Entrepreneurship

Development

Sandeep Singhai
Senior Scientist
CSIR-CSIO
Entrepreneurship Development:
Outline

 Introduction

 How to Start a new Company?

 Small Scale Industrial Undertakings in India.

 Conclusion
 Entrepreneurship:
Introduction-1
Definition:

•French Origin: French word “Entrependre” meaning “to

undertake”.

• An Entrepreneur is the owner of a business enterprise who

makes money through risk and /or initiative. (Richard
Cantillon in 1725)

• An entrepreneur is a person who is willing and is able to

convert a new idea or invention into a successful
innovation (Schumpeter 1935)

•Entrepreneurship is the professional application of

knowledge, skill and competencies and/or of monetizing a
new idea, by an individual or a set of people by launching
an enterprise do novo or diversifying from an existing one ,
thus to pursue growth while generating wealth
 Entrepreneurship: Introduction-II

Aspects of Entrepreneurship :
 Innovation Potential
 Risk-taking Propensity
 Venturing into new business for profit

This requires
 Recognition of opportunity and generation of a
business idea to exploit the opportunity.
 Marshalling and commitment of resources to
pursue the opportunity
 Creation of an operating business organization to
implement a business plan.
 Entrepreneurship: Introduction-III

Myths about Entrepreneurs

1. They are doers, not thinkers.
2. They are born, not made.
3. They are always inventors.
4. They are academic & social misfits.
5. They must fit the “profile ” (checklist) of a successful
entrepreneur.
6. All of them need money.
7. All they need is luck.
8. Ignorance is bliss for them (over-analysis leads to
paralysis ).
9. They need success but experience high failure rates.
10. They are extreme risk-takes.
 Entrepreneurship: Introduction-IV
Common Characteristics of Entrepreneurs
 Total commitment ,determination, and perseverance
 Drive to achieve and grow
 Opportunity and goal orientation
 Taking initiative and personal responsibility
 Persistent problem solving
 Seeking and using feedback
 Self belief
 Calculated risk taking and risk seeking
 Tolerance for ambiguity
 Tolerance for failure
 Integrity and reliability
 High energy level
 Creativity and innovation
 Vision
 Self-confidence and optimism
 Entrepreneurship: Introduction-V
Challenges of Entrepreneurship
 Risk:
- Financial ,career
- Family & social
- Psychic.
 Stress:
- Loneliness
- High Business orientation
- People Oriented
- Need to achieve
 Inflated Ego:
- Overbearing need for control
- Sense of distrust
- Overriding desire for success
- Unrealistic optimism
 How to start a new company? - I

Important Activities:
 Creating a Business Plan
 Making a Product Choice
 Setting up Infrastructure
 Naming & Registering a business
 Choosing a Form of business organisation
 Choosing the location of Industry
 Pricing your Product
 Regulatory requirement
 Financing a start-up business
 Sourcing process, Raw Materials, Machinery and Equipment
 Hiring human resources
 How to start a new company? - II
Creating a Business Plan:
 Cover Page(company’s name, address, telephone, fax, e-mail
and website address, the name and designations of the
contact persons, names of funding organization, company’s
logo)
 Table of Contents(Section title and Section number)
 Executive summary (Kind of business, Profile of the company’s
management, Financial requirements, Budget allocations,
Objectives - both quantitative and qualitative, Market analysis,
Environmental influences)
 Development and Production(Detailing the stages of
development and production of production /service ,spelling
out how time and money will be allocated each stage)
 Resource Requirement(Quality ,Marketing, Target market,
Communication strategy including advertising ,branding
,packaging etc., Sales forecast, Financial plans, Human
Keep In Mind
Resources, Forms of Business, Critical Risk, Conclusion,
 Format and Presentation
Appendixes)
 Writing and Editing
 Summary
How to start a new company? - III
Making a Product Choice
 Scanning for Opportunity
 Making a Market Survey
 Analysing Competition
 Carrying out a Profitability Analysis
- Previously in India there was a reserved list of products for
exclusive manufacture in small-scale sector. However recently
with globalization the government has done away with such
reserved list.

Setting up Infrastructure
 Land and Construction of Building
 Getting Utility Connections (Water and Power)
 Getting a Telephone and Internet connection
How to start a new company? - IV

Naming and Registering a Business

 Incorporation of a company is governed by the
Companies Act 2013 (Previously Companies Act
1956).
 The Act is administered through the Ministry of
Corporate Affairs and the Offices of Registrar of
Companies ,and other government institutions.
 The Registrar of Companies controls the task of
incorporation of new companies and the administration
of running companies.
 For Registration and incorporation of a company, an
application has to be filed with Registrar of Companies.
 Application for registration of a company accompanied
by the selected names, Memorandum of Association
and Articles of Association, and other necessary
documents are to be filed with the Registrar of
How to start a new company? - V
Choosing the location of the industry
 Choosing the region
 Choosing the site

Pricing the product

 Determining the demand for the Product
 Estimating the costs and profits
 Determining the competition for the product
 Considering the governmental regulations
 Selecting a suitable pricing method /policy
 The list of commodities declared as “essential” under
the Essential commodities Act,1955 in order to regulate
or prohibit the production, supply, distribution ,price
and trade of these commodities
 Price Monitoring Cell (PMC)in the Department of
consumer Affairs reports, on daily and weekly basis,
How to start a new company? – VI

Regulatory requirements
 Environment Regulation

◦ Every aspect of environment protection like air, water,

noise, forest conservation, wildlife protection etc.
Also, separate set of laws and rules for emission of
hazardous wastes have been enacted.
◦ The Ministry of Environment and Forests(MoEF), is the
nodal agency for regulating all such environmental
aspects.
◦ Central Pollution Control Board has many standards
for air, water, solid and noise pollution.

