Entrepreneurship Development

Gouri Sankar Moharana

Asst. Prof. Finance
ENTREPRENEURSHIP DEVELOPMENT
Module-I : Entrepreneurship:

Entrepreneurship: Entrepreneurial development today has become very significant; in view of its being
a key to economic development. The objectives of industrial development, regional growth, and
employment generation depend upon entrepreneurial development.

Entrepreneurs are, thus, the seeds of industrial development and the fruits of industrial development are
greater employment opportunities to unemployed youth, increase in per capita income, higher standard of
living and increased individual saving, revenue to the government in the form of income tax, sales tax,
export duties, import duties, and balanced regional development.

Concept of Entrepreneurship:

The word ―entrepreneur‖ is derived from the French verb enterprendre, which means ‗to undertake‘. This
refers to those who ―undertake‖ the risk of new enterprises. An enterprise is created by an entrepreneur.
The process of creation is called ―entrepreneurship‖.

Entrepreneurship is a process of actions of an entrepreneur who is a person always in search of something

new and exploits such ideas into gainful opportunities by accepting the risk and uncertainty with the
enterprise.

Characteristics of Entrepreneurship:

1. Economic and dynamic activity:

Entrepreneurship is an economic activity because it involves the creation and operation of an enterprise
with a view to creating value or wealth by ensuring optimum utilisation of scarce resources. Since this
value creation activity is performed continuously in the midst of uncertain business environment,
therefore, entrepreneurship is regarded as a dynamic force.

2. Related to innovation:
Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an individual to
continuously evaluate the existing modes of business operations so that more efficient and effective
systems can be evolved and adopted. In other words, entrepreneurship is a continuous effort for synergy
(optimization of performance) in organizations.

3. Profit potential:
―Profit potential is the likely level of return or compensation to the entrepreneur for taking on the risk of
developing an idea into an actual business venture.‖ Without profit potential, the efforts of entrepreneurs
would remain only an abstract and a theoretical leisure activity.

4. Risk bearing:
The essence of entrepreneurship is the ‗willingness to assume risk‘ arising out of the creation and
implementation of new ideas. New ideas are always tentative and their results may not be instantaneous
and positive.

An entrepreneur has to have patience to see his efforts bear fruit. In the intervening period (time gap
between the conception and implementation of an idea and its results), an entrepreneur has to assume
risk. If an entrepreneur does not have the willingness to assume risk, entrepreneurship would never
succeed.

Some facts about entrepreneurs and entrepreneurship:

E:xamine needs, wants, and problems to see how they can improve the way needs and wants are met and
problems overcome.
N: arrow the possible opportunities to one specific "best" opportunity.

T:hink of innovative ideas and narrow them to the "best" idea.

R:esearch the opportunity and idea thoroughly.

E:nlist the best sources of advice and assistance that they can find.

P:lan their ventures and look for possible problems that might arise.

R:ank the risks and the possible rewards.

E:valuate the risks and possible rewards and make their decision to act or not to act.

N:ever hang on to an idea, no matter how much they may love it, if research shows it won't work.

E:mploy the resources necessary for the venture to succeed.

U:nderstand that they will have to work long and hard to make their venture succeed.

R:ealize a sense of accomplishment from their successful ventures and learn from their failures to help
them achieve success in the future.

Characteristics of Successful Entrepreneurs

Entrepreneurs are different from each other, but successful entrepreneurs tend to share certain
characteristics. Not all of them have developed each of the following to the same degree, but they tend to
have developed most of them to some degree. Here are some common characteristics of successful
entrepreneurs.
Entrepreneurs tend to:
 be passionate about achieving their goals
 have a spirit of adventure (in fact, the word "adventure" is derived from the Latin word
 meaning "to venture")
 have a strong need to achieve and seek personal accomplishment
 be self-confident and self-reliant
 be goal-oriented
 be innovative, creative, and versatile
 be persistent
 be hardworking and energetic
 have a positive attitude
 be willing to take initiative
 have a strong sense of commitment
 An eye for opportunity: Many entrepreneurs start by finding a need and quickly satisfying it.
 Independence: Even though most entrepreneurs know how to work within the framework for the
sake of profits, they enjoy being their own boss.
 An appetite for hard work: Most entrepreneurs start out working long, hard hours with little
pay.
 Self-confidence: Entrepreneurs must demonstrate extreme self-confidence in order to cope with
all the risks of operating their own business.
 Discipline: Successful entrepreneurs resist the temptation to do what is unimportant or the easiest
but have the ability to think through to what is the most essential.
 Judgment: Successful entrepreneurs have the ability to think quickly and make a wise decision.
 Ability to accept change: Change occurs frequently when you own your own business, the
entrepreneur thrives on changes and their businesses grow.
 Make stress work for them: On the roller coaster to business success the entrepreneur often
copes by focusing on the end result and not the process of getting there.
 Need to achieve: Although they keep an "eye" on profits, this is often secondary to the drive
toward personal success.
 Focus on profits: Successful entrepreneurs always have the profit margin in sight and know that
their business success is measured by profits. Is this your profile or would you rather do your job,
pick up your paycheck and leave the headaches to someone else? Most of us, quite easily, choose
the later.
Entrepreneurial Process:

Entrepreneurship is a process, a journey, not the destination; a means, not an end. All the successful
entrepreneurs like Bill Gates (Microsoft), Warren Buffet (Hathaway), Gordon Moore (Intel) Steve Jobs
(Apple Computers), Jack Welch (GE) GD Birla, Jamshedji Tata and others all went through this process.

To establish and run an enterprise it is divided into three parts – the entrepreneurial job, the promotion,
and the operation. Entrepreneurial job is restricted to two steps, i.e., generation of an idea and preparation
of feasibility report. In this article, we shall restrict ourselves to only these two aspects of entrepreneurial
process.

Figure 1: The Entrepreneurial Process

1. Idea Generation:
To generate an idea, the entrepreneurial process has to pass through three stages:

a. Germination:
This is like seeding process, not like planting seed. It is more like the natural seeding. Most creative ideas
can be linked to an individual‘s interest or curiosity about a specific problem or area of study.

b. Preparation:
Once the seed of interest curiosity has taken the shape of a focused idea, creative people start a search for
answers to the problems. Inventors will go on for setting up laboratories; designers will think of
engineering new product ideas and marketers will study consumer buying habits.

c. Incubation:
This is a stage where the entrepreneurial process enters the subconscious intellectualization. The sub-
conscious mind joins the unrelated ideas so as to find a resolution.

2. Feasibility study:
Feasibility study is done to see if the idea can be commercially viable.

It passes through two steps:

a. Illumination:
After the generation of idea, this is the stage when the idea is thought of as a realistic creation. The stage
of idea blossoming is critical because ideas by themselves have no meaning.

b. Verification:
This is the last thing to verify the idea as realistic and useful for application. Verification is concerned
about practicality to implement an idea and explore its usefulness to the society and the entrepreneur.

Importance of Entrepreneurship: Entrepreneurship offers the following benefits:

1. Development of managerial capabilities:

The biggest significance of entrepreneurship lies in the fact that it helps in identifying and developing
managerial capabilities of entrepreneurs. An entrepreneur studies a problem, identifies its alternatives,
compares the alternatives in terms of cost and benefits implications, and finally chooses the best
alternative.

This exercise helps in sharpening the decision making skills of an entrepreneur. Besides, these managerial
capabilities are used by entrepreneurs in creating new technologies and products in place of older
technologies and products resulting in higher performance.

2. Creation of organizations:
Entrepreneurship results into creation of organizations when entrepreneurs assemble and coordinate
physical, human and financial resources and direct them towards achievement of objectives through
managerial skills.

3. Improving standards of living:

By creating productive organizations, entrepreneurship helps in making a wide variety of goods and
services available to the society which results into higher standards of living for the people.

Possession of luxury cars, computers, mobile phones, rapid growth of shopping malls, etc. are pointers to
the rising living standards of people, and all this is due to the efforts of entrepreneurs.

4. Means of economic development:

Entrepreneurship involves creation and use of innovative ideas, maximisation of output from given
resources, development of managerial skills, etc., and all these factors are so essential for the economic
development of a country.

Factors affecting Entrepreneurship: Entrepreneurship is a complex phenomenon influenced by

the interplay of a wide variety of factors.

Some of the important factors are listed below:

1. Personality Factors:
Personal factors, becoming core competencies of entrepreneurs, include:

(a) Initiative (does things before being asked for)

(b) Proactive (identification and utilisation of opportunities)

(c) Perseverance (working against all odds to overcome obstacles and never complacent with success)

(d) Problem-solver (conceives new ideas and achieves innovative solutions)

(e) Persuasion (to customers and financiers for patronisation of his business and develops & maintains
relationships)

(f) Self-confidence (takes and sticks to his decisions)

(g) Self-critical (learning from his mistakes and experiences of others)

(h) A Planner (collects information, prepares a plan, and monitors performance)

(i) Risk-taker (the basic quality).

2. Environmental factors:
These factors relate to the conditions in which an entrepreneur has to work. Environmental factors such
as political climate, legal system, economic and social conditions, market situations, etc. contribute
significantly towards the growth of entrepreneurship. For example, political stability in a country is
absolutely essential for smooth economic activity.

Frequent political protests, bandhs, strikes, etc. hinder economic activity and entrepreneurship. Unfair
trade practices, irrational monetary and fiscal policies, etc. are a roadblock to the growth of
entrepreneurship. Higher income levels of people, desire for new products and sophisticated technology,
need for faster means of transport and communication, etc. are the factors that stimulate entrepreneurship.

Thus, it is a combination of both personal and environmental factors that influence entrepreneurship and
brings in desired results for the individual, the organisation and the society.

Types of Entrepreneurs: Depending upon the level of willingness to create innovative ideas,
there can be the following types of entrepreneurs:

1. Innovative entrepreneurs:
These entrepreneurs have the ability to think newer, better and more economical ideas of business
organisation and management. They are the business leaders and contributors to the economic
development of a country.

Inventions like the introduction of a small car ‗Nano‘ by Ratan Tata, organised retailing by Kishore
Biyani, making mobile phones available to the common may by Anil Ambani are the works of innovative
entrepreneurs.

2. Imitating entrepreneurs:
These entrepreneurs are people who follow the path shown by innovative entrepreneurs. They imitate
innovative entrepreneurs because the environment in which they operate is such that it does not permit
them to have creative and innovative ideas on their own.

Such entrepreneurs are found in countries and situations marked with weak industrial and institutional
base which creates difficulties in initiating innovative ideas.

In our country also, a large number of such entrepreneurs are found in every field of business activity and
they fulfill their need for achievement by imitating the ideas introduced by innovative entrepreneurs.

Development of small shopping complexes is the work of imitating entrepreneurs. All the small car
manufacturers now are the imitating entrepreneurs.
3. Fabian entrepreneurs:
The dictionary meaning of the term ‗fabian‘ is ‗a person seeking victory by delay rather than by a
decisive battle‘. Fabian entrepreneurs are those individuals who do not show initiative in visualising and
implementing new ideas and innovations wait for some development which would motivate them to
initiate unless there is an imminent threat to their very existence.

4. Drone entrepreneurs:
The dictionary meaning of the term ‗drone‘ is ‗a person who lives on the labor of others‘. Drone
entrepreneurs are those individuals who are satisfied with the existing mode and speed of business
activity and show no inclination in gaining market leadership. In other words, drone entrepreneurs are
die-hard conservatives and even ready to suffer the loss of business.

5. Social Entrepreneur:
Social entrepreneurs drive social innovation and transformation in various fields including education,
health, human rights, workers‘ rights, environment and enterprise development.

They undertake poverty alleviation objectives with the zeal of an entrepreneur, business practices and
dare to overcome traditional practices and to innovate. Dr Mohammed Yunus of Bangladesh who started
Gramin Bank is a case of social entrepreneur.

Classification according to type of business.

• Business Entrepreneurs.
• Trading Entrepreneurs.
• Industrial Entrepreneurs.
• Corporate Entrepreneurs.
• Agricultural Entrepreneurs.

Classification according to use of technology.

• Technical entrepreneur.
• Professional entrepreneur.
• Non-technical entrepreneur.
• High-tech entrepreneur

Classification according to motivation of entrepreneur.

• Pure entrepreneur.
 • Induced entrepreneur.
• Motivated entrepreneur.
• Spontaneous entrepreneur.

Classification according to growth.

 Growth entrepreneur.
 Super growth entrepreneur.

Classification according to stages of development.

• First generation entrepreneur.

• Modern entrepreneur.
• Classical entrepreneur.

Based on type of business

Trading Entrepreneurs: Trading entrepreneurs are those who undertake buying and selling activities.
They are found in the distribution channel. They may be distributors, retailers, whole-sellers. The nature
of work nature of work undertaken by them are slightly differs from one anther For example, distributors
would buy from the manufacture and sell the same to the whole-sellers or retailers. While retailers buy
either from whole seller or distributor and sell the same to the customers.

Industrial Entrepreneurs: Industrial entrepreneurs are those who undertake some manufacturing
activity. They identify the needs of the customers and conceive an idea of manufacturing a new product.
They make use of technology and economic resources to create a profitable venture. They are the owners
of small industrial units who run establishments on their own with the help of new workers and
assistants.

Corporate Entrepreneurs; Individuals who promote big industrial establishments are called corporate
entrepreneurs. The corporate undertakings started by them are registered under some statutes or Acts.
Thus, the corporations will have separate legal status. Companies registered under the Companies Act
and the trusts registered under the Trusts Act are examples or corporate undertakings.

Agricultural Entrepreneurs; Individuals who undertake agricultural operations using modern

mechanical devices and raise crops other than traditional ones may be called agricultural entrepreneurs.
They risk growing crop and experiment with new techniques to raise crops

Based on Technical skill

Technical Entrepreneurs: Individuals who start business using their technical background are called
technical entrepreneurs. They produce product or provide service using technology. They are strong in
technological aspects of their venture then in marketing or other aspects. They are comparatively
innovative.

Non-Technological Entrepreneurs; People who undertake businesses without any technical education
or background are called non-technical entrepreneurs. They exhibit their skill in marketing of the
products and services. They may also undertake manufacturing with the help of technical staff recruited
for that purpose.

Based on Motivation

Pure Entrepreneurs: Individuals who have all qualities of an entrepreneur by birth are called pure
entrepreneurs. They are self motivated and start business for their satisfaction. They are driven by
economic rewards and opportunities provided by imbalances prevailing in the market. They enjoy
freedom and do not like to work under the supervision of other.

Motivated Entrepreneurs: Individuals who are induced to take up some business are called motivated
or induced entrepreneurs. The urge to take up some venture comes from external forces or circumstances.
The entrepreneurial training programmes they attend or incentives offered by the government or the
success achieved by someone who is very close to them may motivate them to start their own enterprise.

Based on Growth

Growth-oriented Entrepreneurs: Individuals who would like to grow over a period by increasing the
size of their business are called growth-oriented entrepreneurs. They always look for new opportunities
to utilize them for their favour. They would like to expand or diversify their business given an
opportunity. They are ready to bear greater risk and take things challenging.

Not Growth Oriented Entrepreneurs: Individuals who do not want to expand their business further are
called stable or not growth-oriented entrepreneurs. They are happy with the present size and status of
their business. Fear of losing control over activities or perceived uncertainty in the market or limited
market for the product may be the reasons for not expanding their business.

Based on Person

First Generation Entrepreneurs: Are those who started the business on their own efforts and skill.
These people are entrepreneurs in the real sense. They will have all the qualities of an entrepreneur.

Entrepreneurs by inheritance: Those who inherited business from their parents or others are called
entrepreneurs by inheritance. Here the risk is comparatively less. But if the earlier generation have a left
a name in the area of the business, these entrepreneurs can shine even better.

Based on scale of operation

Small Entrepreneurs: Individuals who carry on small operation on small scale are called small
entrepreneurs. The investment made would be comparatively less. They use more of labours less or no
technology. Production is limited & they generally cater to the needs of local people.

Medium-scale Entrepreneurs: Medium Scale Entrepreneurs are bigger than small scale entrepreneurs
but smaller than large-scale entrepreneurs. Investment in technology and other resources more or less
equal. They cater to bigger market comparatively.

Large scale Entrepreneurs: Group of individual who come to establish a large scale enterprises may be
considered a large scale entrepreneurs. Heavy investment is made and mass production is undertaken.
They cater to the needs of national and international markets.

Based on Gender

Men Entrepreneur

Women Entrepreneur

Other types of Entrepreneurs are as follows:

Public Entrepreneurs: In many countries government itself established enterprises for the benefits of
the society at large. As the government is the owner of such units they are called public enterprises. Here
government acts as an entrepreneur.

Private Entrepreneurs: Entrepreneurs other than the government are called private entrepreneurs. Most
of the entrepreneurs in our country are being run by private entrepreneur. The primary objective of
private entrepreneurs is maximum profit

Forced Entrepreneurs: Entrepreneurs who start enterprises on the external pressure may be called
forced entrepreneurs. People who do not get job which suits their qualification may start their own
enterprises.

Artisan Entrepreneurs: Skilled person in rural areas are considered are artisan entrepreneurs. These
people acquire their skill through inheritance and trainings in childhood. They are blacksmith, carpenter,
shoemaker, potter, weavers, and like.

Functions of an Entrepreneur: The important functions performed by an entrepreneur are :

1. Innovation:
An entrepreneur is basically an innovator who tries to develop new technology, products, markets, etc.
Innovation may involve doing new things or doing existing things differently. An entrepreneur uses his
creative faculties to do new things and exploit opportunities in the market. He does not believe in status
quo and is always in search of change.
2. Assumption of Risk:
An entrepreneur, by definition, is risk taker and not risk shirker. He is always prepared for assuming
losses that may arise on account of new ideas and projects undertaken by him. This willingness to take
risks allows an entrepreneur to take initiatives in doing new things and marching ahead in his efforts.

3. Research:
An entrepreneur is a practical dreamer and does a lot of ground-work before taking a leap in his ventures.
In other words, an entrepreneur finalizes an idea only after considering a variety of options, analyzing
their strengths and weaknesses by applying analytical techniques, testing their applicability,
supplementing them with empirical findings, and then choosing the best alternative. It is then that he
applies his ideas in practice. The selection of an idea, thus, involves the application of research
methodology by an entrepreneur.

4. Development of Management Skills:

The work of an entrepreneur involves the use of managerial skills which he develops while planning,
organizing, staffing, directing, controlling and coordinating the activities of business. His managerial
skills get further strengthened when he engages himself in establishing equilibrium between his
organization and its environment.

However, when the size of business grows considerably, an entrepreneur can employ professional
managers for the effective management of business operations.

5. Overcoming Resistance to Change:

New innovations are generally opposed by people because it makes them change their existing behavior
patterns. An entrepreneur always first tries new ideas at his level.

It is only after the successful implementation of these ideas that an entrepreneur makes these ideas
available to others for their benefit. In this manner, an entrepreneur paves the way for the acceptance of
his ideas by others. This is a reflection of his will power, enthusiasm and energy which helps him in
overcoming the society‘s resistance to change.

6. Catalyst of Economic Development:

An entrepreneur plays an important role in accelerating the pace of economic development of a country
by discovering new uses of available resources and maximizing their utilization.

To better appreciate the concept of an entrepreneur, it is desirable to distinguish him from an entrepreneur
and promoter.
Table 1outlines the distinction between an entrepreneur and entrepreneurs, and Table 2 portrays basic
points of distinction between an entrepreneur and promoter.

Intrapreneurship

Intrapreneurship is a system which allows an employee to act like an entrepreneur within an

organization. Intrapreneurs are self-motivated, proactive, and action-oriented people who have leadership
skills and think outside the box.

―INTERNAL ENTREPRENEURSHIP‖

―Intrapreneurship‖ is innovation within a company. Intrapreneurship can flourish in any organization. It‘s
just a matter of identifying these people, developing strategy, encouraging participation and committing
to a culture of innovation.

