1 entrepreneurship-1

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Entrepreneurship & Practical Business Training

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Entrepreneurship

An activity that aims at starting, establishing & increasing the size of an enterprise that markets goods or services

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Entrepreneurs

Men or Women who set up and manage their own business

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Characteristics of a Successful Entrepreneur

Self Motivated

Taking Initiatives

Organizing Resources

Taking Risks

Innovating

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Entrepreneurship vs. Economic Development

Increase in overall productivity

Increase in employment

Transfer of technology

Increase in exports

Entrepreneurial Competencies

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12 Essential Competencies required in an entrepreneur

1. Commitment 6. Opportunity Identification

2. Persistence 7. Systematic Planning

3. Information seeking 8. Problem Solver

4. Self-Confidence 9. Persuasive

5. Concern for efficiency & high Quality

10. Purely professional - nothing personal

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Case Study of Gurdeep & his 3 friends who could not start their software business because of lack of INITIATIVE

Entrepreneurial Competencies Initiative

Case Study

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Entrepreneurial Competencies PersistenceCase Study

Case Study of Mrs. Lal who survived from construction problems, electricity problems, theft, outdated technology, seizure of Land & building but still managed to make project a success because of PERSISTANCE

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Case study of Mrs. Bhatia, An entrepreneur having a unit of knitting cardigans who worked by her own self continuously for many nights to keep up to her COMMITMENT

Entrepreneurial Competencies CommitmentCase Study

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Entrepreneurial Competencies Problem SolverCase Study

• Case study of Mr. Ramalingam who played trick on electricity department to get his work done

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Entrepreneurial Competencies Purely professional – Nothing personal

Case Study

• Case study of Mr. Vishal Sharma who suffered huge loss in his Rubber Chappal (Boiler) manufacturing unit because of personal attitude

• Case study of Mr. Narayanan who suffered losses in his finances due to an incompetent Finance Manager

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Entrepreneurial Competencies Persuasion

Case Study

•Case study of Mrs. Bharti who managed to get loan from bank because of PERSUASION

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Major Mental Blocks in starting a business

I don’t have money, I cant do business

I am too young, I cant start a business

I am a women

I am a housewife, I don’t have time to do business

I am in service, I cant even think of a business

I don’t have any family background of business

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Entrepreneurial Competencies Case Study of Macksalin Kharmudai

• 19 yr old boy from shillong, came from a tribal family, the eldest of the 5 children, father a govt. employee

• Learned some works in welding, fabrication, carpentry etc

• Father expired, Macksalin left the school, being the eldest son came up with all the responsibility of the family.

• Macksalin plans to set up a fabrication unit at Shillong

• Applies for a loan of 1.5 Lacs to Meg.IDC, MIDC wanted him to invest at least 25%. He had no money, he requested for some money from relatives and also pledged a small piece of land in the village and started up.

• Took a land at rent and constructed a shed, employed 2 workers & started visiting contractors & clients for orders

• Started getting small orders, he always use to work on the low margins & give high quality works to customers

• Today he is a well established fabricator for shutters, gates, grills etc.

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Entrepreneurial Competencies Case Study of Geeta Khandelwal

• Geeta M.A. (Socio) was a housewife & had one child, husband was in the job in addition he had also established a small unit for manufacturing ferrous & non-ferrous spare parts for melting arc furnaces

• Met with an accident, husband died on-the-spot, Geeta and her child were saved

• Geeta went financially weak, she took up the task for restarting the unit of her late husband

• She sold the land, shifted the machinery in her house garage, Sold her jewellery to get the working capital, finally started production

• She personally went to clients to do her sales calls along with her small child

• Her persuasive competency helped her to get an order from BHEL

• Finally established herself in the market

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A Few Indian Leaders of

Entrepreneurship

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• Name: Mr. Dhirubhai Hiralal Ambani

• Education: High School

• Previously: Gas Station Attendant

• Presently: Founder Chairman Reliance Group

Entrepreneurial Competencies Case Study of Reliance

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Entrepreneurial Competencies Case Study of Reliance

• Dhirubhai’s father was a school teacher and he started his career with selling Bhajia

