ENTREPRENEURSHIP MANAGEMENT - MMS Notes (Anant Dhuri).pdf

Anant Dhuri

ENTREPRENEURSHIP MANAGEMENT

ENTREPRENEURSHIP MANAGEMENT 100 Marks Course content: (A) ENTREPRENEURIAL PERSPECTIVE: Concept of Entrepreneur, Entrepreneurship and Enterprise; advantages

1) 2) 3) 4) (B)

Entrepreneur

Nature and Development Development of Entrepreneurship; Entrepreneurship; Gender issues in Entrepreneurship. The dynamic role of Small Business / Industry in Economic Development Personality of an Entrepreneur / Entrepreneur Innovation and Entrepreneurship THE ENTREPRENEURIAL ENVIRONMENT:

1) 2) 3) 4) 5)

Policy Perspectives in India to promote Entrepreneurship Entrepreneurship Analysis of Business Opportunities in different different sectors of economy at National National and Global levels. Quick - start Routes to establish an Enterprises (Franchising, (Franchising, Ancilliarising & Acquisitioning ) Support Organizations for an Entrepreneur and their Role Legal framework for starting a Business Business / Industry in India.

(C) THE ENTERPRISE LAUNCHING: Product / Project Identification Developing a Project Report / Business Plan Business Financing including venture Capital Finance Managing early growth of a Business, Incubation Program. New Venture expansion - strategies and issues. Reference Text 1. Beyond Entrepreneurship - By James C. Collins, William C. Lazier 2. Entrepreneurship Management Management - By P. N. Singh, By J. C. Saboo Saboo 3. Dynamics of Entrepreneurial - By Vasant Desai Desai 4. Entrepreneurship Development in India - By By Bishwanath Bishwanath Ghosh Ghosh 5. Literature Published by Support Institutions, viz i) SIICOM, ii)SIDBI, i ii)MSSIDC iv)NSIC

1

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Anant Dhuri

ENTREPRENEURSHIP MANAGEMENT

(A) ENTREPRENEURIAL PERSPECTIVE

Concept of Entrepreneur, Entrepreneurship and Enterprise; advantages Entrepreneur 1. 2. 3. 4.

Nature and Development of Entrepreneurship; Gender issues in Entrepreneurship. The dynamic role of Small Small Business Business / Industry in Economic Development Development Personality of an Entrepreneur / Entrepreneur Innovation and Entrepreneurship

1. NATURE AND DEVELOPMENT DEVELOPMENT OF ENTREPRENEURSHIP; ENTREPRENEURSHIP; GENDER ISSUES ISSUES IN ENTREPRENEURSHIP ENTREPRENEURSHIP The concept of Entrepreneurship is comparatively new and dynamic. What is Entrepreneurship? "Entrepreneurship can be described as a creative and innovative response to the environment. Such responses can take place in any field of social endeavour – business, agriculture, education, social work and the like. Doing new things or doing things that are already being done in a new way is, therefore, a simple definition of entrepreneurship. In this book, however, we shall concentrate on business entrepreneurship." It would also be advisable to understand the individual qualities of an Entrepreneur this would help us understand the concept better. Who are Entrepreneurs? Entrepreneurs are quick to see possibilities for achievement. They are not blinded, as mangers in large, sedate organizations often are, by the in-grown culture in which they are embedded. As we are aware, the new ideas for new products and services often originate in unexpected places. Entrepreneurs are the first one to embark on these innovative ideas. There are several examples such as follows: 1. Credit cards were not invented by banks 2. Instant photography photography was was not started by a large camera camera manufacturer manufacturer 3. Large office equipment manufacturer did not not create the Xerographic Xerographic office-copying office-copying machine.

Entrepreneurs are the people who see the need gap and hence capitalize on the same. An entrepreneur grabs such novel ideas, developed it and pursued purs ued its success doggedly with unflagging s pirit. Therefore, these people are successful in their venture and are entrepreneurs in the true sense of the word. Thus, entrepreneurs are self-starters and doers who have organize and build successful enterprises. On the other hand we cannot call an entrepreneur an opportunist because it is not only the selfish interest that drives him but he is also meets the need of the people. The following eleven qualities/ attributes are considered to be some of the important ones for a successful entrepreneur on the basis of the research and experience of Behavioral Science Center, Delhi and various other institutions involved in selection of candidates for entrepreneurial development programs c onducted by them: 1. High level of motivation, 2. Moderate Risk-taker 3. Self-confident with positive self-concept, 4. Excellent Leadership qualities 5. Good Business acumen 6. Managerial competence 7. Problem solving attitude 8. Flexibility and adaptability 9. Realistic approach to planning 10. Independence of thought and action 11. Ability to perceive opportunities and threats What’s an Enterprise? The word enterprise describes the actions of someone who shows some initiative by taking a risk by setting up, investing in and running a business. A person who takes the initiative is someone who “makes things happen”. He or she tends to be decisive. A business opportunity is identified and the person does does something about it. Showing initiative is about taking decisions and being bold – not everyone is like that! Risk-taking is slightly different. In business there is no such