An intrapreneur is an inside entrepreneur within a large firm, who uses entrepreneurial skills without
incurring the risks associated with those activities. Intrapreneurs are usually employees within a
company who are assigned to work on a special idea or project, and they are instructed to develop the
project like an entrepreneur would. Intrapreneurs usually have the resources and capabilities of the firm
at their disposal.

Characteristics of an Intrapreneur

 Adaptive : Intrapreneurs recognize and learn from mistakes, then adapt to find new solutions

 Creative : They posses ingenuity, bringing creativity to the workplace and applying it to everyday
situations

 Goes Against the Grain : Innovation is the name of the game, intrapreneurs often have a
rebellious spirit.

 Internally & Externally Focused : They understand the needs of company and customers.
Perspective is essential and they see the world through many different lenses

 Self-Reliant : Like any leader, they must trust their judgment and ability. Confidence and
independence enables them to convey ideas, even controversial ones

 Visionary : A good idea is one thing, but quantifying costs and benefits, understanding short vs.
long-term implications, and successfully pitching the idea spells success for an intrapreneur.
Distinction between Entrepreneur and Intrapreneur:

Basis Entrepreneur Intrapreneur

• Capacity — Owner — An manager

• Status — Own boss — Salaried employee

• Decisions — Takes own decisions — Executes decisions with the

concurrence of owner

• Reward — Uncertain and unlimited — Fixed rewards and salary

Distinction between Entrepreneur and Promoter:

Basis Entrepreneur Promoter

• Stage of business — From conception to continuation — To bring a business into existence

• Owning business — Owns the enterprise — May or may not own
• Nature of job — Includes everything — Highly specialized
— A consultant or a chartered account
• Example — Any business and offering services

Some Myths about Entrepreneurship:

Over the years, a few myths about entrepreneurship have developed. These are as under:

(i) Entrepreneurs, like leaders, are born, not made:

The fact does not hold true for the simple reason that entrepreneurship is a discipline comprising of
models, processes and case studies. One can learn about entrepreneurship by studying the discipline.

(ii) Entrepreneurs are academic and socially misfits:

Dhirubai Ambani had no formal education. Bill Gates has been a School drop-out. Therefore, this
description does not apply to everyone. Education makes an entrepreneur a true entrepreneur. Mr Anand
Mahindra, Mr Kumar Mangalam Birla, for example, is educated entrepreneurs and that is why they are
heroes.

(iii) To be an entrepreneur, one needs money only:

Finance is the life-blood of an enterprise to survive and grow. But for a good idea whose time has come,
money is not a problem.
(iv) To be an entrepreneur, a great idea is the only ingredient:
A good or great idea shall remain an idea unless there is proper combination of all the resources including
management.

(v) One wants to be an entrepreneur as having no boss is great fun:

It is not only the boss who is demanding; even an entrepreneur faces demanding vendors, investors,
bankers and above all customers.

Entrepreneurship Development
An entrepreneur‘s life will be much simpler, since he works for himself. The truth is working for others
are simpler than working for oneself. One thinks 24 hours a day to make his venture successful and thus,
there would be a punishing schedule.

Entrepreneurial Traits and Skills

In order to organize and run a business successfully, an entrepreneur must possess certain traits
important for driving success. Some of them are:

 Self-confidence: Others will trust you only when you trust yourself. This is the most important
trait of an entrepreneur, who should have the confidence to take one‘s own decisions.
 Risk-taking ability: Business is all about taking risks and experimenting. Entrepreneurs need to
have a risk-taking ability.
 Decision-making ability: Entrepreneurs should have the willingness and capability to take
decisions in favor of the organization all the time.
 Competitive: Entrepreneurs should always be ready to give and face competition.
 Intelligent: Entrepreneurs always need to keep their mind active and increase their IQ and
knowledge.
 Visualization: Entrepreneurs should have the ability to see things from different point of views.
 Patience: This is another virtue which is very important for entrepreneurship as the path to
success is often very challenging and it requires a lot of patience for sustenance.
 Emotional tolerance: The ability to balance professional and personal life and not mixing the two
is another important trait of an entrepreneur.
 Leadership quality: Entrepreneurs should be able to lead, control and motivate the mass.
 Technical skill: To be in stride with the recent times, entrepreneurs should at least have a basic
knowledge about the technologies that are to be used.
 Managerial skill: Entrepreneurs should have the required skill to manage different people such as
clients, employees, co-workers, competitors, etc.
 Conflict resolution skill: Entrepreneurs should be able to resolve any type of dispute.
 Organizing skill: They should be highly organized and should be able to maintain everything in a
format and style.
 High motivation: Entrepreneurs should have high level of motivation. They should be able to
encourage everyone to give their level best.
 Creative: They should be innovative and invite new creative ideas from others as well.
 Reality-oriented: They should be practical and have rational thinking.
Every entrepreneur should have the following necessary skills to run his/her business smoothly.

Confidence to Delegate Tasks

An entrepreneur likely has a full plate and feels that he/she can take on any task. But in reality, they keep
adding to the already-full plate and eventually it is going to collapse and create a mess.
An entrepreneur should be confident to delegate tasks to an experienced member of the company, who
has the ability to get tasks completed.

Effective Time Management

Proper time management is necessary to differentiate between the extremely urgent tasks and those that can
wait. An entrepreneur should use a notebook or whiteboard to prioritize tasks by writing them down.
Mobile devices and tablets have calendars and notepads, but nothing is more effective than actually
making a ―to-do‖ list. Concentrate on one task at a time and don‘t let new ―to-do‘s‖ disrupt your focus.
Check them out one at a time.

Visualizing Aim and Success

Entrepreneurs need to visualize their goals and success in their mind first, if they wish to plan on making
it a reality. Not only do they need to visualize the end result, but also every step that it is required to get
there.

Proper Listening and Communicating Well

Entrepreneurs need to be good at listening and communicating. If they lack this quality then this may
result in miscommunication and wastage of time. Apart from this, extra work is required to correct the
miscommunication.
Time is something that all entrepreneurs would like more of. How often we wished there were more
hours in a day? Wasting priceless time repeating and redoing tasks due to poor communication should be
avoided.

Understanding the Importance of Time

It‘s not possible to give everyone the time they want, as it would leave the entrepreneur with little to no
time to complete the things that is to be done.
If a sales representative has a question, they should discuss it with the sales manager. If a customer has a
question they should be speaking with the company‘s customer care representative.
While people might demand time, it doesn‘t mean that it is a must to grant them the time. Time is valuable,
so it shouldn‘t be wasted on disruptions that can be handled by other members of the organization.

Seeking Help When Needed

We often let our adamant nature to prevent us from asking for help. There were times when we were
stumped and someone came along with the answer and we thought, ―Why in the world didn‘t I think of
that?‖
Sometimes clear mind and a different viewpoint can quickly solve a problem or provide a solution to a
question. One should not be afraid to ask for help when needed, as it can also help to strengthen the
communication within the organization.

Giving Back

It is important to understand how blessed entrepreneurs are to do what they love to do. When we are
appreciative of what we have achieved, we should just take a step back to see what we can do to give
back, it gives a feeling like no other. Nobody said being an entrepreneur is an easy task, and while these
qualities will not transform into automatic success, they sure can help in the journey to success.

Entrepreneurial Motivation

The performance of an entrepreneur is dependent on his/her ability and willingness to perform. Here, by
ability we mean a function of education, experience and skill and by willingness we mean to perform
depending upon the level of motivation. Motivation is one of the fundamental factor required for an
entrepreneur to promote his/her ideas.
Why motivation is an important factor for an entrepreneur:

 Tough competition: An entrepreneur needs to face tough competition, in order to sustain and
make a mark in this global market. To cope with this competition, motivation is required at each stage of
the firm.
 Unfavorable environment: Nobody knows what the future holds. One has to take care of the
current economy and should be prepared for the worst situations of deteriorating economic conditions.
For this, motivation and optimism is essential.
 To create public demand: Market runs by the people and for the people. To run a business
profitably, it is required to create a public demand for your product or service in the market and attract as
many customers as possible. To do this in the right way, motivation is required.
 To enhance creativity: Market always wants something new and different. If every firm offers
the same product without any variation then there is no point of preferring one brand in particular. To
sustain one has to be innovative. Add some new features in the existing products and services, make them
more user friendly in a considerable budget. This requires motivation too.
 To increase productivity: It is very important to take care of the quality of the product as well as
the profit. People will always prefer a product which is cost efficient and of good quality. So, motivation
is required for increase the productivity.
Thus motivation plays a unique role in establishing a company by frequently boosting the entrepreneur to
do effective things efficiently.
The 6Cs that motivate entrepreneurs to establish their own business are as follows:

 Change – Entrepreneurs frequently want change, not only change, they also want to be the bearers of
change. They are solution givers and want to interrupt the status quo. They have a vision like "I want
to assemble the world's information" or "I want to put an AC at every desk" and they take an attempt to
make this change. In this attempt, some succeed and some fail.
 Challenge – Some people love challenges and they opt for starting a new business as it is very
challenging to handle big problems. These people find typical job in a big corporate as boring and not
challenging enough.
 Creativity – Running one‘s own business is all about being more creative and having the
independence to make new discoveries. For example, testing a new website design, launching a new
marketing scheme, creating inventive items that solve a known issue in a different way, creating new
advertising campaigns, etc. One needs to have an infinite room to welcome and introduce creativity in
a small business.
 Control – Some people tend to start a business because they don't want to be pushed around and
work for a product/company in which they have no way to shape their destiny. They want to be their
own boss having their own time, own pace, location of their choice, employees of their choice and
have a progressive role in deciding the direction of the company.
 Curiosity - Successful entrepreneurs are always anxious and ask - "what if we do X this way?‖ They
want to have more than one option to do a work and choose the best one from them. They want to
understand the customer's perceptions, point of views, markets and competitors. They are frequently
anxious to see how their particular theory like "people want to do A with B" works. In this aspect, they
can‘t be differentiated from a scientist who is trying to prove his theorem.
 Cash – The last but not the least part is the cash. Money says it all. Many non- entrepreneurs have a
misconception that cash comes first for entrepreneurs but this is never really true. If this would be the
case, then there is no reason for an Ellison or Gates to keep expanding their business aggressively
after they have made more than billion dollars. However, money is not the primary motivation.
EntrepreneurialAchievement
Entrepreneurs are not always motivated by profit but regard it as a standard for measuring achievement or
success. An entrepreneur greatly values self-reliance and strives for distinction through excellence. They
are highly optimistic (otherwise nothing would be undertaken), and they always favor challenges of
medium risk that is neither too easy, nor ruinous.

Given below are some factors that contribute to the success of an entrepreneur. The factors are:
 Self-confidence: Before convincing others to trust us, it is important to trust our self. The
determination or the courage and belief one has on self to achieve the goal is known as self-confidence.
 Experience: It‘s not always necessary to be experienced for starting a business, but yes, having
some experience will definitely help save time and effort.
 Profit: Opting for a business that has a demand in the market, is always a better choice. However,
it is always good to think of a steady income rather than just profit.
 Brand: Everybody opts for or at least wishes to opt for branded products or services. The reason
varies, some see it as a standard of living, for some it‘s the quality. Keeping this in mind, it is very
important to create a signature mark of your product.
 Market share: It adds to an individual‘s, groups, or firm‘s contribution in the market when by
contributing their company product in the market. A company designs a product with respect to the
demand of the mass.
 Some other factors like consumer relation, social support, government support also contribute as
important factors in entrepreneurial achievement.
Entrepreneurial Personality
Entrepreneurial personality as "the combination of characteristics or qualities that form an individual‘s
distinctive character". Personality traits include the human characteristics, abilities, motives, attitudes and
values which shape the individual person's experiences and actions. Hence, personality traits cause the
mental and behavioural processes of individuals.
Big Five model has been the predominant system to describe a human personality. The Big Five
personality traits are commonly known under the acronym "OCEAN" and consist of openness to
experience, conscientiousness, extraversion, agreeableness and neuroticism. Each of these dimensions
consists of a set of related qualities.

The human‘s psychology and personality aspects might play a significant role in the individual propensity
towards entrepreneurial actions. In his meta analysis, Brandstätter (2011) assessed the correlation
between personality traits and entrepreneurial behaviour. He explored the personality traits of
entrepreneurs by comparing personality scores of those with the scores of managers. It was found that
while being more open to new experiences (openness), entrepreneurs are also slightly more dutiful
(conscientiousness) and rather energetic towards the social and material world (extraversion) compared to
managers. At the same time entrepreneurs tend to score lower in agreeableness and neuroticism. This
suggests that there is an entrepreneurial personality.

Entrepreneurship as a Career
Positive aspects of entrepreneurship
 Being the boss if his own business, he enjoys unlimited powers. He can do things in his own way
and he need not take orders from someone else. He can make his own decisions and act on them.

 There are numerous opportunities for his self- development.

 Working on one‘s own and thus getting rewards yields immense satisfaction and pleasure for
more than what he can get in a job.

 Monetary rewards can be more than commensurate with his capacity and capabilities.

 He can command deference and respect of his immediate family and friends. It is a kind of
intangible reward.

 Instead of depending on others, he generates employment for others.

 He can make significant contribution to the development of the country and be proud of taking
part in nation building activities.

 He can be a great achiever realizing his goals and proving his achievements to the world. He can
be recognized for his outstanding efforts.
Negative aspects
 Though an entrepreneur is his own boss, in some respects he is not. It is so because he is
constrained by various people like his financiers, labourers, suppliers, customers and so on.

 He may have to face frustration since the scope of his operations is limited by his limited
resources.

 He has to work long and hard hours from morning to dusk and his venture tends to absorb all his
energy and time. This may affect his social and family life.

 At times he may have to face disappointments and frustrations since everything in his venture
may not always work the way he would like it to.
  He has to always work with tension since there is always the risk of failure.

Role of Family
It is arguable that family background and entrepreneurship education has an impact towards
promoting entrepreneurship. Family members involved in entrepreneurial activities
can influence individuals' intention in venture creation and also they can view as strength in the hands of
finance and motivation.

A lot has been documented about the importance of the entrepreneur‘s access to financial capital, as well
as educational achievement and progress, to the enterprise‘s ultimate success. The family background of
an entrepreneur is often an unrecognized aspect of success. Few facts regarding the role of family for
entrepreneurs are:

 Two to three times more business is owned by the children of industrialists than those whose
parents don‘t own a business. So it is pretty clear that, business ownership runs within the family but the
question here is does it lead to success?
 Entrepreneurs working in their family business before starting a business of their own, tend to be
10 to 40 percent more successful than they would be otherwise.
 The would-be entrepreneur gains valuable experience through informal learning and
apprenticeship that occurs while working in a family business.
 Who can teach us better than our own parents? A brilliant way of learning the ―name of the game‖
of running an own business is first working in the family business.
 Family business is a golden ticket for family members to hold human capital linked to operating a
business. It is not necessary to gain this experience in the same industry, probably because basic business
experience is what counts.

The major scope through which families shift their business success across generations is by working
through experience. However, a major drawback is the cycle of low rates of business ownership could be
easily broken and relatively worse business outcomes could be passed from one generation to the next. It
is very important to address the lack of opportunities to work in family businesses.
Role ofSociety

Entrepreneurs contribute to the society in the following ways:

 Business yields and allots products and services to meet certain public requirements. Business has to
be very flexible and frequent research on consumer demands should be done to increase profit.

 Entrepreneurs create job opportunities. Income is ensured through entrepreneurship. It is a very

important factor to consider.

 Entrepreneurship has its own contribution in the national well-being. It ensures it in different ways,
assisting the government to preserve and manage all kinds of public, social institutions and services,
etc.
Entrepreneurs facilitate in enlightening and educating people and motivating their growth at a personal
level. Due to high level of competition in the market, it is important for both businessmen as well as their
employees to be involved in the constant process of learning and improving personal skills and abilities
like creativity, determination, communication skills and vision for new business chances.
Role of EDIs (Entrepreneurship Development Institute of India)
Entrepreneurship Development Institute of India (EDII) was established in 1983 in Ahmedabad, Gujarat.
EDII offers four-year of full-time Fellow Program in Management (FPM) course, two-year PGDM
program in Business Entrepreneurship (BE) and Development Studies (DS) with intake of 120 seats in
each discipline.
The Entrepreneurship Development Institute of India (EDI), an autonomous body and not-for-profit
institution, set up in 1983, is sponsored by apex financial institutions, namely the IDBI Bank Ltd, IFCI
Ltd. ICICI Ltd and State Bank of India (SBI).
Functions of EDII
 Creating a multiplier effect on opportunities for self-employment,
 Augmenting the supply of competent entrepreneurs through training,
 Augmenting the supply of entrepreneur trainer-motivators,
 Participating in institution building efforts,
 Inculcating the spirit of 'Entrepreneurship' in youth,
 Promoting micro enterprises at rural level
 Developing new knowledge and insights in entrepreneurial theory and practice through research,
 Facilitating corporate excellence through creating intrapreneurs,
 Improving managerial capabilities of small scale industries,
 Sensitizing the support system to facilitate entrepreneurs establish and manage their enterprises,
 Collaborating with organizations to accomplish the above objectives.

MSME - Development Institute, (MSME-DI) (Formerly Known as Small Industries Service Institute)
maintains a close liaison with the state industries department, Financial Institutions, Voluntary
Organizations and other agencies concerned with the entrepreneurial development. There are 28 MSME-
DI 's and 30 branches of MSME-DI 's are set up all over the country.

 Serve as an interface between central and state governments.

 Rendering technical support services. •Conducting EDP's.
 Initiating Promotional Programs. It maintains an effective linkage is maintained with DIC‘s for
providing the techno-economic and managerial consultancy.
District Industries Centers (DIC's)
These were started on May 8, 1978, with a view to provide an integrated administration framework at the
district level for the promotion of SSI in rural areas. The organizational structure of DIC's consists of one
general manager four functional managers and three project managers to provide Technical Services.

 Conducting industrial potential surveys keeping in view the availability of resources in terms of
material and human skills, infrastructure, demand etc.
  Preparing an action plan for effective implementation of the schemes identified.
 To guide entrepreneurs to select most appropriate machinery and equipments etc.
Sickness of Small-Scale Industries
Industrial sickness usually refers to a situation when an industrial firm performs poorly, incurs losses for
several years and often defaults in its debt repayment obligations. Small Scale Industries (SSIs) play vital
role in the economic development of a country.

In case of small scale industrial unit (SSI), it is regarded as a sick unit if it has:
(i) Incurred a cash loss in the previous accounting year and was likely to continue with losses in the
current accounting year and further its cumulative cash losses are equal to 50 per cent or more of its peak
net worth during the last five years and

(ii) It has defaulted in meeting four consecutive installments of interest.

According to the Development Commissioner, a small scale industrial unit (SSI) becomes sick if it‘s:
(a) Capacity utilization is less than 50 per cent of the highest achieved during the preceding five years
(incipient sickness)

(b) Net worth has been eroded by more than 50 per cent; and

(c) The unit has remained closed for a period more than six months.

On the basis of the above definitions of a sick industrial unit, it emerges that the symptoms of the
sickness of an industrial unit manifest themselves in the form of unbalanced financial structure, erosion of
more than 50 per cent of its net worth, absence of the generation of internal surplus, under- utilization of
capacity and survival of the unit upon frequent infusion of funds.

Causes and symptoms of sickness

Some SSIs turn out to be sick due to various reasons. Some of the major causes for sickness in small
scale industries are dealt in brief.
1. INADEQUACY OF WORKING CAPITAL
Some units turn out sick due to inadequacy of working capital. There may exists delay in sanction of
working capital by financial institutions. Industrial units find it difficult to meet out day to day operations
due to the time gap between sanction of term loan and working capital needs. Shortage of Working
Capital is one of the main reasons for sickness.