• At the age of 16 in 1948, he went to Aden, Yemen & took up as the Gas station attendant & later as a clerk in a oil company

• In 1958, he returned back to India with Rs.50,000/- & started textile trading company

• In 1960, he started his own textile unit

• In 1977, his gross sales was 67 crores, he now needed to expand the capacity of his unit, instead of going to bank for money he went to public & by 1980 he doubled the capacity of the plant

• By the year 2002 Reliance was making a turnover of 75,000 crore

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Entrepreneurial Competencies Case Study of Cadila

• Name: Late Mr. Raman bhai Patel

• Education: B. Pharma

• Profession: Teacher in a pharmaceutical college

• Presently: Ex. M.D., Cadila

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• Name: Mr. Indravadan Modi

• Education: B.Sc. (Tech.)

• Previously: Chief Chemist in a Laboratory

• Presently: M.D., Cadila

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• Planned to start their enterprise, but were discouraged by parents

• Both pooled Rs.26,000/- to start on their own

• Ramanbhai would continue the job and will help after working hours whereas Modi would run around for establishing the business

• Rented a bungalow @ Rs.50/- per month in March 1952, they started the production work

• They produced 2 products Livirubra & Cadilagripe, No employees

• From 5 – 10 AM they were doing production, then do sales calls, call the doctors and give them the samples, After 2 again do production till 5 PM, From 5- 8 PM, deliver the material on their cycle

• After 2 years a sales rep. was hired

• Today CADILA has 14 offices & turnover of over Rs.100 crores

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Photographs of Late Mr. Raman Bhai Patel

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Entrepreneurial Competencies Case Study of Airtel

• Name: Mr. Sunil Mittal

• Education: Graduate from Punjab University

• Previously: Hired Rs.20,000/- to start up a business of cycle spare parts in Ludhiana

• Presently: M.D. Airtel

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Entrepreneurial Competencies Case Study of Airtel

• Soon discovered that business can not grow beyond a limit, he left that business and came to Mumbai in the year 1979

• In 1982 started the business of importing portable Gensets from Japan, the business was running well but suddenly the Government allowed the manufacturing of such Gensets in India itself, Mr. Mittal has to close down the business

• In 1986 started the business of telecom equipments, Fax machines, Cordless Phones & apparatus, in the meanwhile the GSM services were introduced in India in 1992 and TRAI rolled out a tender inviting bids for various telecom circles

• Mr. Mittal submitted his bid for Delhi circle. His bid happened to be the highest one & he was given license to operate Mobile services in Delhi

• Today Mr. Mittal operates in over 18 circles through out India and is the largest Telecom operator of India

• Biggest Telecom Company of the world VODAFONE has invested over 1.5 Arab Dollars in this company in various projects

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• Name: Mrs. Kiran Mazumdar Shaw

• Education: Master in Brewing Technology from Melbourne University

• Presently: M.D., Biocon India Ltd. (Turn Over – 800 Crore)

Entrepreneurial Competencies Case Study of Biocon

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• Mrs. Kiran had her education from Bangalore, was a topper in Science of Bangalore University

• Went to Australia for a Masters degree in Brewing, topped there as well

• In 1978, at the age of 25, she planned to start a unit of manufacturing enzymes, she went to a bank with her proposal but her proposal was turned down

• She started on her own with a capital of Rs.10,000/- & a garage at home as her office

• Today after 25 years, Mrs. Kiran is the richest women of India & her company is making revenues in the tune of 800 Crores

Entrepreneurial Competencies Case Study of Biocon

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Entrepreneurial Competencies Case Study of Career Launcher

• Name: Mr. R. Satya Narayan

• Education: MBA, IIM Bang.

• Previously: Executive with Ranbaxy Labs

• Presently: M.D., Career Launcher (Turn Over – 70 Crore)

Choosing Your

Business

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Entrepreneurial Opportunities

Agriculture

Channel / Trading Dealer / Distributor / Wholesaler / Franchising

SSSBE (Small Scale Service & Business Enterprise)

(Dry cleaning/ Tailoring/ Photo Lab/ Beauty parlors/ Crèches/ etc.)