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ENTREPRENEURSHIP MANAGEMENT

Anant Dhuri

DEVELOPMENT OF ENTREPRENEURSHIP Who is an entrepreneur? What is entrepreneurship? What ¡s an entrepreneurial career path? These frequently asked questions reflect the increased national and international interest in entrepreneurs by individuals, university professors and students, and government officials. In spite of all this interest, a concise, universally accepted definition has not yet emerged. The development of the theory of entrepreneurship parallels to a great extent the development of the term itself. The word entrepreneur is French and, literally translated, means “between-taker” or “go-between.” HISTORY Earliest Period An early example of the earliest definition of an entrepreneur as a go-between is Marco Polo, who attempted to establish trade routes to the Far East. As a go-between, Marco Polo would sign a contract with a money person (forerunner of today’s venture capitalist) to sell his goods. A common contract during this time provided a loan to the merchant adventurer at a 22.5 percent rate, including insurance. While the capitalist was a passive risk bearer, the merchantadventurer took the active role in trading, bearing all the physical and emotional risks. When the merchant-adventurer successfully sold the goods and completed c ompleted the trip, the profits were divided with the capitalist taking most of them (up to 75 percent), while the merchant-adventurer settled for the remaining 25 pe rcent. 18th Century In the 18th century, the person with capital was differentiated from the one who needed capital. In other words, the entrepreneur was distinguished from the capital provider (the present-clay venture capitalist). One reason for this differentiation was the industrialization occurring throughout the world. Many of the inventions developed during this time were reactions to the changing world, as was the case with the inventions of Eli Whitney and Thomas Edison. Both Whitney and Edison were developing new technologies and were unable to finance their inventions themselves. Whereas Whitney financed his cotton gin with expropriated British crown property, Edison raised capital from private sources to develop and experiment in the fields of electricity and chemistry. Both Edison and Whitney were capital users (entrepreneurs), not providers (venture capitalists). 19th and 20th Centuries In the late 19th and early 20th centuries, entrepreneurs were frequently not distinguished from managers and were viewed mostly from an economic perspective: Briefly stated, the entrepreneur organizes and operates an enterprise for personal gain. He pays current prices for the materials consumed in the business, for the use of the land, for the personal services he employs, and for the capital he requires. He contributes his own initiative, skill, and ingenuity in planning, organizing, and administering the enterprise. He also assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances. The net residue of the annual receipts of the enterprise after all costs have been paid, he retains for himself. In the middle of the 20th century, the notion of an entrepreneur as an innovator was established: The function of the entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological method of producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or a new outlet for products, by organizing a new industry. The concept of innovation and newness is an integral part of entrepreneurship in this definition. Indeed, innovation, the act of introducing something new, is one of the most difficult tasks for the entrepreneur. It takes not only the ability to create and conceptualize but also the ability to understand all the forces at work in the environment. The newness can consist of anything from a new product to a new distribution system to a method for developing a new organizational structure. This ability to innovate can be observed throughout history, from the Egyptians who designed and built great pyramids out of stone blocks weighing many tons each, to the Apollo lunar module, to laser surgery, to wireless communication. Although the tools have changed with advances in science and technology, the ability to innovate has been present in every civilization. Definition of entrepreneur today The concept of an entrepreneur is further refined when principles and terms from a business, managerial, and personal perspective are considered. In particular, the concept of entrepreneurship from a personal perspective has been thoroughly explored in this century. This exploration is reflected in the following three definitions of an entrepreneur: In almost all of the definitions of entrepreneurship, there is agreement that we are talking about a kind of behavior that includes: 1. Initiative taking. 2. The organizing and reorganizing of social and economic mechanisms to turn re-sources and situations to practical account, 3. The acceptance of risk or failure. failure. 4. To an economist, an entrepreneur is one who brings resources, labor, materials, and other assets into combinations that make their value greater than before, and also one who introduces changes, innovations, and a new order.

To a psychologist, such a person is typically driven by certain forces - the need to obtain or attain something, to experiment, to accomplish, or perhaps to escape the authority of others. To one businessman, an entrepreneur appears as a threat an aggressive competitor, whereas to another businessman the same entrepreneur may be an ally, a source

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ENTREPRENEURSHIP MANAGEMENT

Anant Dhuri

Entrepreneurship is the process of creating somethin9 new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, receiving the resulting rewards of monetary and personal satisfaction and independence. This definition stresses four basic aspects of being an entrepreneur regardless of the field. First1 entrepreneurship involves the creation process—creating something new of value. The creation has to have value to the entrepreneur and value to the audience for which it is developed. GENDER ISSUES IN ENTREPRENEURSHIP

Since the self-employed women are contributing in significant ways to economic health and competitiveness in countries around the world, the role performed by women entrepreneurs is of utmost importance. All the constraints faced by the women entrepreneurs should be removed so that women may find an equal status along with men in all aspects of life. Appropriate strategy has to be made to extend the benefits of transfer of technology process to women, which will help more and more women to start their own enterprises and can have a separate identity of their own. Entrepreneurship is a human universal. All over the world, and throughout history, people have created businesses. Yet, although women make up more than 50 percent of the world population, they own and manage significantly fewer businesses than men. Venture types and management styles vary across genders as well. Women entrepreneurship presents several distinctive characteristics that differentiate it from men entrepreneurship. But variations exist also across women entrepreneurs in various countries, and between women who are involved in entrepreneurship and those who are not. Overall, the explanation for the behavior of women entrepreneurs and its distinctiveness is complex and multifaceted. Evidence to date suggests that reasons contributing to explaining these differences include demographic and socio-economic variables, subjective perceptions, and cultural factors and institutions, and that such differences have significant implications at the macro-economic level. Studying female entrepreneurship allows researchers to ask questions that shed light on the linkages between entrepreneurship and wealth creation, employment choices and cognition, human capital accumulation and labor market structure, employment choice and family dynamics, business creation and peace, and many others. From a scientific point of view, the study of female entrepreneurship as a distinct area of inquiry informs us not only about women behavior, but also about entrepreneurial and human behaviors in general. All over the world, female entrepreneurship has become an important component of academic and policy conversations around entrepreneurship. Still, there is much we don’t yet understand. 2. THE DYNAMIC ROLE OF SMALL BUSINESS / INDUSTRY INDUSTRY IN ECONOMIC DEVELOPMENT DEVELOPMENT