2. NON-AVAILABILITY OF CREDIT
Sickness in SSI sector may be attributed to non-availability of credit. Delay in getting loans may result in
stoppage of work or lead to production loss. Low production may lead to reduced sales which in turn may
lead to financial loss.

3. POOR AND OBSOLETE TECHNOLOGY

Some industrial units use technology which is outdated. Out dated technology may affect the quantity and
quality of production. This results in production loss and reduces demand for the goods.
4. NON AVAILABILITY OF RAW MATERIAL
Some units may require raw material which are scarcely available. Sometimes, the raw material required
by the unit may not be available in abundance. Hence, this affects the production and the sales of the
goods. If the raw material is not abundantly available, then the industrial units have to spend a large
amount of money to buy them. This may result in financial loss.

5. MARKETING PROBLEMS
Sometimes, the industrial units may not know as to how to create demand for the products. Lack of
marketing knowledge may result in less demand for the goods. Similarly, there may be less demand for
the goods produced by the SSI due to competition or change in the taste of the buyers. For example, lot of
units producing dyes and ceramics have been found sick in Gujarat and Tirupur.

6. ERRATIC POWER SUPPLY

Shortage in power supply affects the industries. This results in delay in production of goods and leads to
financial losses.

7. LABOUR PROBLEMS
The relationship between the employer and the employees may not be cordial. Some of the labour
problems such as strike, lay off, lock out may lead to industrial sickness.

8. POOR MANAGEMENT
The entrepreneur must be a good planner, organizer and a manager. If the Industrial Unit promoters
lack managerial skills, then it may lead to several problems.

9. INADEQUATE ATTENTION TO R&D

Industries have to allocate a part of money in research and development to survive and compete with
competitors. Failure to focus on the above may lead to industrial sickness

10. DIVERSION OF RESOURCES

If the employer utilizes the funds obtained for the business for any personal purposes, then diversion of
funds will lead to industrial sickness. The funds used for personal purposes cannot be regenerated and
hence it may result in delay in payment of loans or financial crisis for the borrower of the loan.

11. GLOBALIZATION
Small scale industrial units may find it very difficult to compete with large scale industries and foreign
competitors. Inability of the units to face growing competition due to liberalization and globalization may
lead to industrial sickness.

12. DISPUTE AMONG PARTNERS

There may arise dispute between the partners or family members running the unit. This results in
stoppage of work and leads to industrial sickness.

13. OVERAMBITIOUS PROJECTS

The project may not be technically feasible, such an overambitious project is one of the reasons for
industrial sickness.

Symptoms of industrial sickness

 Decline in capacity utilization

 Shortages of liquid funds to meet short-term financial obligation
 Non submission of data to banks and financial institutions
 Irregularity in maintaining bank accounts
 Frequent breakdowns in plants and equipment
 Decline in quantity of product manufactured or service rendered
 Delay or default in the payment of statutory dues such as provident fund, sales tax, excise duty etc.
 Decline in technical deficiency
 Frequent turnover of personnel in the industry
 Persisting shortage of cash
 Deteriorating financial ratios
 Widespread use of creative accounting
 Continuous tumble in the prices of the shares
 Frequent request to banks and financial institutions for loans
 Delay and default in the payment of statutory dues
 Delay in audit of annual accounts
 Morale degradation of employees and desperation among the top and middle management level

Cures of sickness
Some of the remedial measures to curb and overcome sickness in industrial undertakings are as follows:

1. IDENTIFYING SICKNESS AT INITIAL STAGE

Sickness in Small Scale Industries are not a sudden phenomenon but it is a gradual process taking 5 to 7
years eroding the health of a unit beyond cure. Therefore, the identification and detection of the sickness
at incipient stage is the first and foremost measure to detect and reduce industrial sickness. Sickness must
be identified at initial stage.

2. FINANCIAL ASSISTANCE
Lending agencies need to relax their lengthy process and other norms for extending credit to the SSIs. To
combat the incidence of sickness financial institutions should grant credit without delay to SSI sector.

A number of initiatives can be undertaken to overcome credit problems such as:.

1. Increasing Working capital limit.

2. Enhancing the powers of bank managers of specialized bank branches in offering credit to SSI.
3. Strengthening the mechanism for discounting bills.
4. Reduced rate of interest.
These measures would improve the flow of credit and keep a check on the incidence of sickness.

3. IMPROVING INFRASTRUCTURE
Infrastructure facilities can be improved by setting up industrial estates. Common testing centres etc.,
infrastructural problems can be solved by improving the roadways, waterways, establishing
telecommunication systems.

4. TECHNOLOGY UP-GRADATION
Funds may be provided by the financial institutions for adoption of advanced technology. Similarly, some
sort of training may be provided for use of the latest technology to overcome technological problems.
Technological up-gradation can help to overcome technological obsolescence.

5. MARKETING ASSISTANCE
Marketing assistance may be provided to entrepreneurs for marketing the goods produced by them.
Government must help to market the goods. Government and Non Government Organizations (N.G.Os)
can come forward for marketing the goods produced by the SSI sector. The problem of poor marketing of
the products can be solved by coordinated efforts of entrepreneurs and promotional agencies.

6. LIQUIDATION
It is better to wind up the business when there is no possibility to revive the unit.

7. GOVERNMENT INTERVENTIONS
Interventions must be made by the government to prevent sickness. Periodic review of financial
statements can help to identify and prevent sickness at initial stage.

8. TRAINING
A proper environment must be created where an entrepreneur will be educated and will have a proper
knowledge, skill and experience about internal and external environment of business to compete with
large-scale industries and multinational companies.

9. REHABILITATION
Potentially viable sick units should be dealt well for the purpose of rehabilitation. Rehabilitation is a
remedy considered for industrial units, which have already become sick and for the units that are on the
verge of collapse.

Under the provisions of SICA, 1985, the Government of India has established Board for Industrial and
Financial Reconstruction (BIFR) in January 1987 for determining the preventive, ameliorative, remedial
and other measures which are required to be taken in respect of sick industrial company and for
expeditious enforcement of rehabilitation schemes.

The main objective of SICA is to determine sickness and expedite the revival of potentially viable units
or closure of unviable units (unit here in refers to a Sick Industrial Company). It was expected that by
revival, idle investments in sick units will become productive and by closure, the locked up investments
in unviable units would get released for productive use elsewhere.

The measures taken by BIFR are

1. Legal
2. Financial restructuring
3. Managerial
REHABILITATION PROGRAMMES
Taking into consideration the many sick micro, small and medium (MSM) industries, the MSM policy
has provided a separate package for rehabilitation of such industries in India.

The policy proposes to set up a rehabilitation fund for sick industries, which will be managed by the
Industries Commissioner and the Director of Industries and Commerce. Funds will be infused into the
committee based on the recommendation of a State-Level Rehabilitation Committee (SLRC).

The rehabilitation fund, among other things, will be used for meeting 75 percent of the cost of the cause
that made the industry unviable, and to sanction an interest subsidy of 4 per cent for two years on
rehabilitation/bridge loans up to Rs.15 lakh to the sick MSM industries.

The rehabilitation measures would ensure that most units under lockout would be able to open at an early
date and appealed to MSM units to avail of the facilities the government was providing them.
The rehabilitation programme involves the following depending upon the nature of sickness.

1. Change of Management
2. Development of a suitable management information system
3. Settlement with the creditors for payment of their dues in a phased manner, taking into account the
expected cash generation as per viability study.
4. Determination of the sources of additional funds needed to refinance.
5. Modernization of plant and equipment or expansion of an existing programme or even
diversification of the products being manufactured.
6. Concession or relief or assistance allowed by the state level corporation, financial institutions and
Central Government.
Role of Banks in reviving industries
Since independence the Financial Institutions (FIs) play significant role in the economy of India. These
FIs bear close relationship with industrial sickness. The leading FIs were shaped between 1948 and 1964.
Among these FIs most mentionable are the Industrial Reconstruction Corporation of India Ltd., the
Industrial Reconstruction Bank of India Ltd., the Industrial Development Bank of India Ltd., the
Industrial Credit and Investment Corporation of India and the Industrial Finance Corporation of India
which have great contribution.

The Role of Industrial Development Bank of India (IDBI) Ltd., Industrial Credit and Investment
Corporation of India (ICICI) and Industrial Finance Corporation of India (IFCI) These institutions were
established to provide development finance to industries. Assistance to sick units was not their objective.
Even so, these institutions have also played a meaningful role in combating industrial sickness. After
formation of BIFR, these FIs also act as operating agencies. Their functions are Soft Loan Assistance
Scheme, Textile Modernization Funds, assistance for expansion / diversification and modernization,
operating agencies of the BIFR and rehabilitation of sick units.

The Industrial Reconstruction Bank of India Ltd. (IRBI) was set up as the principal credit and
rehabilitation agency for revival of sick and closed units. The Government of India imparted greater
financial flexibility and withdrawn the stipulation that 60 percent of its portfolio should consist of sick
companies. IRBI now provides financial assistance to all industrial enterprises like any other financial
institution. The IRBI Act envisages the setting up of a Special Fund, the Reconstruction Assistance Fund,
to meet such special financial needs of assisted units for their survival and rehabilitation which cannot be
obtained from banks and financial institutions in normal circumstances.
Role of Governments in reviving industries
The Government policy statement on industrial sickness on May 15, 1978 in the Parliament requires that
the government should make suitable arrangements for monitoring and detecting industrial sickness at an
early stage. Further, the financial institutions should jointly set up a group of professional directors, who
would be full time employees of the institutions and who could be nominated on the board of directors of
the companies with doubtful managerial competence or integrity and in which the institutions have a
substantial stake.

Furthermore the government should set up a ‗Screening Committee under the chairmanship of the
Secretary, Industrial Development with representatives of the Finance Ministry, Reserve Bank of India
and Financial Institutions, to make recommendations relating to sick undertakings for : (a) take-over of
the management of a sick undertaking with the clear understanding that the units will not be handed back
to the same management; (b) selling off the unit after taking-over of the management or alternatively,
reconstructing which may include writing down the share values, conversion of loans into equity,
acquisition of shares by the government, constitution of new board of directors, etc.; and (c) effecting the
merger of the unit with a public sector undertaking.

Constitution of ‗Board for Industrial and Financial Reconstruction‘ (BIFR), an Appellate Authority, by
the Sick Industrial companies Act (SICA), 1985 is a landmark of Indian industrial economy. The terms
‗revival‘ or ‗rehabilitation‘ mean the selling off of assets and starting a fresh industrial undertaking in
different places. It also indicates rearrangement or reorganization of a company. The revival or
rehabilitation of sick units is an important step for industrial development. The number of sick units is
rising with the progress of time and without rehabilitation the economic scenario will not be changed.

Module II : Environmental Analysis for Enterprise :

Entrepreneurial Environment

 Entrepreneurship environment refers to the various facets within which enterprises- big, medium,
small and other have to operate. The environment therefore, influences the enterprise. By and large,
an environment created by political, social, economic, national, legal forces, etc influences
entrepreneurship.
 Entrepreneurial environment is broadly classified into six important segments, namely, (1) Political
environment, (2) Economic environment, (3) Social environment, (4) Technological environment, (5)
Legal environment, and (6) Cultural environment

Environment

 Political-Political Atmosphere, Quality of Leadership

 Economic-Economic Policies, Labour, Trade, Tariffs, Incentives, Subsidies
 Social-Consumer, Labour, Attitudes, Opinions, Motives
 Technological-Competition And Risk, Efficiency, Productivity, Profitability
 Legal-Rules, Regulations
 Cultural-Structure, Aspirations And Values
Environment refers to the totality of all factors which are external and beyond the control of the business
enterprise. It determines how entrepreneurship control and manage the unit. The entrepreneurial
performance of an enterprise is influenced by the value system of the society, the rules and regulations
made by the government, the monetary policies of the capital market, foreign investments etc. If
environment changes there will be a change in the entrepreneurial performance also. Thus, the healthy
environment promotes the entrepreneurship in a larger scale by facilitating the business operations
thereby contributing to the growth of the unit.

Classification of Environment
Environmental factors are mostly dynamic in nature except few factors which are of static nature. Mostly
these factors can be conceptualized and quantified. Sometimes they could be mentioned only in
qualitative terms.

On the basis of it‘s variability character with reference to point of time, environment may be past, present
and future.

On the basis of decision making situation it may be classified into Market and Non- Market environment.
If the business decisions of a business unit are influenced by the market factors such as, demand, supply,
competition, price etc. the environment is said to be market environment. On the other hand, when the
Government, Law and Social customs and Conventions dominate entrepreneurial decisions it is said to be
Non-market environment. Environment may be grouped in to two, viz, Economic and Non-Economic
environment. Environment formed by the economic factors like fiscal policy, industrial policy, physical
control of price-income, the economic system that operates, the stage of economic development refers to
economic environment.

Then the non-economic environment refers to social, political, legal, educational and cultural factors
pertaining to business operations. Thus, the different facets of entrepreneurial environment on the basis
of factors which form that situation is depicted in the following telescopic view of the Facets of
Entrepreneurial Environment.

Environmental Factors
It is true that the entrepreneurs must have come from diverse economic, social and geographical
backgrounds which interlace influence entrepreneurial spirits. This will enhance the entrepreneurial
performance. The various factors which influences the entrepreneurship may be categorized into two, viz,
Internal and External environment factors.

Internal Factors
The internal environmental factors are mainly the environment in which entrepreneurs are born and
brought up and work. Internal factors are those which will stimulate the entrepreneurs from within to take
up entrepreneurial venture. Some of them are:
  Strong desire of entrepreneurs to do something independently in life.
 Technical know-how or manufacturing experiences acquired by them.
 Business experience in the same or related line.
 Family background including size, type and economic status of family.
 Occupational origins of the entrepreneurs.

Factors are the main springs of action in entrepreneurs. In order to satisfy their strong desire to do
something independently in life, highly motivated persons take a plunge in to industrial activity‘
regardless of any other considerations. But, many a time it is the: compulsion rather than the ambition
that leads the man to success. The reasons that might have compelled the entrepreneurs in putting them
on the road to industry are: The internal Various other internal environmental factors that facilitate the
emergence of entrepreneurship are:
 Success stories of entrepreneurs
 Previous experience in manufacturing
 Previous employment in industry
 Property inherited
 Property acquired
 Encouragement of family members
 Encouragement of friends and relatives
 Acquire or inherited technical and professional skill
External Environment
The success of entrepreneurship in a region at any point of time depends on the very many external
environmental factors. These factors influence the entrepreneurial operations and ultimately determine
the effectiveness of entrepreneurial performance also. These environmental factors can be grouped
into:

Economic Environment
The different economic environmental factors which influence/ inhibit the entrepreneurship are: Structure
of the economy, Industrial Policy, Agricultural‖ Policy, Growth pattern of National income, G.D.P.,
Savings and capital formation in the country. Besides that, Balance of trade and balance of payments,
trade and tariff policy etc.

Legal Environment
Entrepreneur should know what the prevailing legal environment is by knowing the latest position in
legal enactments relating to various aspects of entrepreneurial venture. Such as formation of the unit,
collaboration, foreign exchange, industrial dispute, labour management, social security benefits,
consumer protection etc.
Political Environment
The working political system in a country influences the entrepreneurial growth by designing and
implementing various policy matters pertaining to promotion of entrepreneurship. Hence entrepreneurs
and industrialists should have representatives on various government bodies at all levels of policy
formulation and planning.

Socio-Cultural Environment
In the modem days a suitable entrepreneurial culture must be created by developing healthy work
environment and modem attitudes towards work giving social recognition etc. These factors will give
psychological stimulus which in turn promotes innovation, inspiration, ethics and values which are very
essential for a successful entrepreneurs.

The external environmental factors are:

 Financial assistance from institutional sources.
 Accommodation in industrial estates.
 Provision of consultancy to services on technical Market and financial aspects.
 Provision of subsides of different kinds.
 Arranging the institutional support for marketing the products/ services.

 Attitude of the Government to help new units.

 Encouraging the co-ordination between larger and smaller firms.
 Providing necessary infrastructural facilities continuously.

External environment determine the entrepreneurship in many occasions. Hence presence of conducive
business environmental climate is imperative for entrepreneurship growth. External environment
facilitates various functional areas of business enterprise thereby promote entrepreneurship.

The various factors that impede the growth entrepreneurship arose mainly due to external environment.
Some of them are:
 Changes in governmental policy
 Political instability or hostile government attitude
 Improper co-ordination among different government agencies.

 Undue delay and corruption in giving concurrences for various purposes

 Poor-infrastructural facilities such as supply of power, materials, finance etc.
 Rise in cost of inputs.
 Unfavourable market fluctuations etc.

Identification of Opportunities
Opportunity identification is a unique capability that can be developed much in the same way in
which entrepreneurs might develop other unique capabilities (e.g., management capabilities, social
network building capabilities)

Business ideas and business opportunities are similar in the fact that they're both concepts. But the
key difference between a business idea and a business opportunity is that business ideas are unproven
concepts while business opportunities are proven concepts.

To be successful entrepreneurs, we need to be continually innovating and looking for opportunities to

grow our startups. Here are four ways to identify more business opportunities.

1. Listen to your potential clients and past leads

When you‘re targeting potential customers listen to their needs, wants, challenges and frustrations with
your industry. Have they used similar products and services before? What did they like and dislike? Why
did they come to you? What are their objections to your products or services?

This will help you to find opportunities to develop more tailored products and services, hone your target
market and identify and overcome common objections.

2. Listen to your customers

When you‘re talking to your customers listen to what they saying about your industry, products and
services. What are their frequently asked questions? Experiences? Frustrations? Feedback and
complaints?

This valuable customer information will help you identify key business opportunities to expand and
develop your current products and services.

3. Look at your competitors

Do a little competitive analysis (don‘t let it lead to competitive paralysis though) to see what other
startups are doing, and more importantly, not doing? Where are they falling down? What are they doing
right? What makes customers go to them over you?

Analysing your competitors will help you identify key business opportunities to expand your market
reach and develop your products and services.

4. Look at industry trends and insights

Subscribe to industry publications, join relevant associations, set Google alerts for key industry terms and
news and follow other industry experts on social media.

Converting Business Opportunities into reality

There are some fundamental steps that every new entrepreneur can take to get their idea in motion.

1. Figure out what problem is being solved

When you strip a company down to its core function, you‘ll find that it solves a problem. Right now,
you‘re probably infatuated with your idea and are focused on the solution it provides. Many businesses
claim to have solutions, but what specific problem are they really eliminating?
Amazon, for instance, solved how e-commerce was, at one time, expensive and inconvenient. Today, it
has more customers (and sales) than its brick-and-mortar competition.

Bottom line: all successful companies, products, or services enhance the lives of their customers by
eliminating a problem.

2. Find your market

Picture who your ideal user is - this is the first step to actually figuring out where your idea fits into a sea
of consumers. They all have different habits and needs to fulfill, yet are facing the same problem. Figure
out where your solution will fit into the market and in the lives of people.

One of the biggest mistakes startups make is the failure to get people to understand and want the product
or service. If it turns out that your idea isn‘t being ―sold‖ to your audience, don‘t blame the market.
Instead, figure out what they find compelling, or what it will take to get them to want something different
than what they already have

You have a solution, but it needs to be in front of the right people to be seen as such.

3. Find your support

Having business partners has several benefits, especially when you‘re first starting out. They can act as
support, a sounding board for your ideas, and provide evidence to others that you actually have a good
idea. Aside from building a team, having relationships with other entrepreneurs will give you invaluable
knowledge. Find seasoned entrepreneurs and spark conversations with them. Pick their brains - people
love to talk about themselves, so they‘ll be happy to share what they have learned from their experience
with starting a business.