Manufacturing Industries (SSI / Tiny / Cottage)

Spices/ Bread/ Biscuits/ Paints/ Soaps/ Detergents/ Hosiery etc

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Manufacturing

Industry Sectors

Chemical – Inks / Paints / Detergents / etc

Electrical – Tandoor / Toaster / Auto Lamps

Rubber – Chappels / Erasers /

Plastic – Mug / Bucket / Frames / etc

Food – Pickles / Bread / Buns / Spices / etc

Hosiery – Undergarments / T-Shirts / Dyeing

Glass & Ceramics – Crockery / Mirror / Tiles

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Manufacturing

Industry Sectors

• Mechanical - Pumps/Pistons/Stpl. Pins etc

• Leather - Purses / Chappels / Shoes etc

• I.T.& Electronics - Amplifiers / TV Tuners / UPS / Weighing Scales / Transformers etc

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Manufacturing IndustriesCottage / Household Industries

Industry where the products are manufactured in-house, using locally available raw materials, not mass manufactured & usually traditional in nature

Handlooms, Paintings, Handicrafts, Pottery, Carpet weaving, Wood work,

Recent Additions to this category: Atta chakkis (flour mills), clay and modelling with plaster of paris, dairy products, dry cleaning,, milk cream separation, manufacture of jute products, manufacture of bindi, photo-copying of drawings, packaging of shampoos, packaging of hair oil, rubber stamps, screen painting and mixing and packaging of utensil washing powder.

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Manufacturing IndustriesTiny Industries / Micro Enterprises

Industry where the investment in plant & machinery are calculated up to Rs. 25 Lakhs Items like Land, Building, some quality control & pollution control equipment are not included in the calculation – Only investment in plant & machinery is considered

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Manufacturing IndustriesSmall Scale Industries (SSI)

Industry where the investment in plant & machinery are calculated above 25 Lakh but does not exceed Rs. 5 Crore Items like Land, Building, some quality control & pollution control equipment are not included in the calculation – Only investment in plant & machinery is considered

Industries like Hosiery, Stationery items, Drug & Pharmacy & Sports goods have an investment limit of 5 Crore to be in SSI’s

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Manufacturing IndustriesAncillary Enterprise

Industry engaged in the manufacturing of parts, components, tools, etc, which proposes to supply at least 50% of its production or services to one or more of the industrial undertakings & where the investment in plant & machinery are up to Rs. 1 Crore are termed as Ancillary EnterpriseItems like Land, Building, some quality control & pollution control equipment are not included in the calculation

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Manufacturing IndustriesMedium Scale Enterprise

Industry where the investment in plant & machinery are above Rs. 5 Crore and up to Rs. 10 Crore are termed as Medium Scale EnterpriseItems like Land, Building, some quality control & pollution control equipment are not included in the calculation – Only investment in plant & machinery is considered

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Service IndustryMicro Scale Service Enterprise

Service enterprise where an investment in fixed assets is calculated up to Rs. 10 LakhsItems like Land, Building are not included in the calculation – Only investment in equipment is considered

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Service IndustrySmall Scale Service Business Enterprise (SSSBE)

Service enterprise where an investment in fixed assets is calculated to be more than 10 Lakh but does not exceed Rs. 2 Crore Items like Land, Building are not included in the calculation – Only investment in equipment is considered

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Service IndustryMedium Scale Service Business Enterprise

Service enterprise where an investment in fixed assets is calculated to be more than 2 Crore but does not exceed Rs. 5 Crore Items like Land, Building are not included in the calculation – Only investment in equipment is considered

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SSSBESmall Scale Sector Business Enterprise

Advertising Agencies

Marketing / Industrial Consultants

STD / PCO / FAX / XEROX Centers

Auto / TV / Refrigerator / Watch / etc.

Repairing Centers

Beauty Parlors

Crèche

Photography Lab

Dry Cleaning

Tailoring

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Repair & Maintenance Services

Automobile Repairs2-Wheelers / 4-Wheelers / etc.

Electronic Repairs AC / Fridge / TV / Stereo / Washing Machines etc.