We are constantly being involved with small business, for it is everywhere! When we think of “business,” we may think of large corporations—such as Fortune 500 companies—but if you look around you, where you work and live, you will realize that the vast majority of businesses are small. Not only are these small businesses numerically significant; they are also important as employers, as providers of needed (and often unique) goods and services, and as sources of satisfaction to their owners, employees, and customers. For these and many other reasons, there is hardly anyone who has not at some time or other oth er been tempted to start a small business. Some Unique Contributions of Small Business Small firms differ from their larger competitors. Let’s look at some major contributions made by small businesses that set them apart from larger firms. Smaller firms tend to Encourage innovation and flexibility. Maintain close relationships with customers and the community. Keep larger firms competitive. Provide employees with comprehensive learning experience. Develop risk takers. Generate new employment. Provide greater employee job satisfaction. • • • • • • •

a) Encourage Innovation and Flexibility Flexibility Smaller businesses are often sources of new ideas, materials, processes, and services that larger firms may be unable or reluctant to provide. In small businesses, experiments can be conducted, innovations initiated, and new operations started or expanded. In fact, small firms produce 55 percent of all innovations, and in 2003, there were 189,597 patents issued by the U.S. government. If we apply the 55 percent innovation rate, we can say that more than 100,000 patents were issued to small businesses. This trend is especially true in the computer field, where most initial developments have been carried on in small companies. b) Keep Larger Firms Competitive Competitive Smaller companies have become a controlling factor in the American economy by keeping the bigger concerns on

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ENTREPRENEURSHIP MANAGEMENT

Anant Dhuri

grow big, to expand or contract, and to succeed or fail, which is the basis of our free enterprise system. Yet founding a business in an uncertain environment is risky, so much planning and study must be done before startup. d) Generate New Employment As repeatedly emphasized throughout this chapter, small businesses generate employment by creating job opportunities. Small firms also serve as a training ground for employees, who, because of their more comprehensive learning experience, their emphasis on risk taking, and their exposure to innovation and flexibility, become valued employees of larger companies.

3. PERSONALITY OF AN ENTREPRENEUR / ENTREPRENEUR

Why are certain people successful starting and growing growing a business and others are not? Is it just luck or being in the right place at the right time? Certainly Bill Gates, with with his technical talents, needed the computer revolution in order to make Microsoft the successful company it is. But is it just timing and and luck or are other factors factors involved? Recent research in the field of psychology suggests that personality has a great deal to do with being a successful entrepreneur. In a recent study published in the the highly regarded Journal of Applied Psychology (2006, Vol. 91, No. No. 2, 259-271), Hao Zao of the University of Illinois at Chicago and Scott E. Seibert of the Melbourne Business School analyzed and combined the results of twenty-three independent research studies. A statistical method known as metaanalysis was used which allows research studies to be combined in a way that yields overall trends within a field of research. When using meta-analytic techniques, a few basic rules must be followed. First, all of the studies being combined must use consistent definitions and methods. Therefore, an entrepreneur was was defined as "...someone who is the founder, owner, and manager of a small small business and whose principal purpose is growth." growth." Second, in order to pinpoint exactly exactly what makes an entrepreneur different from other business people rather than people in general, only studies which compared entrepreneurs to managers were were used. Finally, the studies chosen used only personality traits which fit the widely accepted Five Factor Model (FFM) of personality. The FFM organizes personality personality around five general personality personality traits. Personality traits are largely determined by our genetic makeup but also solidified by early environmental influences such as learning, family relationships, and our experiences to name a few. These core traits make us who we are and and cause us to behave in certain ways. Thus, personality traits predict with pretty good accuracy how we perceive situations, solve problems, interact with people, and carry out our job responsibilities. The FFM consists of the following personality trai ts. we are. Some people need a great deal of social interaction 1) Extraversion -  This determines how naturally outgoing we and are comfortable in social environments. Others need very little people contact and may even be timid or a bit fearful of social encounters. more self-confident than others. In addition, some people 2) Emotional Well Being (Neuroticism) -   Some of us are more show emotions readily and others are "stone faced" and rarely change their expression. 3) Agreeableness/flexibility -   This trait involves how easygoing and tolerant versus how intense and potentially irritable a person behaves. Are you someone who goes through life in a fairly calm fashion or do you get frustrated frequently? Easygoing people may be easy to get along with but may also lack drive and and determination. Intense and irritable people may be highly driven and goal oriented but may also ruffle feathers or worse. 4) Openness to to Experience Experience -  This trait determines whether we are likely to seek out new ideas and think creatively or whether we are more practical-minded, efficient, and conservative in our outlook. 5) Conscientiousness -  This trait determines our core "modus operandi." At the one extreme, extreme, people are focused, organized, detail-oriented, perfectionistic, achievement-oriented, achievement-oriented, dependable, and compulsive. On the opposite end, people tend to be flexible, spontaneous, s pontaneous, tolerant of ambiguity, disorganized, and less achievement -oriented. Each of the twenty-three studies included in the meta-analysis compared entrepreneurs to a group of managers on the FFM personality traits. The authors found significant differences between entrepreneurs and managers managers on four out of the five traits. For those of you with minimal familiarity with statistics and research, these are impressive results. The entrepreneurs scored significantly higher than managers on the traits Openness to Experience and Conscientiousness. Therefore, entrepreneurs are characterized as more creative, more innovative, and more likely to embrace new ideas than their manager counterparts. Second, the results indicated that entrepreneurs entrepreneurs were higher than managers on on Conscientiousness. Further analysis indicated that the differences differences here were primarily due to the entrepreneurs having a higher achievement orientation as compared to managers. Entrepreneurs and managers did not differ on other aspects of Conscientiousness such as dependability and organizational skills. The second key set of results showed entrepreneurs to be significantly lower than managers on Neuroticism and Agreeableness. Consequently, entrepreneurs entrepreneurs are more self-confident, resilient, and stress-tolerant than non-