 Companies Act
How to start a new company? – VII
Sourcing Process, Raw Materials, Machinery and
Equipment
 Selection of Process, Raw Materials, Machinery and
Equipment
 The imports are regulated by the foreign trade
(Development and Regulation )Act,1992 acted upon by
Director General of Foreign Trade
 There are 30 Micro, Small and Medium Enterprises
Development Institutes (MSME-DIs) and 28 Branch
MSME-Dis set up in state capitals and other industrial
citiesHuman
Hiring all overResource
the country.
 Manpower Planning
 Recruitment
 Selection and Placement
Small Scale Industrial Undertakings– I
Small Scale Insdustrial Undertaking
 An industrial undertaking in which the investment in
fixed assets in plant and machinery whether held on
ownership terms on lease or on hire purchase does not
exceed Rs 10 million.
(Subject to the condition that the unit is not owned,
controlled or subsidiary of any other industrial
undertaking)
Ancillary Industrial Undertakings
 An industrial undertaking which is engaged or is
proposed to be engaged in the manufacture or
production of parts, components, sub-assemblies,
tooling or intermediates, or the rendering of services
and the undertaking supplies or renders or proposes to
supply or render not less than 50 per cent of its
production or services, as the case may be, to one or
more other industrial undertakings and whose
investment in fixed assets in plant and machinery
Small Scale Industrial Undertakings– II

Tiny (Micro) Enterprises

 Investment limit in plant and machinery in respect of
tiny enterprises is Rs 2.5 million irrespective of location
of the unit.

Women Entrepreneurs
 A Small Scale Industrial Unit/ Industry related service or
business enterprise, managed by one or more women
entrepreneurs in proprietary concerns, or in which she/
they individually or jointly have a share capital of not
less than 51% as Partners/ Shareholders/ Directors of
Private Limits Company/ Members of Cooperative
Society.
Small Scale Industrial Undertakings–
III
Small Scale Service & Business (Industry related)
Enterprises (SSSBEs)
 SSSBEs industry related service/ business enterprises
with investment upto Rs 500,000 in fixed assets,
excluding land and building, are called Small Scale
Service/ Business Enterprises (SSSBEs). This limit has
been raised to Rs.1 million w.e.f. September 2000.

Medium Scale Enterprise

 An industrial undertaking in which the investment in
fixed assets in plant and machinery whether held on
ownership terms on lease or on hire purchase does not
exceed Rs 100 million (if produces goods) and Rs. 50
million (if renders services).
Small Industries Development Bank Of
India (SIDBI)
 Small Industries Development Bank of India (SIDBI), set
up on April 2, 1990 under an Act of Indian Parliament, is
the Principal Financial Institution for the Promotion,
Financing and Development of the Micro, Small and
Medium Enterprise (MSME) sector and for Co-ordination
of the functions of the institutions engaged in similar
activities.

 Activities of SIDBI
◦ Setting Up of New Projects
◦ Expansion, Diversion, Modernization, Technology Up-
gradation, Quality Improvement and rehabilitation of
existing units
◦ Strengthening of Marketing Capabilities of SSI units.
◦ Development of Infrastructure for SSIs
◦ Export Promotion
 Capital Financing - I
Types of Financial Needs
 Fixed Capital: It is that portion of the total capital outlay
that is invested in fixed assets (such as land, buildings,
vehicles, plant and equipment), that stay in the
business almost permanently - or at the very least, for
more than one accounting period. Fixed assets can be
purchased by a business, in which case the business
owns them. They can also be leased, hired or rented, if
that is cheaper or more convenient, or if owning the
fixed asset is practically impossible (for legal or
technical reasons).
 Working Capital: Money invested in short term assets or
current assets is known as working capital. It includes
purchase of raw materials, payment of wages and
salaries, rent, fuel, electricity and water, advertising etc.
 Capital Financing - II
Types of Capital Needs on the basis of period of use
 Long Term Capital (> 5years): To finance Fixed Assets
and permanent part of working capital.
◦ Sources: Issue of Shares and Debentures, Profit
Reinvestment, Loans from financial institutions etc.

 Short Term Capital (< 1 year): To finance Current Assets

and meeting day to day expenses.
◦ Sources: Banks, Trade credit etc.

 Medium Term Capital (2-5 years): To finance certain

activities like renovation of buildings, modernization of
machinery etc.
◦ Sources: Same as long term capital
 Capital Financing - III
Principal Sources of Funds
 Ownership Capital: Capital collected from owners of the
company. It is generally used as permanent capital or
long term capital
 Borrowed Capital: Borrowed from Banks and Financial
Institutions. The financial requirements of the business
are often met by loans.

Public & Private Capital: Collection Methods

Summary
Definition
Entrepreneurship: Aspects,
Myths, Characteristics and
Challenges
Important Activities in Starting a
New Company
Small Scale Undertakings in India
Financing a Business
Thank you
Memorandum of Association
 Name
 Place of the registered office
 Objects
 Liability
 Authorized share capital
 Name, address of subscribes and number of equity
shares held by each

Articles of Association
 Rules and Procedures for Routine Conduct of the Company
Procedure for incorporating a
company
Names has to be approved by the registrar of companies
For a private company, the last two words have to be
“private limited”
For a public company ,the last word has to be “limited”
Within sex months of approval of the name, the
memorandum of association and articles of association
must be submitted.
Registrar of companies gives the certificate of
incorporation
A private company can immediately start the operation
A public company can submit a prospectus to the
registrar of companies and raise capital from capital
market before starting its operation
Or it can submit a statement in lieu of prospectus and
start its operation thereafter