Electric RepairsIron / Fans / Mixers / Coolers etc.

Mobile Phone Repairs

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Professional Services

Medical Services Doctor

Legal Services Lawyer

Placement Services Placement Consultants

Construction Services Architects

Company Affairs Chartered Accountants

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Service EnterprisesSchools Education

Professional Colleges Higher Education

Hotels Temporary

Accommodation

Banquet Halls Wedding facilities

Internet Cafes Internet surfing

Restaurant Food & Good time

Gymnasiums Health services

Clubs Socializing & spending good times

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Channel / Trading

• FMCG Sector / Non Durable Sector / Consumer Durable Sector

Super stockiest – stockiest – retailer

Super distributor – distributor – retailer

Company - retailer

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The Million Dollar Question

What business should I start ?

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Choosing your business

• Study your own self

Who am i ?What can i do ?What i can not do ?Where do i stand ?What do i want ?

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Top Ten Techniques.

that help you find the right business

opportunity for you

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•Technique No. 1

Look at the nature around you

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•Technique No. 2

Add a little value add to the existing product

• Ganga Water • A car signed by Sachin tendulkar• Air, water & a smile is free with patrol

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•Technique No. 3

Join the established markets

• Ready Market & Customers• Ready availability of raw materials, skilled workers • Easy availability of finances from local banks

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Established Markets

Furnishing Fabrics Panipat

Power loom Bhiwandi & Surat

Machine Tools Batala, Faridabad

Brassware Jamnagar, Moradabad

Knitwear Ludhiana, Trichy

Gem & Jewellery Jaipur

Diamond Cutting & Polishing

Surat

Leather Chennai, Kanpur, Agra

Electrical App. Faridabad Haryana

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Choosing your business•Technique No. 4

Look at the requirements of the industries around you & in the pipeline

• Raw material requirements• Consumable items requirements• Packaging

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Choosing your businessLook at the industries around you

Case Study of Mr. Sapan Jhavar

• Mr. Sapan Jhavar is B.E. and has got good experience in the Metallurgical Industry

• 6 Pharma factories in his region and one tooth paste manufacturing unit who have regular requirement of tubes

• All of them showed good interest if they could locally get these tubes

• One tube manufacturing facility already operational in town.

• Sapan started the unit and kept the price marginally lower then the other factory

• For One year he could not get any orders from any of these companies

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What actually happened ???• Out of 6 pharma factories one has invested in the tube

factory• The purchase managers of 2 of the factories had

understanding with the existing tube factory• One of the factory bargained by showing the availability of

tubes locally and got better price and service from the existing supplier

• One of the factory bargained in terms of the credit with the existing supplier

• The nephew of the director of the tooth paste company was already in the business of tubes so they did not shifted to the other supplier

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Why did they encouraged Mr. Sapan to start the project ??

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Why did they encouraged Mr. Sapan to start the project ??

An extra supplier is always welcome so that in case of any problem with the existing supplier they have a second option ready with them

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•Technique No. 5

Look at the waste of the industries around you

• Use the By-products as a resource

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By-products from some Industries

Industry By-product Commercial product

Sugar Mill Bagesse / Press Mud / Molasses

Cattle Feed / Paper / Wax / Chalk / Chemical / Alcohol

Steel Plants Naphthalene dyestuff

Textile Pieces of small sizes

Tiny garments

Fertilizer Plant

Gypsum Plaster board

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•Technique No. 6

Think of an absolutely new & original idea

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Business based on new ideasTime-share resorts

Fire extinguisher for homes & offices (CF)

Water Parks

Dating Service

Synthetic soft drink concentrates

Pre-cooked vegetables & paranthas

Multi Marketing Concept (Amway)

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•Technique No. 7

Study the statistics available on different businesses

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Literature available on Business Statistics

Literature Published by

Handbook of Industrial Statistics

Ministry of Industries

Guidelines of Industries A journal published by the Ministry of Industries

Handbook of statistics Confederation of Indian Industries

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Industry-specific LiteraturesIndustry Literature / JournalsEngineering Current Engineering Practice