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ENTREPRENEURSHIP MANAGEMENT

Anant Dhuri

found between the two groups on Extraversion. Extraversion. Therefore, entrepreneurs were no no more or less outgoing than the the managers. So what is the relevance of these research findings? First, as an organizational psychologist working with business people, I'm frequently asked the question, "Do you think I would be successful starting my own company?" The ability to compare oneself to successful entrepreneurs can can help an individual make an important career decision even if they have no previous experience working in an entrepreneurial environment. Avoiding bad career decisions is something all of us desire. desire. Second, these data can help people who support and work with entrepreneurs to make sound decisions. For example, Venture Capitalists are faced frequently with the decision to fund or not fund a start-up start-up company. With tremendous amounts of money at risk, this research research allows the VC to make sound decisions about the people involved in addition to market analysis and evaluating the merits of the product/service. As the field of psychology continues to move forward forward scientifically and further away from the old days of theory and conjecture, the information which results from psychological research can and should be used to support the making of good business decisions. 4. INNOVATION AND ENTREPRENEURSHIP

It is fairly widely acknowledged that there is a very strong connection between the US’s economic success and the entrepreneurial character of its people which generates innovations. It can be plausibly argued that economic success and entrepreneur-driven innovations are bi-directionally causally linked: each gives a boost to the other in ever widening upward spirals of mutually reinforcing, positive feedback. It is perhaps difficult figure out which came first: the economic success or the entrepreneurial character of the people. It is also fairly widely acknowledged that India is not a hotbed of innovation and entrepreneurial ventures. Why is it so? My conjecture – and it is only a conjecture – is that the primary reason is that India is a late-comer in the race for economic development. India is economically backward relative to the US. The US has solved the basic problem of survival for most of its 300 million citizens. Food, housing, education, medical care, etc. Its annual per capita income is around $47,000. India’s Equivalent Population India is a subsistence economy. India is still struggling to provide even the most rudimentary necessities of life to a majority of its 1,100 million population. India’s annual per capita income is around $940, or about 2 percent of the US’s. That’s the average in an economy which has high income disparity. There are an estimated 800 million Indians whose income is less than $2 per day, and an estimated 500 million with incomes is less than $1 per day. People who barely eke out a living cannot be reasonably expected to be innovative and entrepreneurial in the same sense as people who are economically advanced enough to engage in risky, although highly rewarding, activities. Of the approximately 300 million Indians who have above $2 a day in income, let’s assume 10 percent of them have a per capita income which gives them a life-style comparable to the average American life-style. That means about 30 million Indians have the ability and willingness to engage in activities that are innovative and entrepreneurial like that of the Americans. We are therefore now comparing two economies: the US with 300 million and India with 30 million. That’s an order of magnitude difference. Ability and Willingness There are three necessary elements required for any activity: ability, willingness, and opportunity. Let’s focus on the opportunity available to the 30 million Indians who have the ability and the willingness to be innovative and entrepreneurial. The 30 million Indians exist in an environment which is starkly different from the environment that 300 million Americans live in. The problems the two societies face are qualitatively different. The Indian environment requires implementation of rather well-known solutions. It is a question of execution and not one of advancing into unknown frontiers. No cutting edge research and development is required to address the concerns that face India. The answers are well understood. Execution of the known solutions i s sufficient to engage the skills and talents of the 30 million. There are low-hanging fruits and people are busy picking them whenever they are allowed by the “colonial” government. (I am not so stupid as to not know that the British colonizers have left the place a while back. I just don’t see the difference between the British colonial administration and the administration of the post-independent governments of India.) Opportunity The US faces issues that require innovation because all the low-hanging fruits have been picked long ago. They don’t need more of anything, only better of everything that they already have. They all have phones; now they need better phones. They have to push the frontier because most of their population is at the frontier. They have to be innovative

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ENTREPRENEURSHIP MANAGEMENT

Anant Dhuri

When will Indian entrepreneurs start innovating as their American counterparts? When India has stopped being a subsistence economy. And when will that be? That will be when India has exhausted the available known solutions by implementing them, and therefore become more than just a subsistence economy. Then the opportunity will exist in India for innovations and that’s when the willing and able entrepreneurs of India (whatever their numbers then) will do the thing that the Americans do so well.

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Anant Dhuri

ENTREPRENEURSHIP MANAGEMENT

(B)

1. 2. 3. 4. 5.

THE ENTREPRENEURIAL ENVIRONMENT

Policy Perspectives in India to promote Entrepreneurship Analysis of Business Opportunities Opportunities in different sectors of economy at National and Global levels. Quick - start Routes Routes to establish an Enterprises (Franchising, Ancilliarising & Acquisitioning ) Support Organizations for an Entrepreneur and their Role Legal framework framework for starting a Business / Industry in India.

