – Evaluate
(b) Concept Stage – Lab Development – Evaluate (c) Product Development Stage – Pilot
Production – Evaluation
(d) Test Marketing Stage – Semi Commercial Production Evaluation (e) Commercial Stage –
(i) Introduction (ii) Growth
(iii) Maturity (iv) Decline
Recognized Technology
Social Need
Beginning of Technological
Modeling Innovation
Product Testing
Invention / Innovation
Concept Testing
Development Phase
Planning
Financing
Manufacturing
Marketing
Commercial Phase

Commercialization

(a) Role of Government (b) Role of Corporate –

Intrapreneurship

(c) Role of Individuals – Entrepreneurship (d)

Development of Technology

(i) Utilization of materials (ii) Exploitation &

transformation of energy

(iii) Understanding and application of Scientific Principles (e) The Role of

Government

(i) Promotional (ii)

Neutral (iii) Regulatory

The Strategies for an Entrepreneurial firm

Below is illustrated recommended strategic response for a small firm under differing
conditions of technological and finance requirements for various industries

T – Technological Inputs M – Money Inputs

(a) Technology – High, Money – High – Industry requires large skilled resources
(difficult to obtain for a start up firm) and large financial strength (again a difficult
proposition for a new firm). Recommended response – Act as a Supplier or Sub
–Contractor.

(b) T– High, M– Low – Specialist firm, access to low cost research

(c) T– Low, M– High – Linkage with well– established channels

(d) T– Low, M– Low – Well suited to small firm

 (e) Low Tech – High Volume – Requires strong Financial Ability

(f) High Tech – Low Volume – Requires Strategic Ability

(g) Emerging Options – Franchisee; Sub– contractor

Business Environment & Entrepreneurship Environment
(a) Political – System, Stability, Leadership
(b) Socio– cultural – Culture, Community, Values, Ethics, Attitude
(c) Technological – Education, Absorption, Competition, Innovation
(d) Legal – Regulatory framework, Consumer protection, Concern for
environment, Labour laws
(e) Economic – GDP, GNP, Resources, Fiscal, Non– fiscal policies, Incentives
and Subsidies
Dimensions of Environment
(a) SPECTACLES – Social, Political, Economic, Cultural, Technological,
Aesthetic, Customer, Legal, Environmental and Sectoral
(b) PEETS – Political, Economic, Ecological, Technological and Socio–
demographical
(c) SLEPT – Social, Legal, Economical, Political and Technological
Factors Influencing Entrepreneurship
Individual
Economic Environment
Socio-cultural factors
Support Systems
Political
Legal
Technological Environment
Environment
Environment

OUTLINE OF A BUSINESS PLAN

1. Introductory page

(a) Name and address of the venture (b) Names

and addresses of the principals
 (c) Nature of business (d) Statement of
financing needed

(e) Statement of confidentiality of the report

2. Executive Summary

3. Industry Analysis

(a) Future outlook and trends (b)

Analysis of competitors (c) Market
segmentation

(d) Industry forecasts

4. Description of Venture

(a) Product(s)/Service(s) (b)

Size of business

(c) Office equipment and personnel (d)

Background of entrepreneurs

5. Production Plan or Operations Plan

(a) Manufacturing process (amount subcontracted)

(b) Physical plant (c) Machinery and

equipment (d) Names of suppliers of raw
materials

6. Marketing Plan

(a) Pricing (b)

Distribution (c)
Promotion

(d) Product forecasts

(e) Controls (f) e–

initiatives

7. Organizational Plan
 (a) Form of ownership (b) Identification of partners or
principal shareholders (c) Authority of principals

(d) Management– team background (e) Roles and

responsibilities of members of organization

8. Assessment of Risk

(a) Evaluation of weaknesses of business (b)

New technologies

(c) Contingencies plans

9. Financial Plan

(a) Pro forma income plan (b)

Cash flow projections

(c) Pro forma balance sheet (d)

Break– even analysis

(e) Sources and applications of funds

10. Appendices (contains backup material)

(a) Resumes of principals (b)

Letters

(c) Market research data and survey results (d)

Leases or contracts

(e) Price lists from suppliers (f)

Facility layout

(g) Draft marketing brochure with or without pricing (h)

Structure of e– marketing thrusts, if any

Business plans rank no higher than 2/10 as a predictor of a new venture’s success. With all the
uncertainties involved, it is not easy to forecast or make future projections. An entrepreneurial
venture faces even greater uncertainties. It is hard to predict even revenues

let alone the profits. Thus, every investor knows that any financial projections for a new
company that stretch beyond a year are an act of imagination.

