ESBM

UNIT-4
Transformation of Idea into
Reality
Step 1. Research the Market
1. Research the Market
We may have a good business idea, but unless there's a
viable market for it, product or service won't get off
the ground. Many entrepreneurs launch a business
only to discover that someone else had the same idea
and got it to market first or that the potential market is
too small for the business to be profitable. Conducting
a full market analysis will help you define your
audience and size up your competition
Define Your Target Audience
To turn the business idea into a reality We will need
customers, enough of them to make the business
worthwhile. One of the first things to do when
planning a business is identifying your target market
or audience.
Who has the problem that your product or service
solves?
Who's likely to need or want the solution you offer?
Who has the drive and economic means to buy it?
Where and how will they use your product or service?
Identify the demographics (age, gender, race,
marital status, income, education, occupation) and
psychographics (personality traits, interests, values,
social status, food habits, beliefs, etc.) of your target
audience.
Once you know and understand your potential
customers, you can focus and target your marketing
efforts on reaching and attracting them.
Research Your Competition

In addition to knowing the target audience, WE also need to

know the competition. Researching the competition
involves identifying the competitors and evaluating their
strengths and weaknesses.
Who offers a product or service that is similar to yours?
 How do their products and services measure up?
How is your product or service different and better?
What channels are your competitors using to market and
sell their products?
Is there an industry trend you may have missed?
Use the information you gather to identify ways in which
you can stand out and beat your competition.
Step-2. Test Your Idea
Before you dive headfirst into a new business, take
some time and a few extra steps to test your
idea. Create a functional prototype that you can
present to investors and your target audience. Conduct
focus groups to get feedback on the product or service
before bringing it to market. Then use the opinions
and recommendations you gather through the focus
groups to improve your product or service. Testing
your idea will save you time and money in the long
run.
Step 3. Write a Business Plan
o start a business, you need a business plan. A business plan
typically includes the following parts:
executive summary
company description
products and services
market analysis
competitive analysis
organization and management description
marketing plan
sales strategy
request for funding
financial projections
Step 4. Develop a Financial Plan and
Forecast
A financial plan and forecast are key components of
your overall business plan and required if you're
applying for funding. A financial plan lays the steps
you plan to take to generate future income and
cover future expenses, while a financial forecast is an
estimate or projection of future outcomes such as
revenue, income and expenses. A good financial plan
improves your chances of securing adequate funding
for your new business.
Step 5. Choose a Legal Structure
With your business idea developed and tested, you're
now ready to formally set up your business. To choose
the right legal structure for your business, start by
analyzing your company’s goals and the laws that will
regulate your business. The most common types of
business entities in the U.S. are sole proprietorships,
partnerships, limited liability companies, corporations
and cooperatives. Choose the structure that best fits
your company, and remember that as your business
grows, you can change its legal structure.
Step 6. Create a Marketing Strategy
 To promote and sell your product or service, you need a marketing
strategy. A marketing strategy is a forward-looking scheme for
reaching your target audience and turning prospective
consumers into customers. Your marketing strategy should
cover the four "P's" of marketing—product, price, place and
promotion—and contain your company's value proposition, market
analysis, branding, positioning and campaign marketing plans.
 Having a brilliant idea doesn't miraculously lead to a successful
business. Turning that idea into reality requires hours of
research, testing, planning and strategy, not to mention
patience and persistence. By applying these six steps, you can avoid
common pitfalls that frequently lead to business failure and see
your idea transformed into a successful business
Meaning and Definition of
Project
The foundation of an enterprise is the Project. Hence,
the success or failure of an enterprise depends upon
the project. In simple words, project means a scheme,
design or a proposal of something intended or devised
to be achieved. Following are the important definitions
given by various scholars:
Characteristics of a project
 It is a instrument of change
 2) It has clearly identifiable start and ends
 3) It has a specific goal and objective to achieve
 4) It uses wide variety of resources and skills
 5) It has risk and uncertainty associated with it
 6) The objective of a project is to earn profit and customer
satisfaction
 7) It is concerned with the production of goods and services
 8) It contains an irreversible nature of capital investment, once
made
 9) Every project has a life cycle
 10) It involves activities to be carried out in future
Project Formulation
 The preparation of a project entails consideration of many
aspects. The major aspects to be considered in preparation
of a project are:
 1) Technical
 2) Institutional
 3) Organizational
 4) Managerial
 5) Social
 6) Commercial
 7) Financial
 8) Economic
1) Technical Aspect
 The technical aspect of any project considers the technical
feasibility of any project. It concerns with the technical aspect of
a project form both input supply side and output delivery side.