1. POLICY PERSPECTIVES IN INDIA TO PROMOTE ENTREPRENEURSHIP

The central role of entrepreneurship in the economic growth of nations is increasingly coming into focus, especially in the recent troubled times. As pointed out in a recent article in The Economist even as governments are busy trying to save their economies, policy makers are demonstrating a renewed interest in entrepreneurship and innovation. In modern open economies, entrepreneurship is argued to be far more important than it was. It is evident that entrepreneurial ventures are driving the growth of economies — developed and emerging. However, amongst the types of entrepreneurship there is necessity based entrepreneurship at one end of the spectrum to opportunity based entrepreneurship at the other that seeks to revolutionize the world by leveraging new technology and creating new markets. While India has a long history of entrepreneurship, as evidenced by centuries of business and commercial activity and the existence of generations old business busi ness groups and families, recent Global Entrepreneurship Monitor studies found that entrepreneurship in India has predominantly been necessity based rather than opportunity based. Formidable barriers exist to entrepreneurship continue to exist in India for high growth entrepreneurship. Our research into the barriers and facilitators of entrepreneurship in the previous editions of Entrepreneurial India has revealed many facets of this problem. Several examples cited in interviews include, several constraints to quick technology adoption by Indian companies. Inconsistent Indirect tax rules and enforcement issues that limit the ability to scale quickly, Labor laws that limit the mobility of labor forced entrepreneurs to fear growth in employee strength. Poor infrastructure has led entrepreneurs to create their own and in the process, lock up precious capital which should have been deployed to grow the business. Inadequate availability of land with clear titles, and owner-occupant friendly policies has led to the diversion of scarce capital towards unproductive investments in land and buildings. Lengthy court proceedings and slow judicial enforcement of property rights and private contracts have led to sub-optimal business practices. Despite all odds, the accent on liberalization and globalization in the last two decades has brought about mitigating effects in many of the areas cited above. A discussion with sonic of the established entrepreneurs points to a positive role played by the new economic policies in opening up areas. Given the ambitious economic growth targets that India has set for itself, high growth businesses have a crucial role to play. While high growth businesses have to use their entrepreneurial ingenuity to overcome the environmental constraints or render them irrelevant, public policy has a significant and decisive role to play in minimizing, and preferably, completely removing the constraints that hobble high growth entrepreneurship. The challenge for policy makers in India can thus be articulated as one of creating the right framework of conditions to enable the establishment of fast growing, innovative new businesses. There are many avenues open to policy makers to address the issue, but the challenge would be in prioritization - picking the right set of issues and sequencing them to achieve significant and quick pay-off. Against this backdrop, the Entrepreneurial India 2009 focuses on how to redesign

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ENTREPRENEURSHIP MANAGEMENT

Anant Dhuri

decisions and steps to be taken at various stages. At first you have to prepare a plan. You have to take decisions about the nature of business location and sources of raising necessary capital. You have also to take a decision regarding physical and material resources. Though the procedure for setting up a business is not the same for all types of business, there are certain steps which you have to take to start any business. In this lesson you will learn how to establish a business and how to expand its activities whenever opportunity arises. Preparing a plan of action Once you decide to establish a business unit, you you will have to prepare a plan of action. You will have to decide in advance each and every step you are going to take in that connection till it starts functioning which is helpful in avoiding delay at the initial stages of starting business. The following aspects of the action plan should be kept in view before deciding on the course of action. 1. Selection of the line of business: At first decision is to be taken about the line of business. The main considerations will be its profitability, risk involved and the amount of capital required. You may consider other business opportunities along with the market demand for the goods. 2. Choice of form of organisation: A small business may be organised as a sole proprietorship or a partnership firm. Advantages and disadvantages of both the forms will have to be considered and decision is to be taken. As a sole proprietor you will have the authority of managing the business and will be entitled to the entire profit generated, but then you will also have to bear the risk of loss involved. In partnership there will be others to share the risk and contribute capital and help in management. But then the profit earned will also be distributed among the partners. A company form of organization may also be considered for the purpose. 3. Financial Planning: A business cannot be started and run without sufficient amount of capital. Capital is required to buy fixed assets like land, building, machines and equipment. Capital is also required to buy raw material and meet day to day expenses of the business like wages, electricity charges, carriage, etc. Decision has to be taken in advance regarding the amount of capital required for the various purposes and regarding the sources of raising it, what amount is to be contributed by the owners and the amount to be borrowed from financial institutions, banks, etc. 4. Location of business: Where to establish a business is also to be decided in advance. A business established at a particular location cannot be shifted to other location easily. Decision regarding location of the business unit consists of decision regarding the choice of locality and selection of site. The deciding factors are nearness to the source of supply of raw material, nearness to the market, availability of labour, transportation and banking facilities. Selection of the site depends on cost of land, development cost, etc. 5. Physical facilities: Decisions have to be taken regarding plant and machinery and equipments to be provided for the business, building and other physical facilities like water and power supply, transportation, etc. The factors that may affect the decisions in this regard are the size of business, techniques of production to be used, availability of funds, etc. 6. Plant layout: After selecting the machinery and equipments required, it is necessary to decide about their installation in a proper manner. This is called plant layout. A good layout makes the operations efficient and economical. It reduces the costs of material handling, storage of inventory, use of space, etc. It helps in optimum utilisation of all resources. 7. Man Power and Raw Materials: The number and type of employees to be enrolled have to be estimated and decided

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3. 4. 5. 6.