Hosiery Hosiery & Textile Journal

Paint Colourage

Rubber Rubber news / Rubber India

Plastic Popular plastic

Wool Woolens & worsteds of India

Chemical Chemical weekly

Food Food Industry News

Leather Indian Leather

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•Technique No. 8

Take ideas from other markets

• Developed countries – Undeveloped Countries• One State - Another• City – Towns - Villages

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Ideas that came to India from Developed Countries

Fast Food Restaurants

Amusement Parks

Personal Computers

Credit Cards

Coffee Shops

Departmental Stores

Sanitary Napkins

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Choosing your businessTake idea from other markets

Case Study of Mr. Praveen Jha

Returned to his hometown in Ahmedabad from USA

Wanted to invest in the real estate business

Ahmedabad either had Bungalows for high class or Flats for lower class

In USA Row Houses are a common thing

He introduced the concept of Row Houses to Ahmedabad - A house for Middle Class

He was a Big Success

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•Technique No. 9

Take the help of Government Machinery

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Some Major Govt. BodiesInstitution WorkDistrict Industry Center( One in each District )

Support services in establishing the SSI,

Reg. formalities, project identification

National Small Industry Corp.(In metros & some states)

Provides M/C on hire purchase basis

Supply of Raw material, export promotion

Internal Marketing, training

State Financial Corporation(In the major districts of all states)

Selection of project, finances

Technical Consultancy Org.(One in each state)

Project Identification, identification of technology sources, diagnostic reports for sick units, marketing assistance

Single window mechanism(Gujarat / U.P. / MP / Mahrashtra / Punjab / Haryana /Karnataka / TN / Goa )

Offering complete industrial counseling, helping them comply with necessary government formalities, finances, project implementation

Industrial Infrastructure Ag.(In almost all states)

Infrastructure facilities like land / sheds on hire/pur. basis, power, water, drainage

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A few other Government Bodies

InstitutionSmall Industries Service Institute

National Industrial Development Corporation

Khadi & Village Industries Commission

Commissioner of Cottage Industries

State Small Industries Development Corporation

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•Technique No. 10

Identify the gaps in the market

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• Mr. Jyoti works at Jamshedpur with TISCO he often has to visit Kolkata on official purpose

• Mr. Dave his friend at Jamshedpur owned a club and often showed movies to the members

• Mr. Dave requested Jyoti to get one famous movie from Kolkata which he was not able to get anywhere

• Mr. Jyoti got the movie at 50,000/- and sold to club at 60,000/-• Mr. Jyoti spoke to other clubs & film theatres and found out that

they too were facing the similar problem of availability• He identified the gap and filled it. He now is a successful film

distributor and has offices in Kolkata & Jamshedpur

Choosing your businessIdentify the gaps

Case Study of Mr. Jyoti prakash

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• Mr. Vishal was working in the production department of an engineering company

• He noticed one major problem that whenever the equipments broke-down it use to take a long time to get them repaired, which harmed the production

• He enquired and found out that the only workshop doing the repairing job was situated 1000 kms. away from their unit and besides it was very difficult to take these equipment out for repairs

• He spoke to other Engg. Companies in the area and found that they too were facing the similar problems

• Mr. Vishal identified the gap, he left the job & established his own workshop for repairing & reconditioning of such eqpmts.

Choosing your businessIdentify the gaps

Case Study of Mr. Vishal Agrawal

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♠ If you shortlist 10 business projects - chances are 8 of them are wrong for you

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The best way of selection

is

REJECTION

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Choosing your businessSelecting the right proposalCase Study of Mr. Somesh Dutta

• B.Tech. in Mechanical Engineering

• Worked for 1 Year with textile processing machinery

• Father can afford to invest Rs. 2 Lacs in his business

• Father is a government employee and earns well to support family but will retire after 2 years

• Father has good contacts with the govt. deptts. & with banks

• On the basis of information collected from various sources shortlists enginn. / electronic / plastic / chemical & pharma / wire industries

• Project invstt. available in the range of 5 - 7 Lacs

• Discards the idea of chemical & pharma because of inability to handle the complexities & high investments needed