4. Create a financial model and plan the first phase

Since you have your market research done, now you must figure out if it‘s financially viable. Create a
―bottom-up‖ financial model that focuses on how your product or service is created, marketed, and sold
to an individual user. Doing this will give you more insight on how your business will function. Then, to
verify your projections, create another financial model that is ―top-down,‖ which examines the size of
your market and what goals you need to reach to turn a profit.

Once you‘re satisfied with your financial model, begin moving into planning the first phase of your
business. This plan is simple - get your ideas out. For discussion purposes among your team and mentors,
map out your mission, objective, keys to success, target market, competitive advantage, and basic
strategies. It ensures that everyone involved is on the same page and set to proceed into the next stages.

5. Figure out your source of capital

Entrepreneurs generally don‘t start out just for the money, but money is still needed to get the business
off the ground. Some attainable sources of funding are self-funding, money from people you know
(friends and family), credit cards, or loans. Depending on the amount you need, a more helpful source can
be angel investors and venture capitalists looking to back your mission for a slice of the profits and room
for decision-making.

Whatever source(s) you choose to obtain or to aim for, consider that each one has their own rewards and
risks.

6. Build the MVP

The MVP, or minimal viable product, provides you with the feedback you need before putting your idea
on the market. After all, it‘s of no use to anyone if you build a product customers don‘t want.

Minimal does not necessarily mean ―basic.‖ The point is not to build a minimal product, but a product
that is already great (viable), yet has room to improve (minimal). It‘s how early adopters actually jump on
board to use the product and, if they like it, will provide you the feedback to make it better for them.

7. Find the pivot

The information gathered from your early adopters helps you figure out what works and what garnered
the most response from your audience. You might find that their feedback is entirely different than what
you expected and planned for.

This can lead you to ―pivot‖ your business model, or change a fundamental part of it. Changing direction
doesn‘t mean you failed entirely; it actually helps to prevent failures you may have encountered. Pivoting
doesn‘t necessarily mean abandoning everything you learned - it‘s about taking what you learned and
using it for your new direction. You took one route to a destination and got lost; pivoting is just
recalculating a different route to get there.

8. Stay positive

They say misery loves company - just make sure there is no misery involved with your new business.
Self-doubt and questioning if something will go wrong will only hold you back from taking the necessary
risks. People will question your ideas and your business, but if they don‘t believe in your ability to
overcome it, they are perpetuating their negativity into you. When you stay above the negativity and stay
positive, it will make it easier when you eventually do make a mistake or face an obstacle. And you will
face both.

Your journey to building a sustainable business won‘t be like most processes, simply because there is no
guarantee for success. All you can do is adapt your idea and see what works. If at first you don‘t succeed
with it, try and try again until you do.

Start-ups and business incubation

The term startup refers to a company in the first stage of its operations. Startups are founded by one or
more entrepreneurs who want to develop a product or service for which they believe there is a demand.
These companies generally start with high costs and limited revenue which is why they look for capital
from a variety of sources such as venture capitalists.

 A startup is a company that's in the initial business stage.

 Until the business gets off the ground, a startup is often financed by its founders. and the startup
attracts outside investment.
 There are many different ways to fund startups including family and friends, venture capitalists,
crowd funding, and credit.
 Startups also have to consider where they'll do business and their legal structure.

Business incubation supports the start-up and early stage of new business ventures by providing them
with the safe harbour, intensive resources and a development environment in which they can flourish. A
business incubator is usually the ‗physical‘ manifestation of this process and generally involves the
provision of a ‗with-walls‘ facility through which concentrated business incubation support processes can
be delivered. Businesses can thus gain from close proximity to likeminded enterprises, mutual
development and a shared learning environment. ‗Virtual‘ business incubation programmes also exist,
though they seek to deliver business incubation processes using means other than physical premises.
Although even virtual business incubators frequently provide some contact or hot desking facilities i.e.
client meeting rooms, conference mail and address hosting facilities. Business incubatees (either in situ or
virtual), often are only a part of a larger mass of businesses supported by or at the business incubator.

Setting up a Small Enterprise

Broadly, there are two types of people who establish small enterprises. One people who want to take the
advantages of opportunities available, two, people who have no option for making a livelihood.

These two types of entrepreneurs are also termed as ‗entrepreneurs by choice‘ and ‗entrepreneurs by
compulsions‘ respectively. Starting an enterprise is not so simple and cannot be set up just. In fact, there
are several steps involved in setting up a small business enterprise.
(i) Information Collection:
The first step involved is to decide which enterprise one wants to set up. This begins with collecting
information about the units already working in that field of concern. This can be done by various ways
such as going through the telephone directories or by visiting the registrar‘s office of the small-scale
units.

This will enable the prospective entrepreneur to make an assessment of the present market situation in
that business activity. Based on this information, they can weigh the pros and cons involved in entering
into that business activity.

For example, they can come to know that the medical transcription and call centers have been doing very
well in the service sector enterprises in the country. This is because of high labour cost in high income
countries; the multinational companies have gradually started shifting their labour-intensive
manufacturing activities to the developing countries.

In view of this, there is a great opportunity to tap those products which would be outsourced by the Multi-
National Companies (MNCs) through quality vendors. Similarly, the rapid increase in the tourist influx in
Jammu & Kashmir due to improvement and restoration of peaceful law and order situation indicates very
good prospects for service providing enterprises like travel, tour, and hospitality industry in the region.

(ii) Information Organization:

Having collected information about enterprise concern, the prospective entrepreneur needs to organize
the same in an orderly and systematic manner to derive the meanings from them. This will help to make
assessment about the minimum requirements to start an enterprise in a particular business line.

Here, one generally undertaken exercise is to prepare a checklist for ready reference of all required and
available resources in terms of space, fund, training and development, and manpower requirements. Once
this exercise is over, the step involved will be to prepare a summary of how the checklist will be
transformed into the desired products and services. Here we are presenting you one exercise based on
your above understanding.

Carefully go through the following example and then respond to the questions that follow: Case
Tarun Sony is the youngest son in a family of farmers near to Udhampur. They had so far earned enough
money to sustain themselves respectfully in their society. But Tarun Sony, who has completed his
Masters in Business Administration (MBA) from the Mata Vaishno Devi University, was not interested
in joining the family age-old farming.

During his MBA, he has studied the rags to riches stories of some businessmen like Dhirubhai Ambani.
Inspired from their life stories, Tarun also wanted to be a rich businessman. But he did not dare to speak
of it with his family.

So he wrote all about his dream to his friend Ranjit Tiwari who stays in the nearby city of Jalandhar.
Ranjit Tiwari based on his observations about his uncle‘s very successful poultry farm suggested Tarun
about opening a poultry farm in his village itself. Tiwari painted a ―quick reward‖ picture of the poultry
farm to his friend Tarun mentioning as eggs and hen will multiply so the money will also multiply from
selling them.

Though Tarun had no idea at all about taking care of the hen and its eggs but he was so thrilled and
fascinated by the idea given by Ranjit that he immediately bought 25 hens and kept them in a cage. Thus,
this was the beginning of his enterprise.

Activity for you:

1. Do you agree with Tarun Sony‘s decision to start his poultry farm in this manner? Give reasons for
your answer.

2. What would you recommend other people like Tarun Sony interested in starting a poultry farm?

Here are some inputs that will help you answer the above questions:
a. To open a poultry farm, one should have enough space to keep the well- ventilated cage racks.

b. One should obtain adequate training in the field of poultry farming to be able to identify and select
healthy chicks from the sick ones. He or she should also make provisions for hiring or purchasing an
incubator.

c. There should be easy availability of a Veterinary Doctor near the poultry farm. Sufficient funds should
be available to buy checks and hens. Else it should be possible to seek financial assistance from external
sources including family members, relatives, friends, and financial institutions.

d. The marketing facilities should be conducive for the products.

(iii) Acquiring Required/Vocational Skills:

The third step is to understand the need for upgrading one‘s vocational skills if it is a pre-requisite for
your Small Enterprise Unit (SEU). The importance of acquisition of required skills is justified by the
statement that ―it is better to teach a man to fish than to provide him with fish everyday‖.

There is a need to build on one‘s strengths in order to gain and feel confident of implementing your
project of setting an SEU. Awareness and training in required subject can remove structural barriers. You
will feel sure of yourself in taking loans and as also taking risk. Risk is a part of setting up an SEU.

Once your clients have set up their SEU, updating themselves on the latest developments in the field
should be a continuous process. They can also hire skilled workers and staff to carry out the major tasks
at their SEU.

The following anecdote will exemplify how acquiring required skills on continuous basis is necessary for
survival and growth of business. Case

Akshita Arora was a good tailor. She stitched clothes for her family and friends. She decided to open a
boutique, as a SEU. She took a room on rent near her apartment in Patpaprganj (Delhi) and shifted all her
tailoring material and her machine to it. She started receiving orders.

In the beginning she was satisfied with her work slowly her clients stopped coming to her as she had been
cutting out clothes in the same design. Because she lacked creativity and never felt, the need to upgrade
herself of the new trends in fashion. Added to these is her simple sewing machine. Her business has come
almost to closure.

Give you views about the following issues:

1. Where did Akshita go wrong? Discuss.

2. As Akshita did not try to upgrade her skills in dress designing in order to keep with the latest trends.
What should she do now? Suggest three ways for reviving her SEU.

As a hint for you, following are some of the ways that can help Akshita at her SEU:
a. She should go in for a short-term course in Dress Designing.
b. She should seek financial assistance for buying a latest model of sewing machine with lots of
attachments.

c. She should do some publicity for her boutique in order to get more clients.

Suggest Akshita some ways of publicity to gain popularity for her boutique.

(iv) Financial Requirements:

The fourth step involved is ascertaining the financial requirements for setting up a small business
enterprise. This is particularly important because generally small entrepreneurs do not have their own
funds. Hence, they depend upon borrowed funds from family members or relatives or friends or financial
institutions.

While planning for finance, the prospective entrepreneur needs to consider issues like sources,
availability, estimation and management of working capital. One should have the basic knowledge of
preparing income and expenditure statements.

One should also go for insurance cover provided by the concerned financial institutions. Providing
financial services in a commercial way is gaining a lot of credence these days. There are well-planned
credit schemes for small enterprises available offered by the banks and co-operatives.

(v) Market Assessment:

No business enterprise can be thought of without market. Enterprise exists, survives and thrives because
of market. Production has no value or meaning if it is not sold /marketed. Therefore, while planning for
establishing a small business enterprise, the prospective entrepreneur needs to know who will buy his/her
product.

Here, the trite saying about the importance of market seems worth citing: ―A manufacturer of iron mails
must know before manufacturing who will buy his/her iron nails.‖ In sum and substance, a prospective
entrepreneur needs to identify market for his/her product before it is actually produced. Market survey or
market research helps the entrepreneur assess market for his/ her product. How much significance market
assumes in success and failure of a product is exemplified with the story of a young entrepreneur
Pradeepta Sethi. Case

The story runs like:

It was two years ago that I (Prdeepta Sethi), along with two similar minded guys Rajat Setia and Padmini
Jindal started the computer software company in Bengaluru. Our primary aim was to go beyond being
just a service company that sub-contracts work from the United States (US) on the basis of cheap labour
available in India.

We finally decided on creating software for automating the unorganized sector of cyber cafes. Funding
for the same came from two sources: personal and through the loans from private investors in the ratio
30:70. As all three of us have sufficient technical knowledge and skills, the biggest stumbling block we
faced was the marketing of our product.

We suffered from marketing problem to the extent that we incurred loss for the three consecutive years.
There were moments when we were thinking to shut down the business. However, we have by now
gained some market knowledge and we have also engaged some market survey agencies to find out
market for our product.

The results have started coming in. Last year, we have earned sizeable profit and we are hoping to double
our profit this year. This was mainly due to new markets we identified both within and outside India. We
have just started our second business unit in Hyderabad. We hope we may expand in all metro cities of
our country by year 2020.

(vi) Provision for Crisis:

The last but not the least step involved in setting up a business enterprise is the preparedness to manage
crisis situations, if any. Yes, some may not consider it as a necessary step because foreseeing any crisis
and its handling is simply an additional step.

Even many may view why to think in a negative way for the worst which may not happen at all.
Admitting that optimism helps, there is no harm in being prepared for any eventuality, if it arises. It is
always useful to remain prepared for something unexpected in terms of resources, policies, finances and
natural calamities takes place. Seeking insurance cover is the best way to deal with these situations.

Issues relating to location

The location of a business is the place where it is situated. There are a number of factors that need to be
considered in choosing a location for a business. One of the earliest decisions any entrepreneur has to
make is where to locate his or her business. In order to do this, he or she has to make a careful assessment
of costs. The ideal location would be one where costs are minimised. The entrepreneur would need to
look at the benefits which each area had to offer as well as any government help which might be
available. The main factors affecting location are:

Market: The nearness of the market and the cost of delivering the goods are likely to be important
factors.

Raw materials: If the raw materials are bulky and expensive to transport it will clearly be in the
entrepreneur's interest to locate near to them.
Transport costs: The two major influences are the pull of the market and the pull of the raw materials
and these are determined by whether or not the industry is bulk-increasing or bulk-decreasing.

Land: Land costs vary considerably nationally and some firms, e.g. wholesalers, might need a large
square-footage. They might, therefore, be influenced by the cheaper rents and property prices found in
some areas.

Labour: The availability of labour might well attract firms to an area, particularly if that labour force has
the skills they require.

Safety: Some industries have to locate their premises well away from high density population levels and
their choice of location is limited.

Waste disposal: Certain industries produce considerable waste and the costs associated with the disposal
of this might affect their location.

Government: Government provides special assistance to areas of high unemployment. This takes place
within the UK, and is also a feature of wider European Union regional policy.

A convenient location: A number of businesses have set up close to Heathrow Airport because of its
location. For example, companies engaging in importing and exporting find this a convenient location. In
addition there is a range of hotels, and taxi firms who benefit from the international flow of passengers.
Additionally security and aircraft maintenance firms have located there.

When choosing the best location for your business, your first step is to target the right community. You
can analyze the community you're thinking about by considering the following questions:

 Is the population base large enough to support your business?

 Does the community have a stable economic base that will promote a healthy environment in
which your business can grow?
 Does the demographic profile closely match that of the market you wish to serve?
 What are the community attitudes or outlook?

A community's economic base can have a direct impact on your opportunities. People move from one
community to another for better job prospects, more money, better schools, and a host of other reasons.
To evaluate a community's economic base, check census data and other business statistics for the
following information:

 The percentage of people employed full-time and the trend in employment

 The average family income
 Per capita total annual sales for goods or services similar to yours.

You can also learn a great deal about your prospective community by looking and listening. Some red
flags to pay attention to include:

 The necessity for high school and college graduates to leave town to find suitable employment;
 The inability of other residents to find local jobs;
 Declining retail sales and industrial production; and
 Apathetic local business owners, educational administrators, and other residents.
Favorable signs are:

 The opening of chain- or department-store affiliates;

 Branches of large industrial firms locating in the community;
 A progressive chamber of commerce and other civic organizations;
 Good schools and public services;
 Well-maintained business and residential premises;
 Good transportation facilities with access to other parts of the country; and
 Construction activity accompanied by a minimal number of vacant buildings and unoccupied
houses for sale.

It's also important for you to understand the demographic profile of your potential customers in order to
properly evaluate a community for location. To see if the community you're considering offers a
population with the demographic traits necessary to support your business, look at the community's:

 Purchasing power. Find out the degree of disposable income within the community.
 Residences. Are homes rented or owned?
 Means of transportation. Do prospective customers in the area own vehicles, ride buses or
bicycles, and so on?
 Age ranges. Does the community consist primarily of young people still approaching their prime
earning years, young professionals, empty nesters, or retirees?
 Family status. Are there lots of families in the area or mostly singles?
 Leisure activities. What type of hobbies and recreational activities do people in the community
participate in?

In determining a site for a retail operation, you must be willing to pay for a good location. The cost of the
location often reflects the volume and/or quality of the business you will generate. Never select a site
merely because the facility is open and available or because the rent is low. Keep in mind that there is a
direct correlation between low rent and high advertising expenses. Base your selection of a site on the
market information you've obtained and the potential of the area to generate income for your company.

The most important consideration for choosing a site for a service business is convenience for customers.
Service businesses that deal directly with customers, like nail salons, travel agencies and dry cleaners,
don't need to locate in high-rent districts; they just need to be conveniently located on the beaten path and
visible to their customers. Service businesses that are rarely visited by customers, like TV repair shops
and pest control operators, can be farther afield. But these types of businesses have to make an ongoing
effort to let customers know they're there--hence, the value of display advertising in the newspaper or
Yellow Pages, for example.

Manufacturers will usually be restricted to industrial areas by the zoning ordinances of most towns and
cities. The main criteria for manufacturers is the suitability of shipping and loading facilities, the distance
to key suppliers of raw materials and markets, the availability of cheap fuel, and the skill of the support
staff in the local area.

Like manufacturers, wholesalers are restricted by zoning laws within most cities. Their main criterion is
proximity to local markets, since they don't want delivery to take too much time, especially if the product
is perishable, or costs too much. If costs in either time or money are eventually passed on to customers in
the form of higher prices, customers could wind up looking for other suppliers.

You'll want to consider the following factors when searching for a location for your business:
Restrictive ordinances. You may encounter unusually restrictive ordinances that detract from an
otherwise ideal site, such as limitations on the hours of the day when trucks are permitted to load or
unload. Cities and towns are composed of areas--from a few blocks to many acres in size--zoned for only
commercial, industrial, or residential development. Within each zone are often further restrictions. A
commercial zone may permit one type of business but not another, so make sure to check the zoning
regulations of any potential location before pursuing a specific site or spending a lot of time and money
on a market survey.

History of the site. Learn about the recent history of each site you're considering before you make a final
selection. There are sites--in malls and big shopping centers, as well as in independent locations--that
have been occupied by a succession of businesses that failed. Businesses most often fail because of poor
management, but sometimes choosing the wrong location is a factor. Find out how the site you're
considering affected the businesses of previous tenants or owners.

How much rent your business can afford to pay. Your first-year profit-and-loss projections will tell
you the amount of sales your business will most likely generate. To judge your rental expenses (leased
space plus any add-on costs) relative to your sales, divide the total amount you expect to pay annually by
net sales (gross sales minus returns and discounts). Multiply that number by 100 and compare the
percentage with those of similar businesses to see how you'll fare.

Terms of the lease. Occasionally, an otherwise ideal site may have unacceptable leasing terms. The time
to negotiate leasing terms is before you sign the lease.

The rent-advertising relationship. Your advertising budget is closely related to your choice of site and
the proposed rent. Malls often allocate a lot of money to advertising, in addition to that spent by so-called
"Big Box" and department stores. If you locate in a mall with big department "anchor" stores or have
Staples as your neighbor, your cash register will likely be ringing up sales the first day you open your
doors, with no advertising effort on your part. Of course, your rental expenses will be proportionately
higher than those for an independent location.

Proximity to other businesses. Your business neighbors can influence your volume of business. Their
presence can work for you as well as against you. Make sure your neighbors attract customers with a
similar demographic profile as yours. For example, a shop selling upscale house wares isn't going to
benefit by being in the same mall as the tattoo parlor and biker bar.

Anticipated sales volume. For some types of retailers, exclusivity is key when it comes to small
shopping districts or malls--only one company offering a particular type of goods or services can
successfully locate in each area without sparking an ongoing "whose price is lowest" battle. Usually,
there's not that much business to spread around. But if the foot traffic is high, if there's a strong market
demand, and/or if the business sells a broad range of goods or services, there might be enough business to
go around for everybody.

Accessibility to prospective customers. When determining accessibility, sit in your car and judge traffic
patterns (both on foot and in cars) at different times of the day. Try to determine what hours your
business needs to keep in order to be most convenient for customers. Revisit the site on different days to
observe any changes in the pattern. Do some informal market research by interviewing people passing by
the site you are considering. Do they feel a need for your type of business at this location? Would they
patronize it? What kinds of goods or services would they be interested in buying? Where do they now
shop for these goods and services?