It does not mean to say that business plans should not include numbers. Business plans should
include numbers but those numbers should appear in the form of a business model that shows
that the entrepreneurial team has considered the key drivers of the venture’s success or failure.

Estimation of time and capital is another hurdle faced during preparation of project plan.

Break even analysis is very important. Also the time when cash flow will turn positive needs to
be estimated. But these information should come towards the end of the project report.

There are four independent factors critical to every new venture and should be highlighted in
the business plan –

1. The People

The most important determinant of success. The men and women starting and running
the venture, as well as, the outside parties providing key services or important resources
for it, such as its lawyers, accountants and suppliers.

An ordinary plan can succeed if the execution is immaculate, but an outstanding plan
will surely flop without effective execution. Thus, the people involved in the new
venture are most important. Arthur Rock, a Venture Capitalist legend associated with
companies like Apple, Intel and Teledyne states,

“I invest in people, not ideas”

Three important questions need to be answered in every business plan –

(a) What do they know (about business)?

(b) Whom do they know (the customers, the people in the govt, etc)? and,

(c) How well are they known (their reputation that can be leveraged with various
stakeholders of business like suppliers, employees and govt officials)?

Thus, a business plan should describe each member’s knowledge of the new venture’s
type of products and markets – from competitors to customers.

2. The Opportunity

A profile of business itself – what it will sell and to whom, whether the business can
grow and how fast, what its economics are and who and what stands in the way of
success.

A good business plan begins by focussing on two aspects of opportunity –

(a) Is the total market for the venture’s product large, rapidly growing or both?

(b) Is the industry now, or can it become, structurally attractive?

Investors look for a large and rapidly growing market because it is much easier to
obtain a share of a growing market than to fight with entrenched competitors for a share
of a mature or stagnant market. The business plan should establish the attractiveness of
the industry in terms of growth potential. Building and launching of the product in the
market place is the next emphasis point in the project report.

If it were easy to spot the opportunities, they would have become extinct. They will be
killed before they are born.

Pricing is another issue. Difficult to guess but inevitable for any project report.

Cash flow is equally important. The project report should include –

(a) When does the business have to buy resources, such as supplies, raw
materials and people services? (b) When does the
business have to pay for them?

(c) How long it takes to acquire a customer? (d) How long before
customer sends the business cheque? (e) How much is the
investment for each rupee of sale?

Growth opportunities in terms of place, product, customer base, etc needs to be

elaborated.

Project plan also needs to discuss the mouse traps that the business can get caught into
and plan to avoid them.

Competition is the next issue that should be addressed in great detail. Following
questions should be answered –

(a) Who are the new venture’s current competitors?

(b) What resources do they control? What are their strengths and weaknesses? (c)
How will they respond to the new venture’s decision to enter business?

(d) How can the new venture respond to its competitors’ response? (e) Who else might
be able to observe and exploit the opportunity? (f) Are there ways to co-opt potential or
actual competitors by forming
 alliances?

3. The Context – The big picture – The regulatory environment, interest rates, demographic
trends, inflation and the like – basically factors that change inevitably but can not be controlled
by the entrepreneur.

4. The Risk and Rewards – An assessment of everything that can go wrong and right
and a discussion of how the entrepreneurial team can respond.

The business plan remains same irrespective of the fact whether it is an entrepreneurial venture
or being launched by the established company. After all the market does not differentiate on
the basis of whose money it is; whether of the investor or the shareholders.