• Discards wire because of unease of availability of raw material

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• There were many plastic factories in the area and the ROI was not attractive the idea of plastic was discarded

• Somesh has got contacts only within the frame of textile processing houses he however has friends who are working in the large engineering public sectors

• He wants to achieve a break-even in less then 2 years time

• He further discards electronic industries because of no additional strength in this area

• He finally chose ENGINEERING INDUSTRY

Choosing your businessSelecting the right proposalCase Study of Mr. Somesh Dutta

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Checking Project Viability

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Take 4 tests to check

Viability of the project

Investment & Infrastructure check

Market check

Technical Know-how check

Financial Viability check - I

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• Investment & Infrastructure check

Fixed Assets Working CapitalLand & Building Salaries

Plant & Machinery Office expenses (Tel / Electricity / etc)

Furniture Interest on Loan

Vehicle Traveling expenses

Office equipment Raw material expenses

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• Investment & Infrastructure check

Other Expenses InvolvedLegal expenses

Trial production

Cost on money invested by you

Contingency estimates• You go wrong on estimations• Raw material prices may hike• You have to give credit facilities to your customers

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Market Check

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Market CheckBenefits

• Estimating the demand

• Estimating the profitability

• Determining Pricing

• Determining quality.…accordingly procuring the right machinery, tools & raw materials

• Knowing Competition

• Knowing Customer behavior

• Determining marketing strategy

• Understanding Key determinants of success in the industry

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What is Market Check ?

Gathering information from similar business owners, raw material suppliers, employees working in that enterprise, dealers, packing material suppliers, customers, machinery suppliers, research studies, Government data & research agencies regarding the business

Using your own network to gather the related information

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Procedure of Market Check

• Primary Data

• Secondary Data

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Market Check• Primary Data

Talk to similar business owners, employees working in that enterprise, dealers, packing material suppliers, customers, machinery suppliers, raw material suppliers

• Telephonically

• Mail Contacts

• Personal Contacts

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Market Check• Collecting Primary DataWho is to be surveyed

Target Customers / Dealers / Employees especially Sales Force / Raw Material Suppliers / Machinery Suppliers / Similar Business Owners

Choose the right sample of people

Randomly / Quota wise / Cluster wise

What information do you need from them, design a proper questionnaire ?

Closed ended question / Yes or No type / Open ended / 5-choice answers

Analyze the data collected

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Market Check

• Secondary Data

• Credit Rating Agencies

• Trade publications & records

• Libraries

• Govt. agencies such as

TIC – Trade Information Centers.

TCO – Trade Consultancy Organization

DIC – District Industries Center

• News papers & magazines

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Market Check

• Credit Rating Information Service of India Ltd

• Credit Analysis & Research Ltd.

• Investment Information Credit Rating Agency of India

• Marketing & Development Research Associates

• Secondary Data

Credit Rating Agencies

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Market Check

• Can I start a Squash business in Bangalore ???

Determine on the basis of secondary data

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Market CheckStudy on the Soft drink Market 1991-92

Year Consumption(Millions)

Population(Millions)

Per Capita(In Thousands )

1978-79 778 646 1.21

1979-80 1057 660 1.60

1980-81 1842 675 2.73

1981-82 1998 690 2.89

1982-83 2123 706 3.01

1983-84 2410 722 3.34

1984-85 2600 738 3.52

1987-88 3283 788 4.17

1991-92 5200 850 6.12

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Delhi 60.6%

Mumbai 19.7%

Chennai 8.8%

Kolkata 7.4%

Bangalore 3.5%

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Product Avg. of 5 Metros

Coca Cola 35%

Pepsi 25%

Packed

Juices

25%

Synthetic Drinks(Squash / Rasna etc.)

15%

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Product Avg. of 5 Metros

Delhi Mum Bangalore

Coca Cola 35% 20% 40% 25%

Pepsi 25% 30% 20% 10%

Packed

Juices25% 38% 22% 25%

Synthetic

Drinks (Squash / Rasna etc.)