Anant Dhuri

Small Industries Development Bank of India National Manufacturing Competitiveness Council National Skill Development Corporation State Level Initiatives

1. Khadi & Village Industries Commission - The KVIC is charged with the planning, promotion, organisation and implementation of programs for the development of Khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development wherever necessary. Further, the KVIC is entrusted with the task of providing financial assistance to institutions and individuals for development and operation of Khadi and village industries and guiding them through supply of designs, prototypes and other technical information. 2. COIR Board - Coir Board is a statutory body established by the Government of India under a legislation enacted by the Parliament namely Coir Industry Act 1953 (45 of 1953) for the promotion and development of Coir Industry in India as a whole. It provides support & resources on coir industry to all entrepreneurs dealing with coir and coir products. 3. Small Industries Development Bank of India – Direct Credit Scheme Technology Upgradation Fund Composite Loan Single Window • • • •

4. National Skill Development Corporation -  The National Manufacturing Competitiveness Council (NMCC) has been set up by the Government to provide a continuing forum for policy dialogue to energise and sustain the growth of manufacturing industries in India. The NMCC is expected to suggest various ways and means for enhancing the competitiveness of manufacturing sector including identification of manufacturing sectors which have potential for global competitiveness; current strengths and constraints of identified sectors, and recommend National level industry/sector specific policy imitative as may be required for augmenting the growth of manufacturing sec tor. State Level Initiatives Individual states across India have setup specially focused organisations which work towards the development & support of small scale industries. These organisations run specific promotional schemes in addition to providing financial support to industries. a) Examples of State Financial Corporations (SFCs ) Gujarat State Financial Corporation Maharashtra State Financial Corporation Haryana State Financial Corporation Himachal Pradesh Financial Corporation • • • •

b) Examples of State Industrial Development Corporations (SIDCs) State Industrial and Investment Corporation of Maharashtra Ltd State Industries Promotion Corporation of Tamilnadu Ltd. • •

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Anant Dhuri

ENTREPRENEURSHIP MANAGEMENT

5. LEGAL FRAMEWORK FOR STARTING A BUSINESS / INDUSTRY IN INDIA

Besides incorporation there are many other formalities in establishing a business in India. The foll owing chart contains typical formalities including incorporating a private limited company in India. Nature of Procedure in India

Procedure Number

Duration(days)

Filing the proposed name of company for approval to the Registrar of Companies (ROC); Get the Memorandum and Articles of Association vetted by the ROC and printed

1

7

Make an application to the Superintendent of Stamps or an authorized bank requesting for stamping of the Memorandum of Association and Articles of Association.

2

1

Present the required documents along with the registration fee to the Registrar of Companies to get the certificate of incorporation

3

9

Obtain a company seal

4

3

Visit the UTI Investors Services Limited to obtain a Permanent Account Number

5

7

Obtain a Tax Account Number for income taxes deducted at source from the Assessing Office in the Income Tax Department

6

7*

Register under Shops and Establishment Act

7

2*

Register for value added tax (VAT) before the Sales Tax Officer of the ward in which the company is located

8

12*

Register for Profession tax

9

2*

Register with Employees' Provident Fund Organization

10

2*

Register with ESIC (medical insurance)

11

1*

Filing for Government Approval before RBI/FIPB for Foreigners and NRI's

12

15*

12

35

Totals:

The Different Types of Business Entities in India Starting a business in India requires one to choose a type of business entity. In India one can choose from five different types of legal entities to conduct business. These include Sole Proprietorship, Partnership Firm, Limited Liability Partnership, Private Limited Company and Public Limited Company. The choice of the business entity is dependent on various factors such as taxation, owner liability, compliance burden, and investment and funding and exit strategy. Lets look at each of these entities

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which means their personal assets can be attached to meet business liability claims of the partnership firm. Also losses incurred due to act of one partner is liable for payment from every partner of the partnership firm. A partnership firm may or may not be registered with Registrar of Firms (ROF). Registration provides some legal protection to partners in case they have differences between them. Until a partnership deed is registered with the ROF, it may not be treated as legal document. However, this does not prevent either the Partnership firm from suing someone or someone suing the partnership firm in a court of law. 3. Limited Liability Partnership Limited Liability Partnership (LLP) firm is a new form of business entity established by an Act of the Parliament. LLP allows members to retain flexibility of ownership (similar to Partnership Firm) but provides a liability protection. The maximum liability of each partner in an LLP is limited to the extent of his/her investment in the firm. An LLP has its owner Permanent Account Number (PAN) and legal status. LLP also provides protection to partners for illegal or unauthorized actions taken by other partners of the LLP. A Private or Public Limited Company as well as Partnership Firms are allowed to be converted into an Limited Liability Partnership. 4. Private Limited Company A Private Limited Company in India is similar to a C-Corporation in the US. Private Limited Company allows owners to subscribe to its shares by paying a share capital fees. On subscribing to shares, the owners/members become shareholders on the company. A Private Limited Company is a separate legal entity both in terms of taxation as well as liability. The personal liability of the shareholders is limited to their share capital. A private limited company can be formed by registering the company name with appropriate Registrar of Companies (ROC). Draft of Memorandum of Association and Article of Association are prepared and signed by the promoters (initial shareholders) of the company. A Private Limited Company can have between 2 to 50 members with minimum share capital of Rs 1,00,000 (one lac). To look after the day to day activities of the company, Directors are appointed by the Shareholders. Minimum two Directors must be appointed to look after the daily affairs of the company. A Private Limited Company has more compliance burden when compared to a Partnership and LLP. For example, the Board of Directors must meet every quarter and at least one annual general meeting of Shareholders and Directors must be called. Accounts of the company must be prepared in accordance with Income Tax Act as well as Companies Act. Also Companies are taxed twice if profits are to be distributed to Shareholders. Closing a Private Limited Company is a tedious process and requires many months. One the positive side, Shareholders of a Private Limited Company can change without affecting the operational or legal standing of the company. Generally Venture Capital investors prefer to invest in businesses that are Private Limited Company since it allows great degree of separation between ownership and operations. It also allows investors to exit the company by selling shares without being liable for company affairs.