Customer parking facilities. Does the site provide easy, adequate parking and access for customers? Is
it well lit? Is there sufficient security? What is the condition of the parking area? Will it need expansion,
 resurfacing, or striping, possibly at additional cost to tenants? Keep in mind that even large shopping
centers and business parks sometimes do not have adequate parking for all their customers. If you plan to
locate in a mall or business park, evaluate the parking conditions over a period of days at different times
and judge whether or not they are acceptable.

Side of the street. Market research has demonstrated that the "going-home" side of the street is usually
preferable to the "going-to-work" side. People are more likely to stop at stores on the way home than
when they are in a hurry to get to work on time. Also, the sunny side of the street is generally less
desirable for retail operations than the shady side, especially in warm climates. Research shows that rents
are higher on the shady side in high-priced shopping areas.

Environmental Problems and Environmental pollution Act

The environmental problems like global warming, acid rain, air pollution, urban sprawl, waste disposal,
ozone layer depletion, water pollution, climate change and many more affect every human, animal and
nation on this planet.

Air pollution, poor management of waste, growing water scarcity, falling groundwater tables,
water pollution, preservation and quality of forests, biodiversity loss, and land/soil degradation are some
of the major environmental issues India faces today.

Major Environmental Problems

 Ozone Depletion, Greenhouse Effect and Global Warming
 Desertification
 Deforestation
 Loss of Biodiversity
 Disposal of Wastes

ENVIRONMENTAL REGULATIONS IN INDIA

Indian government has shown some foresight in the area of environmental concerns by enacting
legislations meant to protect the environment. India has about two hundred laws dealing with
environmental protection (www.cpreec.org). India's environmental regulations date back to the 1970s.
The first important regulation enacted was the Water Act of 1974 followed by the Air Act of 1981. These
acts created the Central Pollution Control Board (CPCB) responsible for data collection and policy
enforcement. It also developed detailed procedures for environmental compliance at the central
government level. Simultaneously, a second control board at the state level called State Pollution Control
Board (CPCB) was also established to collect data and for policy enforcement at the state level. These
were followed by other regulations meant to protect the environment. India's key policies relating to
environmental protection are governed by:
* The national forest policy, 1988;
* Policy statement for abatement of pollution, 1992; and
* National conservation strategy and policy statement on environment and development, 1992.

Hence, it is clear that the current environmental problems in India are not due to a lack of legislation, but
there appears to be other factors that are contributing to the current situation.

Environment Protection Act, 1986 is an Act of the Parliament of India. In the wake of the Bhopal
Tragedy, the Government of India enacted the Environment Protection Act of 1986 under Article 253 of
the Constitution. Passed in March 1986, it came into force on 19 November 1986. It has 26 sections and 4
chapters. The purpose of the Act is to implement the decisions of the United Nations Conference on the
Human Environment. They relate to the protection and improvement of the human environment and the
prevention of hazards to human beings, other living creatures, plants and property. The Act is an
―umbrella‖ legislation designed to provide a framework for central government coordination of the
activities of various central and state authorities established under previous laws, such as the Water Act
and the Air Act.

The Environment (Protection) Act was enacted in the year 1986. It was enacted with the
main objective to provide the protection and improvement of environment and for matters connected
therewith. The Act is one of the most comprehensive legislations with pretext to protection and
improvement of environment.

The purpose of the Environmental Protection Act (EPA) is to support and promote the
management, protection, enhancement and wise use of the environment, while recognizing the
following: Preventing, mitigating and remediating environmental impacts is important in making
decisions and taking actions.

According to the Environmental (Protection) Act 1986, the term environment includes water, air, land
and the interrelationship which exist among and between water, air, land and human beings, other living
creatures, micro-organism, plant and property.

The salient features of the act are:

1. The central government shall have the power to take all such measure as it deems necessary or useful
for the purpose of protecting and improving the quality of the environment and preventing, controlling
and decreasing environmental pollution.

2. No person carrying on any industry, operation or processes shall discharge or emit any environmental
pollutants or permit to do so in excess of such standards as may be prescribed.

3. No person shall handle or cause to be handled any hazardous substances except in accordance with
such procedure and after complying with such safeguards as may be prescribed.

4. The central government or any officer empowered by it, shall have power to take, for the purpose of
analysis, sample of air, water, soil or other substances from any premises, factory etc. as may be
prescribed.

5. Whoever fails to comply with or violate any of the provisions of this Act or the rules made or orders or
directions issued there under shall in respect of each such failure or violation be punishable with
imprisonment or with fine or with both

Industrial Policies and Regulations

Industrial policy can be defined as a statement stating the role of government in industrial development,
the position of public and private sectors in industrialization of the country, the comparative role of large
and small industries.
In short, it is a proclamation of objectives to be achieved in the fields of industrial development and the
steps to be taken for achieving these objectives. So, the industrial policy formally represents the spheres
of activity of the public and private sectors.
It enlists the rules and procedures that will monitor the growth and pattern of industrial activity. The
industrial policy is neither fixed nor flexible. It is constructed, modified and further modification is done
according to the changing situations, requirements and perspectives of developments.

The major objectives of industrial policy are discussed below.

Rapid Industrial Development

The industrial policy of the Government of India focuses at increasing the level of industrial development.
It explores ways to construct favorable investment environment for the private sector and also for
mobilizing resources for the investment in public sector. In this way, the government roots to promote
rapid industrial growth in the country.

Balanced industrial Structure

The industrial policy is crafted to correct the prevailing downgraded industrial structure. Say for example,
India had some fairly developed consumer products industries before independence but the capital goods
sector was not at all developed, also basic and heavy industries were by and large absent.
Thus, industrial policy had to be enclosed in such a way that imbalances in the industrial structure are
corrected by laying stress on heavy industries and development of capital goods sector. Industrial policy
explores methods to maintain balance in industrial structure.

Prevention of Concentration of Economic Power

The industrial policy explores to facilitate a borderline of rules, regulations and reservation of spheres of
activities for the public and private sectors. This is targeted at minimizing the dominating symptoms and
preventing focus of economic power in the hands of a few big industrial houses.

Balanced Regional Growth

Industrial policy also targets at correcting differences of region in industrial development. It is a well-
known fact that some regions in our country are quite developed industrially, like Maharashtra and
Gujarat, while others are marked as industrially backward regions, like Bihar and Orissa. It is the job of
industrial policy to amend some programs and policies, which will result in the development of industries
or industrial growth.
The first industrial policy statement of the Government of India was formed in 1948 and was modified in
1956 in industrial development policy dominated by the public sector till 1991 with some minor
modifications and amendments in 1977 and 1980.The year 1991 noticed far reaching changes that were
made in the 1956 industrial policy. The new Industrial Policy of July 1991 witnessed the border outline
for industrial development at present.
IndustrialPolicyResolution1956
In April 1956, the Indian Parliament adopted Industrial Policy Resolution of 1956 (IPR 1956). It is
marked as the first comprehensive documented statement on industrial development of India. It
systematizes three different groups of clearly defined industries.
The policy of 1956 regulated to design the basic economic policy for a very long time. The Five-Year
Plans of India confirmed this fact. With respect to this Resolution, the establishment of a socialistic
pattern of society was seen through the objective of the social and economic policy in India. It ensured
more powers to the governmental authorities.
Companies were grouped into categories. These categories were:
 Schedule A – Those companies which were considered as an exclusive responsibility of the state or
the society.

 Schedule B – Companies which were marked as progressively state-owned and in which the state
would basically establish new companies, but in which private companies would be anticipated only
to supplement the effort of the state.

 Schedule C – The left companies and their future development would, in general, be neglected and
would be entirely dependent to the initiative and enterprise of the private sector.

Even though there was a category of companies left to the private sector that is those companies that are
above Schedule C. The sector was monitored by the state by a system of licenses. So to set up a new
company or to widen production, obtaining a license from the government was a prerequisite to be
fulfilled. Launching of new companies in economically backward areas was incentivized through easy
licensing and subsidization of important inputs, like electricity and water. This step was taken to
encounter regional differences that existed in the country. In fact, the license to boost the production was
issued by convincing the government that the economy required more of the products and services.
Some other salient behavior of the IPR 1956 was fair and non-biased treatment for the private sector,
motivating the village and small-scale companies, eradicating regional differences, and the requirement
for the provision of amenities for labor, and attitude to foreign capital. This Industrial Policy of 1956 is
also referred to as the Economic Constitution of the country.
Some of the essential policy measures were declared and procedural simplifications were undertaken to
opt for the above stated objectives. Following are some of the policy measures:

Liberalization of Industrial Licensing Policy

A list of goods demanding compulsory licensing is reviewed on an ongoing regular basis. Currently, only
six industries are monitored under compulsory licensing mainly on account of environmental, safety and
strategic considerations that need to be taken care of. In the same way, there are only three industries
reserved specifically for the public sector. The lists of goods under compulsory licensing and industries
reserved for the public sector are included in Appendix III and IV respectively.

Introduction of Industrial Entrepreneurs' Memorandum (IEM)

Companies which don‘t require compulsory licensing are expected to file an Industrial Entrepreneurs'
Memorandum (IEM) to the Secretariat for Industrial Assistance (SIA). Industrial approval is not needed
for these types of exempted industries. Amendments are also permitted to IEM proposals filed after
1.7.1998.

Liberalization of the Locational Policy

A crucially reformed locational policy in tune with the liberalized licensing policy is in place. Approval
from industries are not required from the Government for locations not within the range of 25 kms of the
periphery of cities having a population of more than one million apart for those industries, where industrial
licensing is compulsory. Non-polluting enterprises like electronics, computer software and printing can
be located within 25 kms of the periphery of cities with more than one million population. Other
industries are allowed in such locations only if they are located in an industrial area so designated prior to
25.7.91. Zoning and follow land use regulations as well as environmental legislations.
Policy for Small Scale Industries

Reservation of goods that are manufactured exclusively for small scale industries ensures effective
measure for protecting this sector. Since 24th December 1999, entrepreneurial undertakings with a
maximum investment up to rupees one crore are within the small scale and ancillary sector.

Non-Resident Indians Scheme

The general policy and provisions for Foreign Direct Investment as available to foreign investors or
company are completely applicable for NRIs as well. With addition to this, the government has broadened
some concessions mostly for NRIs and overseas corporate bodies having more than 60% stake by the
NRIs. These include investment by NRI/OCB in the real estate and housing sectors, domestic airlines
sector up to 100%.They are also permitted to invest up to 100% equity on non-repatriation basis in all
activities except for a small negative list.

EHTP vs STP Scheme

For constructing strong electronics company along with a view to modify export, two schemes viz.
Electronic Hardware Technology Park (EHTP) and Software Technology Park (STP) are in function.
Under EHTP/STP scheme, the inputs are permitted to be procured free of duties.

Policy for Foreign Direct Investment (FDI)

Promotion of FDI forms a vital part of India's economic policies. The role of FDI in boosting economic
growth is by way of infusion of capital, technology and modern management activities. The Department
has put in place a liberal and transparent foreign investment regime where all the practices are opened to
foreign investment on automatic route without any limit on the extent of foreign ownership.

Identifying big idea

A Big Idea refers to core concepts, principles, theories, and processes that should serve as the focal point
of curricula, instruction, and assessment. Big Ideas reflect expert understanding and anchor the discourse,
inquiries, discoveries, and arguments in a field of study.

Why do most people FAIL?

1. They don‘t have an idea, or

2. They have too many ideas and can‘t decide which ONE to go all in on.

YOUR BIG IDEA is the idea that will finally help you generate Real Revenue: the type of revenue that
creates the lifestyle freedom you’ve always dreamed of.

But when you have several ideas floating around in your head – each of them a good idea in its own right
– how do you decide which ONE to focus on?

You might be afraid of choosing your ONE big idea because you worry:

 What if I choose the wrong idea to pursue?

 What if no one thinks my idea is a good idea?
 What if I spend all of my time focusing on this one big idea, only for it to fail?
Got a new business idea? Let‘s get started! Take these steps to evaluate your idea before setting up a
business:

1. Write your business plan.

2. Assess market demand.
3. Research your direct and indirect competitors.
4. Get to know your customers–who are they, what do they want?
5. Ask for feedback on your idea.

Preparation of Business Plan

A business plan is a document that summarizes the operational and financial objectives of
a business and contains the detailed plans and budgets showing how the objectives are to be realized. It
is the road map to the success of your business.

A business plan is an effective means of defining your goals and the steps needed to reach them. It spells
out your purpose, vision and means of operation. It also serves as your company's resume, explaining
your objectives to investors, partners, employees and vendors.

Good plans are usually highly detailed and include information on all aspects of the business, including
the industry, marketing, finance, personnel and various operating procedures. They are specific,
communicate to all company employees and require commitment from everyone.

Every business needs to have a written business plan. Whether it‘s to provide direction or attract
investors, a business plan is vital for the success for your organization. But, how do you write a business
plan? A business plan include:

 Executive summary -- a snapshot of your business

 Company description -- describes what you do
 Market analysis - research on your industry, market and competitors
 Organization and management -- your business and management structure
 Service or product -- the products or services you‘re offering
 Marketing and sales -- how you‘ll market your business and your sales strategy
 Funding request -- how much money you‘ll need for next 3 to 5 years
 Financial projections -- supply information like balance sheets
 Appendix -- an optional section that includes résumés and permits

So, here are seven steps for writing a perfect business plan.

1. Research, research, research.

―Research and analyze your product, your market and your objective expertise,‖ William Pirraglia, a
now-retired senior financial and management executive, has written. ―Consider spending twice as much
time researching, evaluating and thinking as you spend actually writing the business plan.

―To write the perfect plan, you must know your company, your product, your competition and the market
intimately.‖

In other words, it‘s your responsibility to know everything you can about your business and the industry
that you‘re entering. Read everything you can about your industry and talk to your audience.

2. Determine the purpose of your plan.

A business plan, as defined by Entrepreneur, is a ―written document describing the nature of the business,
the sales and marketing strategy, and the financial background, and containing a projected profit and loss
statement.‖ However, your business plan can serve several different purposes.

As Entrepreneur notes, it‘s ―also a road map that provides directions so a business can plan its future and
helps it avoid bumps in the road.‖ That‘s important to keep in mind if you‘re self-funding or
bootstrapping your business. But, if you want to attract investors, your plan will have a different purpose
and you‘ll have to write a plan that targets them so it will have to be as clear and concise as possible.
When you define your plan, make sure you have defined these goals personally as well.

3. Create a company profile.

Your company profile includes the history of your organization, what products or services you offer, your
target market and audience, your resources, how you‘re going to solve a problem and what makes your
business unique. Company profiles are often found on the company‘s official website and are used to
attract possible customers and talent. However, your profile can be used to describe your company in
your business plan. It‘s not only an essential component of your business plan; it‘s also one of the first
written parts of the plan.

Having your profile in place makes this step a whole lot easier to compose.

4. Document all aspects of your business.

Investors want to make sure that your business is going to make them money. Because of this
expectation, investors want to know everything about your business. To help with this process, document
everything from your expenses, cash flow and industry projections. Also, don‘t forget seemingly minor
details like your location strategy and licensing agreements.

5. Have a strategic marketing plan in place.

A great business plan will always include a strategic and aggressive marketing plan. This typically
includes achieving marketing objectives such as:

 Introducing new products

 Extending or regaining market for existing products
 Entering new territories for the company
 Boosting sales in a particular product, market or price range. Where will this business come from?
Be specific.
 Cross-selling (or bundling) one product with another
 Entering into long-term contracts with desirable clients
 Raising prices without cutting into sales figures
 Refining a product
 Having a content marketing strategy
 Enhancing manufacturing/product delivery

―Each marketing objective should have several goals (subsets of objectives) and tactics for achieving
those goals,‖ states Entrepreneur.

“In the objectives section of your marketing plan, you focus on the ‗what‘ and the ‗why‘ of the marketing
tasks for the year ahead. In the implementation section, you focus on the practical, sweat-and-calluses
areas of who, where, when and how. This is life in the marketing trenches.‖

Of course, achieving marketing objectives will have costs. ―Your marketing plan needs to have a section
in which you allocate budgets for each activity planned," Entrepreneur says. It would be beneficial for
you to create separate budgets for for internal hours (staff time) and external costs (out-of-pocket
expenses).

6. Make it adaptable based on your audience.

―The potential readers of a business plan are a varied bunch, ranging from bankers and venture capitalists
to employees,‖ states Entrepreneur. ―Although this is a diverse group, it is a finite one. And each type of
reader does have certain typical interests. If you know these interests up-front, you can be sure to take
them into account when preparing a plan for that particular audience.‖

For example, bankers will be more interested in balance sheets and cash-flow statements, while venture
capitalists will be looking at the basic business concept and your management team. The manager on
your team, however, will be using the plan to ―remind themselves of objectives.‖

Because of this, make sure that your plan can be modified depending on the audience reading your plan.
However, keep these alterations limited from one plan to another. This means that when sharing financial
projections, you should keep that data the same across the board.

7. Explain why you care.

Whether you‘re sharing your plan with an investor, customer or team member, your plan needs to show
that you‘re passionate and dedicated, and you actually care about your business and the plan. You could
discuss the mistakes that you've learned, list the problems that you‘re hoping to solve, describe your
values, and establish what makes you stand out from the competition.

When I started my payments company, I set out to conquer the world. I wanted to change the way
payments were made and make it easier for anyone, anywhere in the world to pay anyone with few to no
fees. I explained why I wanted to build this. My passion shows through everything I do.

By explaining why you care about your business you create an emotional connection with others so that
they‘ll support your organization going forward.

Need to know about Accounting

Accounting Is a Resource and a Tool for Growth. Beyond being necessary for a company's immediate
financial health, accounting practices are important strategic tools for entrepreneurs. They allow small
business managers to make future projections and predictions in real time.

Accounting is essential if you want to be able to grow your business in a way that can be measured and
predicted. Having a system of tracking your business' assets, liabilities, and income lets you to make
smart, informed business decisions based on the past performance and present financial health of your
company.
Without accounting, you have no way of knowing how the startup is doing.
 1. good accounting will let you know at a glance how much client owe you, and how much you owe
vendors, as well as how much you have spent on the startup in total, how much you have spent in
operations and how much you have made in revenue.
2. You first year end may seem like its a long way off, but it's not. It's less than a year away, and you'll
need a balance sheet, and and income statement to submit your tax return. It's much better to keep
your numbers up to date so that you don't get surprised at the number of hours it takes to get the
numbers in order for the government.
3. Sales taxes! If you are in a region where you have to charge sales tax, then you need to know how
much you have collected, in order to remit it to the government.
4. Investors want to know how their investment is playing out. No VC will give you money and just
say "hey, here's some cash. Pay us back when are doing well." They will want to see monthly, or
annual reports.

The purpose of accounting is to provide financial information to the stakeholders of the business:
management, investors and creditors. Accounting measures and summarizes the activities of the company
and communicates the results to management and other interested parties.
Working capital Management

• Working capital management is concerned with making sure we have exactly the right amount of
money and lines of credit available to the business at all times
• Working Capital is the money used to make goods and attract sales

• The less Working Capital used to attract sales, the higher is likely to be the return on investment
• Working Capital = Current Assets − Current Liabilities

Working Capital Management

Cash Management
• Identify the cash balance which allows for the business to meet day to day expenses
reduces cash holding costs
Receivables Management
• Money which is owed to a company by a customer for products and services provided
on credit
• Identify the appropriate credit policy
Inventory Management
• Identify the level of inventory which allows for uninterrupted production
• Reduces the investment in raw materials, minimizes reordering costs and hence
increases cash flow
Inventory Management

A company's merchandise, raw materials, and finished and unfinished products which have not yet been
sold. These are considered liquid assets, since they can be converted into cash quite easily.