15% 12% 18% 40%

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• Technical Know-how check

Are you fully aware of the technical intricacies involved in the project

Do you have a stable resource which can handle the technical aspects

Can you fully rely on the hired resource for the purpose

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Choosing your businessTechnical Know-how checkCase Study of Mr. Sunil Bhatia

• Mr. Bhatia worked for over 7 years as a chemist with a dyestuff factory at Ahmedabad

• Holds thorough understanding of the dyestuff production

• Starts up his own dyestuff factory• Factory gets well established and began to give

good profits • Mr. Jignesh who had little knowledge about the

technical aspects of the business was watching the growth of this factory,

• He decides to starts up his own factory and picks up the production supervisor from bhatia’s factory

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Choosing your businessTechnical Know-how checkCase Study of Mr. Sunil Bhatia

• Production supervisor was not so good in the know-how of the process

• Product coming out was substandard and the batches were not passed during inspection for quality control

• Struggled for 8 months to improve the quality and soon the supervisor found a better job and he left

• Mr. Jignesh was left in lurch and faced huge loss

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• Financial Viability checks - I

ROI Return on Investment

(Profit / Investment x 100)

Gross profit on turnover Profit calculated after deducting the production & selling costs

Gestation period Initial period when you continue to operate with losses or without losses at break even

Break even point Point at which you neither make profits nor make any losses

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Choosing your businessCase Study of Mr. Mohd. Faris

• Mr. Faris has done ITI in mechanical works, makes up his mind to start up a business enterprise

• Can invest a maximum of Rs. 3 Lacs• Can not afford a gestation period of more then 2 Years • Must reach break even by 2nd year• By 3rd year he needs a ROI of not less then 25%• He is looking for an industry where his technical skills

are also used

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Choosing your businessCase Study of Mr. Mohd. Faris

Product Gas Lighter

Link Clips

Cutlery Paint Brushes

M/c. Cost 2.5 – 3.0 Lacs

80,000/- 2.5 – 3.0 Lacs

1.25 Lacs

Annual Turnover

27 Lacs 1.20 Lacs

10-11 Lacs

15 Lacs

Gestation Period

2 Years 1 Year 2 Years 1 Year

Estimated

ROI

80% 15% 35% 60%

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8 Common errors done While choosing a project

1. Falling prey to the attractive numbers

2. A partial or incomplete view of the project

3. Mismatch between personal & project profile

4. Lack of interest in the project

5. Lack of confidence in the project

6. Blind faith on the information collected from the market

7. Failure to grasp the key determinants of success in the given project

8. Me-Too Syndrome

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Choosing your businessFalling prey to attractive numbers

Case Study of Mr. Navneet Gupta

• Mr. Gupta came across the demand of cheese in many parts of Rajasthan & Gujarat

• He enquired about the cheese projects from the plant manufacturers. This is the information he received

On 100% capacity utilization, the plant would produce 10000 cubes of 50gms in one month

No plant in that industry worked for over 90% capacity utilization, so max. production would be 9,000 cubes

Cost on production per 50gms cube of cheese would be Rs. 3

Cost of milk was never stable so the cost on production of cheese also increased at that time(Rs.3.5)

Market price per 50gms cube is Rs.6

The margin of Rs. 1 given to the dealers was never told (Rs.5)

From above estimates his profit per month would be Rs.30,000/-

From above estimates his profit per month would be Rs.13,500/-

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Choosing your businessFailure to grasp key determinants

Case Study of Mr. Himanshu Chadha

• Mr. Himanshu is a BE in Mechanical Engineering• His friend Mr. Ganesh made him aware of the high demand of power

coil used in the two-wheeler• Himanshu developed the power coil and both friends started the

business in partnership

They produced high quality coil

Thereby charging high price for it

Quality was never a key determinant of that industry, but low price definitely was

They would work on advance payments with wholesalers & not give any credit

Industry had a culture of giving long credits to the wholesalers and no advance payments

They were ready to give a guarantee of up to 10 years on it

Wholesalers were satisfied with life of 3-5 years of a coil

K's 104

Choosing your businessFailure to grasp key determinants

Case Study of Mr. Himanshu Chadha

They would advertise to establish the brand name

Industry worked largely on interest of wholesalers rather then advertisements

They would make timely payments regards to their liabilities & govt. taxes

Competitors were evading tax to curb costing

It took them full one year to realize the key determinants of the business and change themselves according to the industry, till that time they incurred losses