For example if you want to take up an agricultural project in a
region, you may have to examine the soil type of the region,
water availability, crops grown, livestock breed suitable for the
area, pests prevalent in the area etc. This information can be
used in estimating the possible yield and income from
agriculture. Such information can be collected through soil
surveys, groundwater surveys, collection of hydrological data,
primary surveys of farmer households etc. The information
regarding marketing and storage facilities responsible are
needed to assess the possibility of marketing and processing of
the products.
2) Institutional Aspect
The institutional aspect of a project deals with the
framework within which the project will have to
operate. A complete knowledge of the institutional
aspect helps identifying the components of
institutional framework that will have a bearing on the
project. Some of the elements that constitute the
institutional framework include government
institutions.
3) Organizational Aspects
Here the term organization refers to the structure if
the body that would undertake the task of project
execution. The proposed organization must have the
capacity tn ;vy OUL the assignments given to it
4) _Management
'The main task of management is to implement the
project objectives within the framework of
organizational structure. For good management, a
clear definition of functions and activities are
required. There is also a need for allocating
responsibilities to various agencies for various project
activities
5) Social Aspect: It is very importarit to assess the
social patterns, customs, culture, traditions and habits
of the clientele. Various aspects like changes in living
standards, material welfare, income distribution etc
6) Financial Aspects:Decisions about undertaking any
project depend a lot on financial analysis of a project.
As there could be many beneficiarieslparticipating
agencies of any project, 48 there is a need for separate
financial analysis each.
Project Identification
The purpose of project identification is to develop a
preliminary proposal for the most appropriate set of
interventions and course of action, within specific
time and budget frames, to address a specific
development goal in a particular region or setting.
Investment ideas can arise from many sources and
contexts. They can originate from a country’s sector
plan, programme or strategy, as follow-up of an
existing project or from priorities identified in a multi-
stakeholder sector or local development dialogue.
Identification involves:
Identification of Project
constraints
A number of activities are involved in the project from
its generation to implementation. An entrepreneur has
to face several hurdles in various stages of its
implementation. These constraints are classified into 2
which are described below
a. Internal constraints
b. External constraints
Internal constraints
 These arises on account of the limitations of the management system which
will eventually responsible for the implementation of the project. These
constraints may relate to the inputs, resources and output. The following are
the important internal constraints faced by the entrepreneur
 I Entrepreneurs have to rely more on outside consultants for the preparation
of
 feasibility reports for implementing a project, which is a costly affair.
 ii. The project team may find to difficult to achieve unrealistic goals set up by
the
 experts.
 iii. The entrepreneurs may have to face difficulties in providing resources at
the time of implementation of a project. Physical and non-physical resources
are required for a project. Physical resources include finance, personal
inventories and infrastructural facilities. The non-physical resources include
patents, secret processes, unique experiences and skills.
External constraints
These are project environments comprising of things,
people and situations outside a project. These are
factors external to the control of the entrepreneurs.
The following are the external constraints faced by the
entrepreneurs:
i. Size, nature, location, and extent, etc
ii. Govt. policies and regulations
iii. Finance
Classification of project
A) Quantifiable and Non-quantifiable
projects
Quantifiable projects are those projects in which
reasonable quantitative assessment of the benefits can
be made. E.g. industrial development, power
generation, mineral development projects, etc.
Non-quantifiable projects are those projects in which
such assessment is not possible. E.g. health,
education, defence projects, etc
Planning Commission of India classification – This
classification is useful
for resource allocation at macro level
B. Sectoral projects
Planning Commission of India classification – This
classification is useful for resource allocation at macro
level
A.Agriculture and allied sector
b. Irrigation and power sector
c. Industry and mining sector
d. Transport and communication sector
e. Social service sector
f. Miscellaneous sector
C) Techno-economic projects
a) Factor-intensity oriented classification i.e. based on factors of production
i. Capital intensive projects – These are projects which involves large scale
investment in P&M
ii. Labour intensive projects – These are projects which involves large scale
investment in human resources
b) Causation-intensity oriented classification i.e. based on causes of investment
i. Demand based projects – These are projects implemented to make available
of certain goods and services whose
demand is high
ii. Resources based projects – These are projects implemented to make
available of certain raw materials, skills or other inputs which is scarce
c. Magnitude oriented classification i.e. based on size of investment
i. Large scale projects
ii. Medium scale projects
iii. Small scale projects
D)All India and state Financial institutions
classification
All India and state Financial institutions classification i.e.
according to age and experience and
the purpose for which the project is being taken up