Policies, procedures, and techniques employed in maintaining the optimum number or amount of each
inventory item. The objective of inventory management is to provide uninterrupted production, sales,
and/or customer-service levels at the minimum cost.
Techniques: -

• ABC
• JIT
• FSN
• VED
• BILLS OF MATERIAL
• BIN CARDS
• EOQ-ECONOMIC RE-ORDER QUANTITY
• INVENTORY/TURNOVER

Importance of Inventory Management

TRANSCATIONS MOTIVE: It emphasizes the need to maintain inventories to facilitate smooth
production and sales operations
PRECAUTIONARY MOTIVE: It necessitates holding of inventories to guard against the risk of
unpredictable changes in demand and supply forces and other factors

SPECULATIVE MOTIVE: It influences the decision to increase or reduce inventory levels to take the
advantage of price level fluctuations
Conflicting needs : -

– To maintain a large size of inventories of raw materials and WIP for efficient and smooth production
and of finished goods for uninterrupted sales operations
– To maintain a minimum investment in inventories to maximize profitability
Objective: -

– determine and maintain optimum level of inventory investment

– to maintain sufficient inventory for the smooth production and sales operations
– to avoid excessive and inadequate levels of inventories

– Making adequate inventories available for production & sales when required.

Benefits of holding inventories:

Avoiding losses of sales  avoid non-supply of goods at times demands by understands.
Reducing ordering costs cost associated with individual order such as typing approving mailiyet
can be reduced.
Achieving efficient production run Supply of sufficient inventories protects against shortage of raw
materials that may interrupt production operation.

Cost of holding inventories:-

Ordering cost  cost which are associated with placing of orders to purchase raw materials &
components. Salary, rent. ―More the order the more will be ordering costs vice verse‖.
Carrying costs  cost involved in holding or carrying inventories like insurance. Charger for
covering risk, thefts. It includes opportunity cost.
Money blocked in inventories been invested. It would earn a certain return. Loss of such return may
be considered opportunity cost.

Models of inventory mgt:-

Several models & methods have been developed in recent past for determine the optimum level of
inventories.

Classified into two types:-

Deterministic models:- There is no uncertainty associated with demand supply of inventory.

Probabilistic models:- It always some degree of uncertainty associated with demand pattern & lead times
of inventories. Unusually deterministic models associated:
 Economic ordering quantity.(EOQ)
 ABC analysis.
 Inventory return over ratio.
EOQ: Important decision to be taken by a firm in inventory mgt is how much to buy at a time. This is
called EOQ. EOQ give solution to other problem like: How frequently to buy? When to buy? What
should be the reserve stock?

Assumptions:- EOQ is based on certain assumption.

The firm knows how much items of particular inventories will be used or demanded.
Use of inventories/sales made by the firm remains constant, or unchanged.

The moment inventories reach the zero level, the order of inventory is placed without delay.

These assumptions are also called limitations of EOQ.

Determination of EOQ:-

Ordering cost: Cost concerned with the placing of an order to acquire inventories. Yes it way from time
to time depending upon the no of items orders places & no of items ordered in each order.

Carrying cost: Cost related to carrying or keeping inventories in a firm.

Ex: interest on investment, obsolescence, losses, insurance, premium. Volume of inventory & carrying

cost. EOQ can be determined by an approach.

The order-formula approach:-There are number of mathematical formula to calculate EOQ. The most
frequently used formula is Q= 2Ux P / S

Q = EOQ.
U = Quantity purchased in a year/month.
P = Cost of placing an order. (ordering cost)
 S = Annual/ monthly cost of storage of one unit known (carrying cost)
Trial & Error Approach:- Carrying & ordering cost should be studied ―order formula approach‖.

Graphic Approach: EOQ can found by drawing a graph.

ABC Analysis:-
A – Items with highest value.

B – Items with relatively low value.

C – Items with least valuable.

A – items maintain bare minimum necessary level of inventories.

B – items will be kept under reasonable control.

C – items would be under simple control.

FSN – Fast moving, Slow moving, Non-moving.

Fast moving  in order of have smooth production.High demand – adequate inventory of these items
maintained
Slow moving items:-Slowly moving indicated by a low turnover ratio needed to maintain at
minimum level.
Dormant/obsolete items  have no demand these should be disposed of a early as possible to curb
further losses caused by them.

Inventory turnover Ratio:

Cost of goods consumed or sold during year

= -------------------------------------------------------- --------100
Average inventory during the year

Production and Operation Management

Investment Analysis

Both launching new product first time or diversified the product line involve investment. Basic objective
of every investment is to maximise the profit. Hence the scarce capital should be invested in those
opportunities which could give the maximum return on capital employed (profit).

Tools for investment analysis:

NPV, IRR, Payback Period, ARR, Benefit cost Ratio.

Technique of ratio analysis and capital budgeting have been used as most important tool of investment
analysis. Investment analysis deals with the interpretation of the data incorporated in the Performa
financial statement of a project and presentation of data in the form in which it can be utilised for
comparative appraisal of the projects
Ratio Analysis:
Ratio analysis established arthimetical relationship between two relavant figures.normally it is
expressed in percentage.

Return on proprietor’s fund( Equity)

Net Profit after tax and interest X100

Proprietors fund

Objectives of investment is to earn maximum profit whether investment to be worth making in terms of
return compared to risk.

Return on Capital Employed

Net profit before interest and tax X100

Capital Employed

Equity Capital = 5 lakhs, Loan = 3 lakhs, Rs. 80,000 net profit before tax and interest.

80,000 X100 = 10% (compare with other industry)

8,00,000

Return on Total Investment

Net Profit after interest and tax X100 = Overall profitability of business.

Total Asset

Capital Budgeting
Involves investment decision balancing the sources and uses of funds for acquiring fixed assets like plant
and machinery. Investment in fixed asset implies the choice of a particular project. The project selection
is made on certain techniques.

Techniques of Capital Budgeting.

Pay Back or Payout Period
How long he / she to wait before the invested capital is recovered. Cash flow start coming and
accumulate after certain period of time, the accumulated amount equal to the original investment made.

Average rate of return

Accounting rate of return is a reverse of payback period method. Pay back based on cash flow. Average
rate of return based upon principles of accounting. It does not consider the time period. The average rate
of return is calculated by dividing the average net income after taxes by the average investment over the
life of the project.

ARR = Average net income after tax X 100

 Average investment over the life of the project.

It ignore time value of money.

Product Layout
During the course of technical arrangement of various facilities such as machinery, equipment etc., it is
very necessary to give considerable emphasis on a proper plant layout to achieving their optimum
utilization. Some important aspects while deciding the plant layout. There are
1. Production technology and production mix.
2. Efficiency, economic and uninterrupted flow of men and material
3. Adequate space for maintenance work
4. Scope for future expansion and diversification of the project
5. Health conducive layout of the plant
6. Proper lighting and ventilation.

Marketing Management
Before any production/ service is offered for sale to market, several decision need to taken in regarding
marketing. Ex: price of product has to determined, the methods of marketing has been identified and the
channels of distribution have to be worked out.

Marketing

Market : it is a place where the sellers and buyers assemble to exchange their products for money and
vice versa. Concept has been change time to time.

Traditional concepts:
Early days, „marketing‟ includes activities involved in the flow of goods and services from production to
consumption.

Modern Concepts:
Due to changes of customers, behaviour concepts are also changed customers started to buy the goods or
services that were more beneficial to them in terms of quality, price, satisfaction, durability, look and so
on. The benefits to the consumers may be tangible and intangible.

The new approach relies on to produce the goods or offer services that satisfy the customers‟ demands.

Traditional approach focus on the needs of the sellers (Buyers Beware).

Modern approach focus on the needs of the buyers. (sellers beware).

Problems of Marketing of small industries:

 Competition with modern section

 Lack of sales promotion

 Weak in bargaining power
Market Assessment:
Demand forecasting

Demand refers to willingness and ability of customers to buy products or services. When we consider this
definition for all the potential customers having both willingness and ability to buy a product it is termed
as ―total Market‖
There are number of techniques available for forecasting dmand.
 Survey Method

 Statistical method

 Leading indicator method

Market Segmentation:
Market segmentation is the sub- dividing of a market into homogeneous subsets of customers, where any
subset may conceivable be selected on a market target to be reached with a distinct marketing mix.
Basic of Market segmentation
 Geographic variable

 Demographic variable

 Education variable

 Income variable

Marketing Mix:
Marketing mix classified the four factor under 4 P‟s vie Product, Price, Promotion, Place.
―Marketing mix is the tailoring the product its price, its promotion and distribution to reach the target
customers‖.
Brand
A brand is a name, term, sign, symbol or design or a combination of them, intended to identify the
goods or services of one seller or group of sellers and to differentiate them from those of
competitors.
Brand mark is a symbol or mark used fr the purpose of identification of the product.
Packaging
Packaging is an art science and technology of preparing goods for transport and sales.
Pricing Policy
Price is the money that customers must pay for a product or services. Pricing the product is something
different from its price.
Salient features:
Pricing cover all marketing aspect like the item- goods and service. Mode of payment, methods of
distribution, currency used etc. pricing may carry with it certain benefits to the customers like free
delivery, guarantee, installation from after sales servicing.
Pricing refers to different prices of a product for different customers and different prices for the same
customers at different times.
Factors affecting prices:
Economic and non- economic
1. Product characteristics

2. Product cost

3. Objectives of the firm

4. Competitive situation

5. Demand for the product

6. Customers behaviour

7. Government regulation

Pricing methods / policies

Cost plus method

Total cost + profit = selling price. Total cost includes fixed cost + variable cost. Profit refers to margin.
Skimming Pricing:
It suitable for a product introduced is innovative and innovative and it used mainly by sophisticated
group of customers. High price is usually promoted by heavy promotion. Recover the cost with in a
shorter period of time.
Penetration Pricing:
It is Contrary to skimming to attract more customers are very particular for price and which product is an
items of mass consumption. Under this policy, the price of the product is set at lower level of penetrate
into the market.
Market rate policy
This policy adopts the prevailing market rates for determining the price of the product. Unusually this
policy used for unbranded products like oils, couriers, tailoring, repairing.

Variable price policy:

The price of the same product varies from customers to customers depending upon the situation
prevailing in the market.
Resale price Maintenance
The manufacturer of the product fixes prices of the whole seller and retailer. The retailer price of the
product like drugs and detergents are printed on the package. Retail price is fixed somewhat higher to
meet of the cost of inefficiency retailers not selling the goods timely.

DISTRIBUTION CHANNELS / METHODS OF MARKETING:

A channel of distribution or marketing channels is the structure of intra-company organisation units and
extra-company agents and dealers, wholesale and retails through which a commodity, product or service
is marketed.
In view of number of intermediaries of the product channels it can be classified into three.
 Zero level Channelproducer toconsumer
  One level Channel  Producer  retailerconsumer

 Two level Channel  producer  whole seller  retailer 

consumer.
Human Resources Management and Labour Laws
The decisive role played by Human Resources Management (HRM) in the emergence and sustenance
of entrepreneurship development in an organisation cannot be misplaced as it ensures optimum
deployment and development of personnel towards the actualization of set organisational objectives.

Labor laws clarify and codify business owners' obligations to their employees. The labor movement has
a long history of lobbying for laws that protect worker's rights, improve worker safety, prevent
child labor and increase workers' bargaining power relative to their employers.
In order to promote the Start-Up ecosystem in the country and incentivizing the entrepreneurs in setting
up new start-up ventures and thus catalyze the creation of employment opportunities through them, the
Ministry of Labour & Employment has issued an advisory to the States/UTs/Central Labour Enforcement
Agencies for a compliance regime based on self-certification and regulating the inspections under various
Labour Laws.

Concessions provided to Start-ups

It has been suggested that if such start-ups furnish self-declaration for compliance of nine labour laws for
the first year from the date of starting the start-up, no inspection under these labour laws, wherever
applicable, will take place. The Labour Laws to be covered under this are:

1. The Building and Other Constructions Workers‘ (Regulation of Employment and Conditions of
Service) Act, 1996
2. The Inter-State Migrant Workmen(Regulation of Employment and Conditions of Service) Act,
1979
3. The Payment of Gratuity Act, 1972
4. The Contract Labour (Regulation and Abolition) Act, 1970
5. The Employees‘ Provident Funds and Miscellaneous Provisions Act, 1952
6. The Employees‘ State Insurance Act, 1948

From the second year onwards, up to 5 years from the setting up of the units, such start-ups are required
to furnish self-certified returns and would be inspected only when credible and verifiable complaint of
violation is filed in writing and approval has been obtained from the higher authorities. The nine labour
laws, included are:

 The Industrial Disputes Act, 1947;

 The Trade Unions Act, 1926;
 The Building and Other Constructions Workers‘ (Regulation of Employment and Conditions of
Service) Act, 1996;
 The Industrial Employment (Standing Orders) Act, 1946;
 The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act,
1979;
 The Payment of Gratuity Act, 1972;
 The Contract Labour (Regulation and Abolition) Act, 1970;
 The Employees‘ Provident Funds and Miscellaneous Provisions Act, 1952; and
 The Employees‘ State Insurance Act, 1948.
Start-Ups may be allowed to submit self-certified returns (as is being done under Shram Suvidha
Portal under these Acts for the Central sphere) under aforesaid Acts.

The advisory to State Governments is not to exempt the Start-ups from the ambit of compliance of these
Labour Laws but to provide an administrative mechanism to regulate inspection of the Start-Ups under
these labour laws, so that Start-ups are encouraged to be self-disciplined and adhere to the rule of law.
These measures intend to avoid harassment of the entrepreneurs by restricting the discretion and
arbitrariness. Punitive action shall, however, be taken whenever there is a violation of these labour laws.

Organizational support services - Central and State Government Incentives and Subsidies
Institutional support refers to the support to the entrepreneurs by different types of institutions. It
also refer to formulate policies provide support regulate and facilitate to develop manufacturing and
service enterprises with the help of many institutions.
The term ―incentive', generally means encouraging productivity. It is a motivational force, which
encourages an entrepreneur to take a right decision and act upon it. The objective of
providing incentives is to motivate an entrepreneur to set up a new venture in the larger interest of the
nation and the society.

Many incentives are provided both by the Central and State Governments to promote the growth of small-

scale industries and also to protect them from the onslaught of the large-scale sector. Among the various

incentives given to small-scale industries the following deserve special mention:

1. Reservation:

To protect the small-scale industries from the competition posed by large-scale industries, the

Government has reserved the production of certain items exclusively for the small-scale sector. The

number of items exclusively reserved for the small-scale sector has been considerably increased during

the Five Year Plan Periods and now stands at 822.

However, prior to the 1997 – 98 Budget the number of items reserved for the small-scale sector stood at

836. The Finance Minister de-reserved 14 items in the 1997 – 98 Budget.

2. Preference in Government purchases:

The Government as well as Government organisations shows preference in procuring their requirements

from the small-scale sector. For instance, the Director General of Supplies and Disposals purchases 400

items exclusively from the small-scale sector. The National Small-Scale Industries Corporation assists the

SSI units in obtaining a greater share of Government and defence purchases.

3. Price preference:

The SSI units are given price preference up to a maximum of 15 per cent in respect of certain items

purchased both from small-scale and large-scale units.

4. Supply of raw materials:

In order to ensure regular supply of raw materials, imported components and equipment‘s, the

Government gives priority allocation to the small-scale sector as compared to the large-scale sector.

Further, the Government has liberalised the import policy and streamlined the distribution of scarce raw

materials.

5. Excise duty:

In respect of SSI units excise duty concessions are granted to both registered and unregistered units on a

graded scale depending upon their production value. Full exemption is granted up to a production value

of Rs.30 lakhs in a year and 75 % of normal duty is levied for production value exceeding Rs.30 lakhs but

not exceeding Rs.75 lakhs. If the production value exceeds Rs.75 lakhs, normal rate of duty will be

levied.

6. RBI’s credit guarantee scheme:

In 1960, the RBI introduced a Credit Guarantee Scheme for small-scale industries. As per the Scheme,
the RBI takes upon itself the role of a guarantee organisation for the advances which are left unpaid,
including interest overdue and recoverable charges. This scheme covers not only working capital but also
advances provided for the creation of fixed capital.

7. Financial assistance:

Small-scale industries are brought under the priority sector. As a result, financial assistance is provided to

SSI units at concessional terms by commercial banks and other financial institutions. With a view to

providing more financial assistance to the small-scale sector, several schemes have been introduced in the

recent past the Small Industries Development Fund (SIDF) in 1986, National Equity Fund (NEF) in 1987

and the Single Window Scheme (SWS) in 1988.

SIDF provides refinance assistance to small-scale and cottage and village industries and the tiny sector in

rural areas. NEF provides equity type support to small entrepreneurs for setting up new projects in the
tiny/small-scale sector. In 1996, the small-scale sector received 42.3 per cent of the total priority sector

advances from public sector banks.

8. Technical consultancy services:

The Small Industries Development Organisation, through its network of service and branch institutes,

provides technical consultancy services to SSI units. In order to provide the necessary technical input to

rural industries, a Council for Advancement of Rural Technology was set up in October, 1982.

The Technical Consultancy Organisation renders consultancy services to SSI units at a subsidised rate.

Many financial institutions are also providing subsidies to SSI units for availing of consultancy services.

For instance, small entrepreneurs proposing to set up rural, cottage, tiny or small-scale units, can get

consultancy services at a low cost from the Technical Consultancy Organisations approved by the All-

India and State-level financial institutions.

They have to pay only 20% of the fees charged by a technical consultancy organisation. The entire

balance of 80% or Rs.5, 000 whichever is lower is subsidised by the Industrial Finance Corporation of

India.

9. Machinery on hire purchase basis:

The National Small Industries Corporation (NSIC) arranges supply of machinery on hire purchase basis

to SSI units, including ancillaries located in backward areas which qualify for investment subsidy. The

rate of interest charged in respect of technically qualified persons and entrepreneurs coming from

backward areas are less than the amount charged to others. The earnest money payable by technically

qualified persons and entrepreneurs from backward areas is 10% as against 15% in other cases.

10. Transport subsidy:

The Transport Subsidy Scheme, 1971 envisages grant of a transport subsidy to small-scale units in

selected areas to the extent of 75 % of the transport cost of raw materials which are brought into and

finished goods which are taken out of the selected areas.

11. Training facilities:

The Entrepreneurship Development Institute of India, financial institutions, commercial banks, tech

12. Marketing assistance:

The National Small Industries Corporation (NSIC), the Small Industries Development Organisation

(SIDO) and the various Export Promotion Councils help SSI units in marketing their products in the

domestic as well as foreign markets. The SIDO conducts training programmes on export marketing and

organises meetings and seminars on export promotion.

13. District Industries Centres (DICs):

The 1977 Industrial Policy Statement introduced the concept of DICs. Accordingly a DIC is set up in

each district. The DIC provides and arranges a package of assistance and facilities for credit guidance,

supply of raw materials, marketing etc..

Module III : Startup and Business Incubation :

Start up: Definition
A startup is a company that is in the first stage of its operations. These companies are often initially
bankrolled by their entrepreneurial founders as they attempt to capitalize on developing a product or
service for which they believe there is a demand.
Startups are companies or ventures that are focused around a single product or service that the founders
want to bring to market. These companies typically don't have a fully developed business model and,
more importantly, lack adequate capital to move on to the next phase of business. Most of these
companies are initially funded by their founders.
Startups ecosystem: support organizations, big companies, universities, funding organizations,
service providers, research organizations
A startup ecosystem is formed by people, startups in their various stages and various types of
organizations in a location (physical and/or virtual), interacting as a system to create new startup
companies.