K's 105

Constitution of an Organisation

K's 106

Forms of Organization

Proprietorship

Partnership

Private Limited Company

Public Limited Company

Co-operative Enterprises

K's 107


Proprietorship 100% Owner of the Organization

One man control – single ownership

Unlimited Liability

No difference between your personal &

business assets

K's 108

Proprietorship

ADVANTAGES DISADVANTAGES

Complete Control Limited Funds

No difference of opinion

Limited Skills

Quick decision Unlimited Liability

K's 109


Partnership Minimum 2 partners – maximum 10 in banking &

20 in non-banking business

Contractual relationship – written / oral agreement among the partners

Liability not limited to your share in the partnership, it is still unlimited

No difference between your personal &

business assets

Sharing of profit & loss amongst members on mutually agreeable percentages

K's 110

PartnershipADVANTAGES DISADVANTAGES

Larger Financial resources

An incompetent or dishonest partner can cause disaster to the business

Combined abilities, skills & judgment results in better decisions & better management

Transferring of partnership rights to an outside person is not possible without the permission of other members

Survival capacity of a business is much higher

Disagreement & distrust among the partners can lead to breakage of partnership & business in question

K's 111

Forms of OrganizationPrivate Limited Company

Shareholders are the owners of the company

Minimum 2 shareholders, Maximum 50 shareholders

Prohibits any invitation to the public to subscribe for any shares

Family members can also be the shareholders

Limited Liability

Less paperwork because many of the company laws do not apply to private limited companies

K's 112

Private Limited Company

ADVANTAGES DISADVANTAGES

Limited Liability transfer of shares restricted by the articles of association

Larger Financial resources

Can not raise capital from the public

Freedom from excessive legal control & regulations

Not suitable for a Large scale organisation

Stable permanent life Delayed decisions

K's 113


Public Limited Company Shareholders are the owners of the company

Minimum 7 shareholders, Maximum unlimited can be millions of shareholders

Can raise more money from the market then a private limited company

Limited Liability

More paperwork because many of the company laws are applicable to public limited companies

K's 114

Public Limited CompanyADVANTAGES DISADVANTAGES

Limited Liability No secrecy – full publicity of accounts

Large Financial resources

Excessive legal control & regulation

Free transferability of shares

Delayed decisions

Any amount of capital can be raised from the public

Time-consuming, Expensive & Difficult formation

Stable permanent life

K's 115

Forms of OrganizationCo-Operative Enterprises

Basic aim is to render service to its members & society in general

Management of a society is entrusted to a managing committee elected by its members

State Government has full right to conduct periodic inspection on audited accounts, annual reports etc.

Must get registered under the Co-operative Societies Act, 1912.

Voluntary association of people, who are open to become a member or leave it at their own free will

The capital to run it is provided by the members

K's 116

Co-operative EnterprisesADVANTAGES DISADVANTAGES

Ease of formation Lack of motivation

Limited Liability Rivalries often seen within the society

Tax Advantage(Advantage in Income tax, Surcharge, stamp duty & Reg. fees)

Under state regulations

Eligible for state patronage(in the form of loans, grants etc.)

Lack of competent management

Suitable for small sized business operations(Usually business related to socio-economic development of weaker sections of the society like educational institutes, etc.)

K's 117

Ownership Patterns in some SSI’s in India

INDUSTRY Sole Proprietorship

Family Partnership

Non-Family Partnership

Cooperatives

Flour Mills 36.4 49.1 14.5 -

Hosiery 63 25 20 1

Drugs 60 35 3

Utensils 55 38 6 1

Soap 27 53 20

Oil Mills 15 70 12 2

Printing Press 52 28 20

Wooden Furniture 60 31 8 1

Electrical Goods 25 69 6

K's 118

Choice of Constitution Depends upon

Size of Business

Nature of Business

Control over Business

Amount of Capital

Risk & Liability

Government regulations & control

Tax liability