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1. Tax Laws One of the most misunderstood laws in India are the Income Tax Act. It is important for you as an entrepreneur to explain to your CA about your business in as simple terms as possible. This is especially true if you are working on a tech or unconventional idea. CAs crib a lot about Indian accounting systems and how adjustments (faking accounts) account was a norm and how one cannot survive in the Indian context without indulging in such practices. But clean and true books of accounts are very important not just from compliance point of view, but also from investor point of view. Always remember that as a promoter of your company, you are criminally liable for all tax mis-deeds. If you raise money in 2nd or 3rd year of your operations, any investor will appoint his/her CAs and lawyers to do due diligence. Such account adjustments will cost dearly at the time when investors turn their back on your company due to accounting malpractices. Another important area that is over looked is the Tax Deduction at Source. Are you deducting and depositing the TDS on every payment that you make to your contractors, employees and agents? Often this gets overlooked in the initial years only to haunt back the company few years later when they receive notices from the IT department. Same is true for Profession Tax which is applicable in many states of India. Make sure you comply with every tax law of the country in letter and in spirit. 2. Labour/Employment Laws It is very important to understand the labour laws of your state. What is the minimum wage that you must pay to your employees? Is sweat equity part of minimum wage? Another mis-conception that many entrepreneurs have is that if you hire a person as a contractor, he/she is treated as a contractor as per the law. This may not always be true. It is important to take advice from a labour law specialist. Also if your staff strength (full time employees + contractors) is more than 20, you must register and comply with Provident Fund and ESIC laws in India. A professional labour law consultant can help you with the compliance. Before hiring your employees/consultants, talk to a labour law professional and get the necessary paper work done. 3. Privacy Laws It is important to have proper Privacy laws in place. This is more true for companies that are collecting customer information online. Do you have a privacy policy? Is it in accordance with the Information Technology Act 2000? How do you handle and report breach of privacy? It is also important to protect privacy rights of your employees. Often many companies ask very personal and direct questions to prospective employees during interview. Asking any information that is irrelevant for the job profile is not only illegal, it can land you in court if the person chooses to sue you.

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Anant Dhuri

ENTREPRENEURSHIP MANAGEMENT

(C) THE ENTERPRISE ENTERPRISE LAUNCHING

1. Product / Project Identification 2. Developing a Project Report / Business Plan 3. Business Financing including venture Capital Finance 4. Managing early growth of a Business, Incubation Program. 5. New Venture expansion - strategies and issues. 1. PRODUCT / PROJECT IDENTIFICATION

The first difficult task before an entrepreneur is to select a project, thus various aspects of project identification. The sensible entrepreneur has an infinitely wide choice with respect to the new project. These may be: project/service, market, technology, equipment, scale of production, location etc. The selection of a feasible and promising project is really difficult. The selection a feasible project depends to a large extent on Government policies, infrastructural development and skill of the employees. Project Identification or Selection of a Project It refers to the collection, compilation and analysis of economic data for eventual purpose of locating possible opportunities for investment. Opportunities can be: (a) Additive:  These are such opportunities which enable the decision-makers to better utilise the existing resources without any significant change in the business. (b) Compliment opportunities:  Here new ideas with certain changes in the p resent structure. (c) Breakthrough opportunities: In this opportunities require fundamental change in both structure and character of the business.

Observation is one of the most seasoned choices of a suitable project. The capable business leaders come across situations which can be to invest. The observant mind is always on the lookout for opportunities which can from the existing processes sometimes lead to new opportunities and new project. In our country as well as in other developed countries trade and professional magazines provide a very fertile source of project ideas. It is very important for every person who is involved in the process of development of new investment opportunities to remain in touch with the latest developments in his own field of specialisation. It is also necessary for him to keep in touch with developments in other fields which may be horizontally or even vertically linked with his own line of specialisation. Study of technical and professional literature, besides keeping a person all constant also stimulates and helps in the process of development of new project ideas. Bulletins of research institutes are also a very fertile source of information for the development of new project ideas. These bulletins generally give the broad outlines of the new processes or products developed by research institutes and are very useful in identification of new opportunities. The information made available in the Research

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a deal with the equipment manufacturer for a kickback and in the process sacrifice quality. Industry is a goose that lays golden eggs. One should not be shortsighted and come to grief by going in for poor quality equipment. 7. Marketing: It is not advisable to get into a project particularly the first, which would mean survival amidst cut-throat, dog-eat-dog competition involving direct selling to the ultimate consumer. One should go in for products with a limited number (say 10 to 20) of industrial c ustomers. Choosing an Idea Establishing yourself as a successful e ntrepreneur depends upon choosing a good idea. That i dea must not only be good for the market, but good for the project and good for you. It means that the project is viable, profitable and socially good. It should also be manageable without much dependence on others. At first, when one is searching for an idea worthy of his commitment, don’t pursue one idea at a time. Develop five or ten in parallel until one emerges so strongly that it begins to dominate thoughts and fantasies. To adopt one idea at a time has several disadvantages. First, because one is constantly receiving random information from what one reads and gets from people. Choosing an idea is quite difficult and the entrepreneur bas to weigh objectively his intrinsic capabilities in fmalìsing an idea. In the idea stage, suggestions for new products are obtained from all possible sources: customers, competitions, R&D, distributors, and company employees. Frequently, one of the creative problem-solving techniques discussed below are used to develop marketable ideas. The suggested ideas need to be carefully screened to determine which are good enough to qualify for a more detailed investigation. Role of Project Identification The project identification is often of great importance for the following reasons: 1. Product identification becomes the catalytic agent of economic development. 2. Product identification initiates the process of development, production, employment, income generation and so on. 3. Product identification has consequences which are long-term in nature. 4. Projects provide the framework of the future activities of the enterprises. 5. Product identification shapes the future pattern of services. 6. Projects usually involve substantial substantial financial outlays. 7. It also initiates initiates development of basic infrastructure and environment. 8. Project commitments commitments cannot be easily reversed. 9. Project identification brings the necessary changes in society in course of time. Selection of a Product: While selecting a product, the entrepreneur is concerned with identifying a particular product that he hopes to market successfully at a reasonable profit. Therefore, the selection of the right product is very essential for being successful in the business. The right product means that which can be marketed at a reasonable profit which will induce him to continue in the business. Various factors influence the entrepreneur in selecting the right product. These decisive factors are: 1. Import Restrictions: If the items selected are banned items it would considerably weigh favourably or otherwise in the selection of the products. Thus, if the item selected falls in the category of banned import items, the entrepreneur