These organizations can be further divided into categories: universities, funding organizations, support
organizations (like incubators, accelerators, co-working spaces etc.), research organizations, service
provider organizations (like legal, financial services etc.) and large corporations. Different organizations
typically focus on specific parts of the ecosystem function and/or startups at their specific development
stage(s).
Elements Of Startup ecosystem Organizations and activities with start-up activities

 ideas, inventions and researches  universities

 start-ups at various stages  advisory & mentoring organizations
 entrepreneurs  startup incubators
 start-up team members  startup accelerators
 angel investors  coworking spaces
 start-up mentors  service providers (consulting, accounting, legal, etc.)
 start-up advisors  event organizers
 other entrepreneurial minded  start-up competitions
people  investor networks
 third people from other  venture capital companies
organizations with start-up  crowdfunding portals
activities  other funding providers (loans, grants etc.)
 start-up blogs & other business media
 other facilitators

People from these roles are regarded as linked together through shared events, activities, locations and
interactions. As startup ecosystems are generally defined by the network of interactions among people,
organizations and their environment, they can come in many types but are usually better known as startup
ecosystems of specific cities or online communities (although some may say that due to social networks,
the entire globe is just one big network of startup ecosystems).
In addition, resources like skills, time and money are also essential components of an start-up ecosystem.
The resources that flow through ecosystems are obtained primarily from the people and organizations that
are active part of those startup ecosystems. By events and meetings with and between organizations and
different people, these interactions play a key role in the movement of resources through the system
helping to create new potential startups or strengthening the already existing ones and hence influencing
the quantity of startups build. Failures of start-ups, release people witm improved skills and time for
either establishing a new start-up or joining an already existing one.

Start-up ecosystems are controlled by both external and internal factors. External factors as financial
climate, big market disruptions and big companies transitions, control the overall structure of an
ecosystem and the way things work within it. Start-up ecosystems being dynamic entities—invariably,
they are initially in formation stages and once established are subject to periodic disturbances (like the
financial bubbles) passing afterwards to the recovering process from some of those past disturbances.

Start-up ecosystems in similar environments but located in different parts of the world can end up doing
things differently simply because they have a different entrepreneurial culture and resources pool. The
introduction of non-native people knowledge and skills can also cause substantial shifts in the ecosystem
functions.
Internal factors not only control ecosystem processes but are also controlled by them and are often subject
to feedback loops. While some of the resource inputs are generally controlled by external processes like
financial climate and market disruptions, the availability resources within the ecosystem is controlled by
internal factors like people and organizations ability to contribute towards the ecosystem. Other internal
factors include startups success and failures succession along types of people and available skills.
Although people exist and operate within ecosystems, their cumulative effects are large enough to
influence external factors like financial climate.

People diversity also affects startup ecosystem functions, as do the processes of disturbance and
succession. Startup Ecosystems provide a variety of goods and services upon which other people and
companies depend on and thus, the principles of startup ecosystem management suggest that rather than
managing individual people or organizations, resources should be managed at the level of the startup
ecosystem itself. Classifying start-up ecosystems into structurally similar units is an important step
towards effective ecosystem management.

Startup ecosystem management

When management is applied to the whole start-up ecosystem, rather than just single start-ups or
organizations, it is termed start-up ecosystem management. Start-up ecosystem management is driven by
explicit goals, executed by policies, protocols, and practices, and made adaptable by monitoring and
research based on our best understanding of the interactions and processes necessary to sustain ecosystem
structures and functions. Thus, the purpose of it is to manage areas at various scales in such a way that
ecosystem services and resources are preserved while appropriate resource use and options for livelihood
are sustained.

Due to the nature of the start-up ecosystem management including the capability of catering needs for
ecosystem management on a long term bases with its own sustainability through turmoil and disruptions,
the responsibility is typically shared between those with such abilities. A fundamental principle is the
long-term good production sustainability for start-ups by the ecosystem; "intergenerational sustainability
[is] a precondition for management, not an afterthought". It also requires clear goals regarding future
trajectories and behaviors of the system being managed. Other important requirements include a sound
understanding of the system( including connectedness, people and organization dynamics) and the
context in which the system is operating. Other important points include an understanding of the role of
people, talent and money as components of the ecosystems and the use of adaptive management.

Some systems for startup ecosystem management exist, ranging from documented knowledge and tools,
to online platforms, all the way to specifically developed comprehensive infrastructure solutions.

Since start-up ecosystems are dynamic entities—invariably, they are subject to periodic disturbances and
are in the process of recovering from some past disturbance. When an startup ecosystem is subject to
some sort of perturbation, it responds by moving away from its initial state. The tendency of a system to
remain close to its equilibrium state, despite that disturbance, is termed its resistance. On the other hand,
the speed with which it returns to its initial state after disturbance is called its resilience.

From one year to another, ecosystems experience changes in their people, organizations and
environments. A financial turmoil constitutes short-term variability in environmental conditions. The
pool of people resources also vary from year to year, building up during downturn for bigger companies
and crashing as they gear up their recruiting. Longer-term changes also shape ecosystem processes—
where the biggest startup companies eventually make big exists releasing capital and talent to the start-up
ecosystem.

In addition to it, disturbance plays also an important role in startup ecological processes. The frequency
and severity of disturbances determine the way they impact in the start-up ecosystem functions. Major
disturbances like a startup bubble burst leave behind an investment dry environment. Startup ecosystems
that experience severing disturbances undergo primary succession. Less severe disturbances like
individual start-up failures or support organization reorganization result in secondary succession. More
severe and frequent disturbances result in longer recovery times. Start-up ecosystems recover more
quickly from less severe disturbance events.

Start-up ecosystem studies

Start-up ecosystems can be studied through a variety of approaches—theoretical studies, studies
monitoring specific start-up ecosystems over long periods of time and those that look at differences
between start-up ecosystems to elucidate how they work. These studies can be carried out in a variety of
scales. There are several independent studies made to evaluate start-up ecosystems to better understand
and compare various start-up ecosystems and to offer valuable insights of the strengths and weaknesses
of different start-up ecosystems. India has the 2rd largest startup ecosystem in the world; expected to
witness YoY growth of 10-12% ~20,000 startups in India; around 4,750 of these are technology led
startups 1,400 new tech startups were born in 2016 alone; implying there are 3-4 tech startups born every
day

Startup development phases, Ideating, concepting, committing, validating, scaling, establishing

STARTUP MINDSET
You are a student or you have heard the word ―startup‖ and are looking for options to get to know more,
but you don‘t know where to start. These organisations are waiting for the young & curious, who are keen
to create innovative projects for launching new products and solutions with help of technology tools.

PRE-STARTUP
You have an idea for a scalable, innovative product or a service with a clear concept & milestones on
how to get there. What you probably need is resources to fund your early prototype, team members, test
your idea with clients. Find partners for your prototype through mentoring and supporting networks.

STARTUP
You have developed an MVP and the signed shareholder agreement between founders. Now you are
ready for investments and to accelerate your business with the help of angel investors, accelerators and
investment funds. Ecosystem partners in this phase will also to get you prepared for market validation
and scaling.

SCALEUP
Your product or service is showing a clear and measurable user growth and you have already attracted
significant funding. To move into establishing phase you need to go global. Use the help of partners to do
that.

SCALING
Your product or service is showing a clear and measurable user growth and you have already attracted
significant funding. To move into establishing phase you need to go global. Use these partners to do that.

ESTABLISHING
You have achieved great continuing growth and you no longer need to struggle to get resources. Now you
can decide whether to continue business as usual or exit.

Startup business partnering, Startup culture, Co-founders, Preparing to Launch

Business partnering is the development of successful, long term, strategic relationships between
customers and suppliers, based on achieving best practice and sustainable competitive advantage. In the
business partner model, HR professionals work closely with business leaders and line managers to
achieve shared organisational objectives. In practice, the business partner model can be broadened to
include members of any business function, for example, Finance, IT, HR, Legal, External Relations, who
act as a connector, linking their function with business units to ensure that the technical, or functional,
expertise they have to offer is placed within the real and current concerns of the business to create value.
 A business partner is a commercial entity with which another commercial entity has some form
of alliance. This relationship may be a contractual, exclusive bond in which both entities commit not to
ally with third parties. Alternatively, it may be a very loose arrangement designed largely to impress
customers and competitors with the size of the network the business partners belong to.

Business partnering is the development of successful, long term, strategic relationships between
customers and suppliers, based on achieving best practice and sustainable competitive advantage.
A strategic business partnership is a long-term business relationship focused on creating joint value for
two or more organizations. A strategic business partnership is not a business relationship that looks to
exchange or extract value for your business from the other organization.

Benefits of Partnering
 Enhance your image.
 Enhance the delegate experience.
 Positive publicity and heightened visibility.
 Competitive advantage/differentiation.
 Enhanced business, consumer and VIP relations.
 Recognition as a supporter of the sports movement.
 A startup culture is a workplace environment that values creative problem solving, open communication
and a flat hierarchy. In a corporate culture, core values are typically informed by the identity of the
company, including its mission statement, products and customer service.
A great culture makes your startup unique. It helps you to recruit the best people, retain employees and
motivate them. It makes your employees work efficiently and with a more positive attitude. It is even
harder to maintain due to the progressive growth of most startups.
How to Build a Great Startup Culture
1. Build on your strengths.
2. Be transparent in your communications.
3. Establish a set of values.
4. Hire accordingly.
5. Provide a pleasant work environment.
6. Do team activities outside work.
Many first-time startup founders struggle to devote time to define their culture from the beginning, only
to come to the painful realization that culture certainly has an impact on the operational side of business.
Seasoned founders and CEOs who believe there is room for culture from the beginning experience less
culture-related stress as they grow.
Culture wasn‘t built in a day – whether a growing company is defining its culture or an established
company is redefining its culture — the important thing to remember is that workplace culture consists of
the values, people and communication of a company; essentially, it forms a community that thrives on the
participation of all parties.

Prepare to Launch Your Startup

1. Understanding Whether Your Product is Meeting the Demand or Creating One

The key to better understand your product is to get the market validation right. Going all guns without a
market validation may leave your offerings without any buyer. This is where you need to identify
whether you are meeting the market demand or creating a new one.

Stick to 80% rule wherein you strive to have an honest review about offerings based on the interviews.
Don‘t wait to hit the 100per cent successful feedback at early stages. Check if your product is creating a
demand or meeting one by validating your assumptions. These are done by interviewing experts e.g.;
Industry analysts, people employed by the industry that you are jumping in, consultants, etc.

Try to remove all the possible ‗false positives‘ associated with your product and get to know your product
completely before it is up for the offerings.

2. Launch Timing is Very Important

A lot of startups miss out on this. But the launch timing of your product is crucial, considering the market
scenario and competition. Sure, you have a great idea, but is the market ready for such change? Timing
an idea is like a cherry on the top where reception of product can yield overwhelming results.

Uber came out as an implausible company having a unique business model that blends with remarkable
execution. The need to get drivers into the system was during the economic slowdown. The taxi drivers
were unable to reach passengers that easily and had to move around, wasting gas, looking for them. And
Uber came just right in when people were looking for odd jobs and small employment opportunities.

Even YouTube came in just after the codec problem to view online videos was resolved by Adobe Flash
offered. The broadband reach also witnessed a growth of over 50per cent in the USA.

3. Never Forget Your Team: Ever!

Successful businesses are built by great execution, and such massive scale execution never happens
single-handedly. You will need a team who contributes their blood and sweat for your startup. When
starting from scratch, the A-team is your biggest asset to brainstorm with. This is why you need to take
unanimous decisions considering the whole team. This is why some decisions are elected and not selected
in startups.

You are the one who‘s taking an entire team along with your vision. The same works the other way round
as well. Here you will need to brainstorm ideas, bounce the craziest of plans in the workplace. Launching
a startup involves trial and error so you need to be patient with the team. The idea is to have a fruitful,
constructive conversation happening on a regular basis with tea members to assure you stay on the same
page.

4. Long-Term Vision – Short-Term Milestones

Startup demands some sort of agility. Long-term vision comprises of careful planning goes hand in hand
with dedication, hard work and time. Break those tasks into small milestones and strive to accomplish
them. The key is to manage all resources, including finances and make it all work for the goal that you
are chasing while starting up. Implement a step-wise approach across the team to have everything work in
tandem

- Ask what needs to be done to achieve a particular goal. List it out and have others in your team to
follow the same approach.

- Make common boxes and chunk it to ensure efficiency.

- For each thing that you chunked, ask – ‗what needs to get done to make this happen?‘ Keep a note of
activities for this process until you get back to where you are currently.

5. Stay Laser Focused on Your Goals.

For all the goals you list you must create a timeline as well to achieve it. Then you implement actions that
route through the tunnel of goals that you dig, again, ensuring that the team follows it as well.

Never try and compromise long-term goals for short-term profits. And being a startup you constantly
evolve with every decision you make. This is why improvisation is the key to achieving milestones and
making it a habit will create all the difference.
Another startup super-power is the ability to quickly pivot which the big companies lack. The startup
culture offer entrepreneurs the ability to their initial idea, design choices, and product features to
add/remove before launching the MVP.

Coming to the first point again, the market feedback will have founders pivoting their startup from the
original idea, niche, or even market to another in pursuit of a final product.

It is a tough task for entrepreneurs to create a win-win scenario for all the stakeholders involved. This
involves considering what your customers win, what your employees gain, what your investors earn. And
not to forget, what you become while on the journey of scaling your startup. Commit yourself to make it
better for all.

Financing startups
Startup capital refers to the money that is required to start a new business, whether for office space,
permits, licenses, inventory, product development and manufacturing, marketing or any other
expense. Startup capital is also referred to as "seed money."
Retail businesses usually require less capital. Debt and equity are the two major sources of financing.
Government grants to finance certain aspects of a business may be an option. Also, incentives may be
available to locate in certain communities and/or encourage activities in particular industries.
According to data compiled by Fundable, only 0.91 percent of startups are funded by angel investors,
while a measly 0.05 percent are funded by VCs. In contrast, 57 percent of startups are funded by
personal loans and credit, while 38 percent receive funding from family and friends.

Putting all your eggs in one basket is never a good business strategy. This is especially true when it
comes to financing your new business. Not only will diversifying your sources of financing allow
your start-up to better weather potential downturns, but it will also improve your chances of getting the
appropriate financing to meet your specific needs.
Keep in mind that bankers don't see themselves as your sole source of funds. And showing that you've
sought or used various financing alternatives demonstrates to lenders that you're a proactive entrepreneur.

Whether you opt for a bank loan, an angel investor, a government grant or a business incubator, each of
these sources of financing has specific advantages and disadvantages as well as criteria they will use to
evaluate your business.
Here's an overview of seven typical sources of financing for start-ups:

1. Personal investment
When starting a business, your first investor should be yourself—either with your own cash or with
collateral on your assets. This proves to investors and bankers that you have a long-term commitment to
your project and that you are ready to take risks.

2. Love money
This is money loaned by a spouse, parents, family or friends. Investors and bankers considers this as
"patient capital", which is money that will be repaid later as your business profits increase.
When borrowing love money, you should be aware that:
 Family and friends rarely have much capital
 They may want to have equity in your business
 A business relationship with family or friends should never be taken lightly
3. Venture capital
The first thing to keep in mind is that venture capital is not necessarily for all entrepreneurs. Right from
the start, you should be aware that venture capitalists are looking for technology-driven businesses and
companies with high-growth potential in sectors such as information technology, communications and
biotechnology.
Venture capitalists take an equity position in the company to help it carry out a promising but higher risk
project. This involves giving up some ownership or equity in your business to an external party. Venture
capitalists also expect a healthy return on their investment, often generated when the business starts
selling shares to the public. Be sure to look for investors who bring relevant experience and knowledge to
your business.

BDC has a venture capital team that supports leading-edge companies strategically positioned in a
promising market. Like most other venture capital companies, it gets involved in start-ups with high-
growth potential, preferring to focus on major interventions when a company needs a large amount of
financing to get established in its market.
4. Angels
Angels are generally wealthy individuals or retired company executives who invest directly in small firms
owned by others. They are often leaders in their own field who not only contribute their experience and
network of contacts but also their technical and/or management knowledge. Angels tend to finance the
early stages of the business with investments in the order of $25,000 to $100,000. Institutional venture
capitalists prefer larger investments, in the order of $1,000,000.
In exchange for risking their money, they reserve the right to supervise the company's management
practices. In concrete terms, this often involves a seat on the board of directors and an assurance of
transparency.

Angels tend to keep a low profile. To meet them, you have to contact specialized associations or search
websites on angels. The National Angel Capital Organization (NACO) is an umbrella organization that
helps build capacity for Canadian angel investors. You can check out their member‘s directory for ideas
about who to contact in your region.
5. Business incubators
Business incubators (or "accelerators") generally focus on the high-tech sector by providing support for
new businesses in various stages of development. However, there are also local economic development
incubators, which are focused on areas such as job creation, revitalization and hosting and sharing
services.

Commonly, incubators will invite future businesses and other fledgling companies to share their
premises, as well as their administrative, logistical and technical resources. For example, an incubator
might share the use of its laboratories so that a new business can develop and test its products more
cheaply before beginning production.

Generally, the incubation phase can last up to two years. Once the product is ready, the business usually
leaves the incubator's premises to enter its industrial production phase and is on its own.
Businesses that receive this kind of support often operate within state-of-the-art sectors such as
biotechnology, information technology, multimedia, or industrial technology.

MaRS – an innovation hub in Toronto – has a selective list of business incubators in Canada, plus links to
other resources on its website.
6. Government grants and subsidies
Government agencies provide financing such as grants and subsidies that may be available to your
business. The Canada Business Network website provides a comprehensive listing of various government
programs at the federal and provincial level.
Criteria
Getting grants can be tough. There may be strong competition and the criteria for awards are often
stringent. Generally, most grants require you to match the funds you are being given and this amount
varies greatly, depending on the granter. For example, a research grant may require you to find only 40%
of the total cost.

Generally, you will need to provide:

 A detailed project description

 An explanation of the benefits of your project
 A detailed work plan with full costs
 Details of relevant experience and background on key managers
 Completed application forms when appropriate
Most reviewers will assess your proposal based on the following criteria:

 Significance
 Approach
 Innovation
 Assessment of expertise
 Need for the grant
Some of the problem areas where candidates fail to get grants include:

 The research/work is not relevant

 Ineligible geographic location
 Applicants fail to communicate the relevance of their ideas
 The proposal does not provide a strong rationale
 The research plan is unfocused
 There is an unrealistic amount of work
 Funds are not matched
7. Bank loans
Bank loans are the most commonly used source of funding for small and medium-sized businesses.
Consider the fact that all banks offer different advantages, whether it's personalized service or customized
repayment. It's a good idea to shop around and find the bank that meets your specific needs.

In general, you should know bankers are looking for companies with a sound track record and that have
excellent credit. A good idea is not enough; it has to be backed up with a solid business plan. Start-
up loans will also typically require a personal guarantee from the entrepreneurs.
BDC offers start-up financing to entrepreneurs in the start-up phase or first 12 months of sales. You may
also be able to postpone the principal payments for up to 12 months.

Different stages of financing

Stage 1: Seed capital: The descriptor ―seed‖ is appropriate here, since it suggests money that will fuel a
startup‘s growth down the road. At this point, the leaders of a startup may not have any commercially
available product yet and are instead most likely focused on convincing investors why their ideas are
worthy of VC support.
Seed funding rounds are typically small and are channeled toward research and development of an initial
product. The money may also be used for conducting market research or expanding the team. There are
seed accelerators out there, like Y Combinator, that accept applicants, provide seed capital and offer an
opportunity to demo a solution to major investors.

Stage 2: Startup capital: This stage is similar to the seed stage. With initial market analysis conducted
and business plans in place, companies look to begin marketing and advertising the product and acquiring
customers.
Organizations at this stage likely have at least a sample product available. VC funding may be diverted to
acquiring more management personnel, fine-tuning the product/service or conducting additional research.