A) Profit-oriented projects B) Service-oriented projects

i. New projects i. Welfare projects
ii. Expansion projects ii. Service projects
iii. Modernization projects iii. R&D projects
iv. Diversification projects iv. Educational projects
E) Need-based projects
Need-based projects i.e. based on objectives of project
a. Balancing projects
b. Modernization projects
c. Replacement projects
d. Expansion projects
e. Diversification projects
f. Rehabilitation or reconstruction projects
F. According to the Urgency /speed
required of Execution
 a. Normal projects – These are projects which require
minimum capital cost. Adequate time
 is allowed for implementation of such projects
 b. Crash projects – These are projects which require
additional capital costs to save time. The contractors and
vendors are paid extra money to save time in procurement
and construction
 c. Disaster projects – These are projects which require very
high capital cost, but the project’s time is considerably
reduced. Whatever required to save time is allowed in these
projects. The vendors who can supply within a very short
time are selected irrespective of the cost.
G) Others
Domestic projects and foreign projects, social
projects, import substitution projects, govt. projects,
green field project, etc
PROJECT APPRAISAL
Project appraisal is the process of assessing, in a
structured way, the case for proceeding with a project
or proposal, or the project's viability. It often involves
comparing various options, using economic appraisal
or some other decision analysis technique. The entire
project should be objectively appraised for the same
feasibility study should be taken in its principal
dimensions, technical, economic, financial, social and
so far to establish the justification of the project or The
project appraisal is the process of judging whether the
project is profitable or not to client.
PROJECT APPRAISAL
TECHNIQUES
Project appraisal is the effort of calculating a project's
viability. Appraisal involves a careful checking of the
basic data, assumptions and methodology used in
project preparation, an in-depth review of the work
plan, cost estimates and proposed financing, an
assessment of the project's organizational and
management aspects, and finally the viability of
project
PROJECT APPRAISAL
TECHNIQUES
 i) Urgency:According to this criterion, the projects that are more
urgent get preference over those that are less urgent. However,
one of the problems in using this criterion is to judge the urgency
of any project. The decision taken may be subject to the personal
bias of the decision maker. In view of this limitation, it should not
be used for investment decision making
 ii) Payback Period:In simple terms, the payback period is the
length of time required to recover the initial cash outlay on the
project. If the cash inflows are constant, then the payback period
is calculated by dividing the initial outlay by the annual cash
inflow. For example, a project which has an initial cash outlay of
Rs 10,00,000 and a constant annual cash inflow of Rs 3,00,000 has
a payback period of : 10,00,00013,00,000 = 3.5 years.
iii) Accounting Rate of Return:The accounting rate of
return or the simple rate is the measure of profitability
which relates income to investment, both measured in
accounting terms. As there are various ways of
measuring income and investment, there are a large
number of measures for accounting rate of return
Project Report
 A project report is a document that specifies the status of
a project and other related information. In other words,
it is a report that includes all the details about a project,
navigating each step with great insight. This document
helps to ascertain the feasibility of the activities or plans
taken to fulfill a particular project's objectives.
 The project progress report is a written document that
includes all the information about the objectives,
challenges, and milestones of the project. It is regularly
updated as it tracks the project status and plays a crucial
role in planning and managing any project.
Why Project Report is Important?
 Writing a project report helps you understand and discover what it
takes to make your project a success.
 Project reports offer clarity on your ideas. You should also be able to
explain the concept to others before sharing your strategies and
ideas with investors or friends.
 Planning and creating is worth it if a report helps you avoid making
costly mistakes, wasting time, and losing money.
 A project report can increase your chances of a successful project by
ensuring that the project manager can record, review and report
progress against the baselines and add underlying data as required.
 Numerous studies over the years have shown that companies who
plan are more likely to get funding, be successful, and reach their
goals than those who don't.