Stage 3: Early stage/first stage/second stage capital: Though sometimes called ―first stage,‖ this stage
only comes after the seed and startup ones in most cases. Funding received at this stage will often go
toward manufacturing and production facilities, sales and more marketing.
The amount invested here may be significantly higher than during prior stages. At this point, the company
may also be moving toward profitability as it pushes its products and advertisements to a wider audience.

Stage 4: Expansion stage/second stage/third stage capital: Growth is often exponential by this stage.
Accordingly, VC funding serves as more fuel for the fire, enabling expansion to additional markets (e.g.,
other cities or countries) and diversification and differentiation of product lines.
With a commercially available product, a startup at this stage should be taking in ample revenue, if not
profit. Many companies that get expansion funding have been in business for two to three years.

Stage 5: Mezzanine/bridge/pre-public stage: After reaching this juncture, the company may be looking
to go public, given that its products and services have found suitable traction. Funds received here can be
used for activities such as:
 Mergers and acquisitions
 Price reductions/other measures to drive out competitors
 Financing the steps toward an initial public offering
If all goes well, investors may sell their shares and end their engagement with the company, having made
a healthy return. Many tech IPOs – think Facebook, Twitter and Yelp – were only possible after years of
VC funding that fueled user and revenue growth. There‘s a saying that there‘s no such thing as a free
lunch, and VC funding of free apps and services is a good case in point.
Co-founders
A founder is someone who is calling the shots alone in his startup. This means he has a team working
under him on salary and no one shares the equity. A co-founder is someone who is part of
the founding team. He/she can be an investor and a co-founder or a skilled person working as a co-
founder.
How many founders should a startup have?
So, the answer is, most startups have one to optimally two founders. A few have three. Four or more is
extremely rare and detrimental proportional to the number of founders added.
The term is commonly used in the context of business and startups, where the founder is basically
someone who founds and establishes a business or start-up. A co-founder is basically a person who helps
the founder set up the company, and lends their skills or resources to the business and idea.
co-founder. A person who, in conjunction with one or two other individuals, is instrumental in starting a
business, charity or some other enterprise. Each person involved in the creation of the entity is considered
a co-founder.

FFF
The FFF round is short for the Friends, Family and Fools round. It's kind of a joke, but it actually has a
basis in reality. This round is usually in the very early stages of a startup's fundraising life-cycle. And
without it, most startups that we know as corporations today would have never made it.
Each year between 35-40% of startup ventures receive capital from friends and family. This group is
commonly called ―friends, family, and fools.‖ The reason fools are grouped into this category relates to
the risk associated with lending or investing in a seed venture.

The most common funding sources for a startup are friends and family and fools. It can be the easiest and
least time-consuming fund-raising source around.

However, for the many pros in raising funds from your immediate circle, there are as many cons to
consider as well, which I list below so that you can consider whether it really is worthwhile.

Pros

1. Funding can be quick due to existing relationship – there is no bureaucracy and far less hassles than
dealing with professional investors and VCs‘. Cash comes in quick.

2. Returns can be more flexible – you can negotiate flexible terms and take out loans rather than equity,
which means you keep control and ownership in the early stages.

3. Business models that are less mainstream can be funded – institutions like banks and VCs‘ like
mainstream business models so the less mainstream model may not get funded.

4. It can be more fun – family and friends will be more encouraging and probably go out of their way to
help you succeed. You probably will have more supporters than you need!

5. Everyone benefits – if you do well, everyone benefits and there‘s nothing like sharing success.

Cons

1. Limited experience – the more questions asked about your business model, the more refined it can
be, increasing the chance of success in the long-term. Professional investors will have more experience
than family and friends.

2. Get less funding – your immediate circle may not be able to fund you fully and this may affect the
success of the business.

3. Relationships may suffer – if you don‘t succeed, your relationships may suffer.

4. Too many cooks can spoil the broth – as the saying goes, all your loved ones will give you ongoing
advice due to their involvement and that‘s the last thing you need!

5. Later stages could get complicated – if you‘ve given equity to family and friends, taking on board
new professional investors at a later growth stage can get complex.

Angels
An angel investor (also known as a private investor, seed investor or angel funder) is a high net worth
individual who provides financial backing for small startups or entrepreneurs, typically in exchange for
ownership equity in the company. Often, angel investors are found among an entrepreneur's family and
friends.
The reasons for angel investing vary by investor. Some angel investors look at angel investing as a
way to diversify their portfolio to include a high risk, high return asset class. Some angel investors just
want to give back to entrepreneurs and support the teams, companies, and missions in which they believe.

An angel investor is an affluent individual who provides capital for a business startup, usually in
exchange for convertible debt or ownership equity. An angel investor is a high net worth individual who
invests their own money into startup companies in the hopes of gaining a return on their money.

In return, the angel gets a share of your business, say 10%. The angel's objective is usually to sell his or
her stake later on, say five years down the line, for a significant profit. If your business fails, you don't
have to pay back the money the angel invested, as you would with a loan.

In general, angel investors expect to get their money back within 5 to 7 years with an annualized internal
rate of return (―IRR‖) of 20% to 40%. Venture capital funds strive for the higher end of this range or
more. So how big does a company have to grow to in order to achieve a venture-friendly rate of return?

An Angel Investor is willing to take a Risk. On the other hand, angel investors usually do not balk at
making a bigger investment if they believe in the organization's potential. An angel investor can usually,
"smell," a good idea and a good deal.
Venture Capitals
Venture capital is a form of private equity and a type of financing that investors provide
to startup companies and small businesses that are believed to have long-term growth potential. Venture
capital generally comes from well-off investors, investment banks and any other financial institutions.
Venture capital is usually provided to startups showing long-term growth potential or those with a good
track record.

A venture capital fund is a pooled investment vehicle. This means that the money deployed by a VC firm
typically comes from institutional investors, corporations, or wealthy individuals.

Investing in startups is risky. In fact, it‘s sometimes estimated that three out of every four venture-backed
startups fail, so a VC has to make sure that those that do succeed cover the losses of those that fail.
Venture capital investors spend other peoples‗ money and as such have to deliver healthy returns to their
own investors.
The different stages
The amount of the venture capital raised varies greatly depending on the stage a startup is at.

Seed: The earliest stage of venture capital funding. They are usually closed by early-stage startups and
the cash is usually used to get the business started.

Series A: Startups raising at this stage usually have an established product, market fit, and a rising
customer base.

Series B: Rounds at this level are usually closed by scaleups. At this stage, the company should have
some revenue in select markets and should be looking to expand operations.

Series C and beyond: The term ‗startup‗ becomes a little redundant at this stage. Companies going for this
level of funding are usually established and likely operating on a global scale with the prospect of being
acquired or going public becoming increasingly plausible.

Venture capital funding is not really structured to be a long-term investment, meaning most investors —
whether they are angels or private equity funds — want to exit their investments after five or seven years.
This means they‘ll want to either sell their shares to another investor or get a sizeable exit through
an IPO.
If a VC decides to invest in your startup, they may release all their funds at once or hold back and give
them to you over a specific amount of time.
Term sheets (bullet-points outlining your agreement with the VC) may also include specific clauses about
your startup meeting certain goals before you can raise more capital.

Venture capital is designed to help ambitious companies scale but it‘s not the only route to success — and
this aggressive type of growth can come at a price. So make sure to educate yourself on all the
possibilities available to your startup before making a decision.
Business Incubation: Business Incubation Definition and Principles

Business incubation programs are often sponsored by private companies or municipal entities and public
institutions, such as colleges and universities. Their goal is to help create and grow young businesses by
providing them with necessary support and financial and technical services. There are approximately 900
business incubators nationwide, according to the National Business Incubation Association.

Incubators provide numerous benefits to owners of startup businesses. Their office and manufacturing
space is offered at below-market rates, and their staff supplies advice and much-needed expertise in
developing business and marketing plans as well as helping to fund fledgling businesses. Companies
typically spend an average of two years in a business incubator, during which time they often share
telephone, secretarial office, and production equipment expenses with other startup companies, in an
effort to reduce everyone's overhead and operational costs.

Not all business incubators are alike, however, so if you have a specialized idea for a business, try to find
the incubator that best suits your requirements. If you're interested in finding an incubator in your state,
visit the National Business Incubation Association's website. Or get in touch with your local economic
development agency, located in the phone book under the listing for your state government. You can also
call the information offices of your local colleges and universities to see whether they have any business
incubation programs.

If an incubation program seems interesting to you, be prepared to submit a fleshed-out business plan. The
plan will be reviewed by a screening committee to determine whether or not you meet the criteria for
admission. Incubators carefully screen potential businesses because their space, equipment, and finances
are limited, and they want to be sure they're choosing to nurture businesses with the best possible chance
for success.

Incubators, besides guiding the process of incubation, are also business-like organizations themselves
and, as such, they must be run with an entrepreneurial mindset and follow proper business practices. The
following principles and elements provide guidelines that will help an incubator manager be successful in
balancing the incubator‘s double-role as a business enabler and as a business in itself.

Key Principles of Business Incubation:

1. Realize the incubator itself is a dynamic model of a sustainable and efficient business operation, and
must be managed as a business-like organization. An incubator cannot prepare its clients for success and
have a lasting impact if it does not succeed. Incubators must operate as businesses with a strong focus on
succeeding as one.

2. Focus the energy and resources of the incubator on assisting companies throughout their growth
process, thereby maximizing the companies‘ chances of success and their positive impact on the
community‘s economy. Incubators should devote their services to those companies most in need of their
support and most-likely to succeed as a result of that support.
3. Develop a sophisticated range of services and programs directed at companies according to their needs
and stage of development. Incubators are only as good as the services they can provide their clients.
Developing targeted and effective services which can be utilized by incubatees at various stages of
development is critical.

4. Develop a network that the incubator can rely on. An incubator is not a standalone business that has all
the required competencies and capacities ‗in-house‘. It needs to involve the community and gain the
support of their area‘s stakeholders. Collaboration and integration are a critical success factor. For
example, incubators need to refer to external sources of support in different expertise areas such as for
mentors for instance.

Incubator Models and Success Factors,

1985, Campbell, Kendrick & Samuelson, white-box, process, operations

Campbell, Kendrick & Samuelson‘s incubation model (1985)

Campbell, Kendrick, & Samuelson among the first introduced this model in 1985[1] in order to illustrate 4 key
practices that “value-added incubator” should provide:

 the diagnosis of business needs,

 the selection and monitoring of the services provided to the firms,
 the investment of capital, and
 the access to the working, network of the incubator.

The model stresses on process functions of incubator as main business development tool that can transform idea into a
real business. Incubation process is of key importance. This is main outcome of the model.

However, authors didn‘t clarify some points:

 Incubation process. How should it happen (iteratively or stage-gate model or chaotic)? What resources does it
require?
 Viability of entrepreneurs and their competences. The model also fails when considering that all potential
entrepreneurs or early-stage startups are potentially viable and does not take into account the lack of capabilities of
potential entrepreneurs.
 No linkages to the entrepreneurial life cycle and external environment. There are no linkages between the life
cycle of entrepreneur, incubation process and external environment. There could be environmental barriers that can
arise during the process that might doom the new venture to failure.
 4 key activities are not explained explicitly. For instance, the model is not explicit about selection proposal for
potential incubates. What criteria to adopt when selecting a business to support? Would not a bad or incorrect
selection process influence (negatively) the feasibility and future growth of a potential new business? Following this
line of thinking,

1987, Smilor, mixed, structure, operations

This model was developed by Smilor in 1987 by refining Campbell‘s model (1985). Smilor created structure model via
describing main incubator affiliates, support systems and description of main outcomes of the incubation process. He
considers an incubator as a transformation mechanism that assist entrepreneur in building a venture. Even though the
representation of the model doesn‘t provide extensive information about particular services that business incubator
supplies to tenants, Smilor categorizes the benefits that business incubators provide to their tenants through four
dimensions:

1. Credibility development.
2. The shortening of the learning curve.
3. Faster troubleshooting.
4. Access to the network of entrepreneurs

1988, Nijkamp & Smilor, black-box, structure model, operations

This model is the combination of two. Firstly, Smilor introduced his model and then it was extended by Nijkamp.
Nijkamp‘s (1988) model is the interpretation of a generic business incubator. He argues that any business incubator acts
as a mediator between entrepreneurs and community. Thus, successful implementation of the incubator requires
combintation of at least these elements:

 Sources of entrepreneurs
 Recognition of opportunities by entrepreneurs
 Demand for business incubation services

2000, Carter & Jones-Evans, white-box, process model, operations

This is a first true process model in a row. Carter & Jones-Evans (2000) proposed a typical five-step incubation process,
as shown in the figure above. As it can be seen from Carter & Jones-Evans‘ (2000) model the process is organized and
focused on the needs of the incubatee, which will be supported by the services provided by the incubators during the
incubation process. The incubation process according to the Carter & Jones-Evans consists of the following stages: idea
formulation, post entry development, opportunity recognition, entry and launch, pre-start planning and
preparation

2000, Nowak and Grantham, white-box, structure, operations

Nowak and Grantham (2000) have established their model on the following premise: ―Traditional business
development entrepreneurs face a common challenge: the absence of capital, human resources, and management
capabilities.‖ So, the new model needs to provide the small business community with a structure and mechanism to
easily access:

 information on ‗‗best practices‘‘ for business development

 industry and management experience
 resources for international marketing, sales and distribution
2002, Lazarowich & Wojciechowski „New Economy‟ Incubator Model, white-box, structure, operations
The model described by Lazarowich and Wojciechowski[1] explains ‗new economy‘ incubators. They are characterized
by the following:

 ―Business incubators are private-sector, profit-driven with the pay-back coming from investment in companies
rather than from rental income.
 They tend to focus mainly on high-tech and internet-related activities and unlike ‗traditional‘ incubators, do not
have job creation as their principal.
 ‗New economy‘ incubators often have an essentially virtual presence with financial and business services at the
core of the offering unlike their ‗traditional‘ counterparts that usually center on the provision of physical
workspace.‖

Business Incubation
Business incubation features strongly in local, regional and national economic strategies and is a key
component in the development of most overseas, developed and developing economies, particularly those
aiming to develop a knowledge based economy. The benefits of business incubators are numerous.
Amongst other things, they can:
 act as a catalyst for economic change development;
 help young companies to negotiate the hurdles that often lead to their early downfall;
 help entrepreneurs overcome the isolation and stress of starting a business;
 provide access to an array of expertise, mentors, investors and specialist advisors;
 provide visibility and credibility in the marketplace;
 facilitate linkages with and the commercialisation of university or corporate research and new ideas
utilizing
 research and development expertise and proof of concept functions; encourage faster sustainable
growth and greater survival rates of new and existing companies;
 Act as catalyst for urban and rural regeneration;
 enable growing companies to become stand alone entities within the community

Business incubation (process) is not managed workspace (place), nor is it universally provided by
innovation centres. There are indeed some innovation centres which purely provide managed workspace.
As detailed above, business incubation is fundamentally about the provision of bespoke, hands-on
business support to businesses at a stage of their business life cycle where they are the most vulnerable.
Also, crucially, business incubation is a process which selects businesses/business ideas, encourages their
development and growth and requires them to graduate or move on. Instead, managed workspaces or
serviced office spaces have:
 no intensive business support or mentoring - having access to a few hours of Business Link or general
business
 support is not sufficient; little or no access to wider local and regional networks, particularly finance,
technical expertise, etc;
 no focus on growing businesses with selection/entry requirements often restricted (only) to their ability
to pay
 the rent; no graduation policy, businesses are encouraged to stay as long as they can pay the rent, which
leads to ‗silting up‘ and restricts the number of businesses that can be supported;
 a primary objective of maximising rental income, which is not committed to supporting its client
businesses.

Business incubators are focused, fundamentally, on mentoring their growing client businesses and while
the provision of office space is a key element, it is nonetheless secondary. Whereas business incubation
provides an environment allowing start-ups and early stage businesses to accelerate their growth up to the
point where ‗they can fly the nest‘, services offered by managed workspace commonly fit the needs of
established, self sustainable businesses. Links with managed workspaces are therefore useful when
preparing the incubatees to exit the business incubator and helping them finding grow-on space. provided.
Business incubation can be a resource intensive intervention and there are only a small number of private
sector providers which go beyond providing fully serviced managed office space. When properly
conducted business incubation is therefore almost invariably subsidised from public revenues in one way
or another.
Types of Business Incubators : Different types of business incubators will help new business owners,
entrepreneurs, and startup founders-

 Education
 Ceramics
 FinTech, or financial technology
 Homeland security
 Green technology
 Food
 Fashion, etc.

Stages of Incubation

#1. Physical Facility Support

In this, business incubator assists new businesses and startups by offering physical support such as office
spaces or technical equipment, etc.

#2. Support Service

In this, different types of business support are offered, such as skill development, operational training,
etc.
 #3. Networking Facilities

Startups and new businesses will get networking facilities in this kind of business incubation.

An incubator is an organization designed to help startup businesses grow and succeed by providing free
or low-cost workspace, mentorship, expertise, access to investors, and in some cases, working capital in
the form of a loan.

Make sure to research potential incubators carefully to be sure they provide the following benefits:
 Your incubator should provide a free or low-cost workspace that allows you to reduce overhead while
you grow.

 Look for an incubator that will give your business access to benefits that can help accelerate your
business, including office space and services, mentorship, expertise, influence, and sometimes capital.

 Incubators may also offer business development programming such as workshops and panel discussions.

 Make sure investors trust the incubator to invest in the right startups and groom them into successful
businesses. Joining this type of incubator will give you an advantage when seeking funding.

 Businesses in some incubators might have access to office must-haves like internet, administrative
support, and production equipment. Office services vary from program to program.

 The structured environment and curriculum of an incubator can help a new business keep focus and grow
in the right direction.
Many incubators target specific industries-such as digital education, green technology, homeland
security, fashion and food-and thus offer targeted resources and expertise. It‘s important to make sure you
have a clear understanding of what an incubator provides before applying.

Not all incubators are equal; some provide more or better benefits than others. Here are some potential
downsides:
 The application process can be rigorous and competitive. For most incubators, an applicant is required to
submit a detailed business plan and disclose all business activities.
 Many incubators require a time commitment of around one to two years, plus adherence to the schedule
set by the incubator, which can include many trainings and workshops. Yes, you will learn a lot, but
you‘ll also spend a fair amount of time doing it.

 For better or worse, an incubator is a professional environment. You can‘t simply come and go as you
please, and you‘ll be expected to answer to someone other than yourself in regards to your progress.
Think of an incubator like a boss who is invested in your success.
Incubator Operation
1. Comprehensive admission process
The programs of business incubators are not open to all companies. Potential candidates must go through
a competitive and comprehensive admission process. Although each incubator formulates its own
admission requirements and process, the admission process usually includes the completion of the
application form, as well as in-person interviews. The ultimate goal of the process is to determine the
viability of a startup‘s idea and the ability of the company‘s management team to realize the idea.

2. Creation of a new cohort

Companies that are selected form a new cohort in the incubator and receive access to all services and
resources offered by the incubator. They usually spend several months to a couple of years in the
incubator. However, startups that stay longer than usual within the incubator are more common.

3. Mentorship and advisory services

During the program, the company‘s management extensively works with mentors and advisors to gain the
required experience to convey the company‘s ideas to potential customers and investors. At the same
time, the incubator‘s staff work with the companies to set up the operating processes.

Roles of business incubation

Business incubators support the development of start-ups by providing them with advisory and
administrative support services. According to the National Business Incubation Association,
an incubator's primary objective is to produce successful and financially viable firms that can survive on
their own.

A business incubator is a company that helps new and startup companies to develop by providing
services such as management training or office space. It usually provides affordable space, shared offices
and services, hand-on management training, marketing support and, often, access to some form of
financing.

Research has shown that business incubators can be an effective tool for supporting local innovation and
new business creation and can reduce SME failure rates substantially. As one of the first business
incubators in India, TREC-STEP has promoted more than 156 start-up ventures.