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Checklist for Choosing Ideas of New Product A) Fit with you Skills and Experience Do you believe in the product or service? Does the need arise and you feel feel like attending it personally? Do you like and understand the potential customers? Do you have experience in this this type of business? Do the basic success factors of this business fit your skills? Are the tasks of the enterprise ones you will enjoy doing yourself? Do you enjoy working working with the people employed and supervising them? Has the idea begun to take over your imagination and spare time? Is the idea innovative to the extent of social benefit? Are you expecting a good return? • • • • • • • • • •

B) Fit with the Market Is there a real customer need? Can you get a price that gives you good margins? Would customers believe in the product coming from your company? Does the the product product or service you propose produce produce a clearly perceivable perceivable customer benefit which is significantly better than that offered by competing ways to satisfy the same basic need? Is there a cost effective way to get message and the product to the customers? • • • •

•

C) Fit with the Enterprise Is there a reason reason to believe your enterprise could be very good good at the business? Does it fit the enterprise culture? Can you imagine who might sponsor it? Does it look profitable (high margin - low investment)? Will it look to large markets and growth? • • • • •

D) What to do When Your Idea is Rejected? Frequently, as an entrepreneur, you will find that your idea has been rejected and/or is not s uccessful as envisaged. There are a few things you can do: 1. Give up and select a new idea. 2. Listen carefully, understand what is wrong, wrong, improve your idea and your your presentation, and try again. 3. Find someone else to whom you you can present your your idea by considering: - Who will will benefit most if it works and can they be a sponsor? - Who are are the potential customers and will they demand the product? product? How the people who really care about entrepreneurial ideas?

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1) Technical feasibility: Technical feasibility would encompass factors such as description of the product specification to be adopted, raw materials available as per requirements, outline of “Manufacturing process” inclusive of a “flow chart process”, quality control measures, power supply, and availability of water, transport facilities and communication network. 2) Economic Viability:  It essentially involves complication of demands for domestic and export markets, most appropriate installed capacity requirements, capturing a substantial share of market sale, revenue expected, and suitable price structure and so on. 3) Financial Implications:  Project costs covering “Non-recurring expenses” such as land and buildings, plant and machinery, equipment, pre-operative expenses, and so on and “Recurring Expenses” such as working capital needs, raw material needs, and wages for personnel and so on will have to be worked out in detail. The probable cost of production over a period of 5 years to be assigned and expenses such as fixed and variable expenses and break even analysis should be presented. Besides, profit per month, percentage of profit on total investment and percentage of profit on expected sale should also be computed and furnished. 4) Managerial Competency:   The new entrepreneur manager entering the small scale sector should devote his full attention to the new venture and should consider the product line chosen as a “Major Economic Activity”. Elements of Project Report It is essential for the entrepreneur to know the basic elements of a Project Report. They are: 1) Description of the promoters of the enterprise 2) Description of the enterprise 3) Economic viability and marketability 4) Technical feasibility 5) Financial projections 6) Profitability analysis

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4. Description of Plant and M achinery: It is necessary to give a brief description in the project report about the plant and machinery required for the manufacturing activity with the detailed specifications, quality, cost and availability, whether indigenous or imported, name and address of supplier, whether it is envisaged to acquire all the machinery at one point of time, in the beginning itself, some machines need not be purchased by the entrepreneur but can be hired on rental basis from others. The entrepreneur may like to get the machines on hire purchase basis. in easy installments from organizations like NSIC. Some machines may have to be imported from other countries. All these facts and details thereof should be mentioned in the project report. 5. Testing Equipment: A list of testing equipment with detailed specifications, purpose, usefulness, cost, name and address of supplier is to be given. It is also necessary to state clearly why this equipment is considered necessary for the unit. 6. Project Cost: i) Fixed Capital— Land and Building: The extent and cost of the land proposed to be acquired, total cost of the buildings to be constructed and the covered area. Future expansions if any, indicating the additional covered area, proposed to be constructed, its costs, etc. should be given. 7. Break Even point. B.EP: is that point where cost and revenues de rived are always equal. On this point there c annot be any profit, thus to earn profit one should produce more than B.E.F. 8. Profitability of the Business: The profit is to be worked out year b y year for a period of three to five years. The percentage of profit, the rate of return on investment and repayment schedule are to b e indicated. A statement of cost of p roduction and profitability may be appended to the report as given below:

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ENTREPRENEURSHIP MANAGEMENT

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focused. The finished project is an operating tool to help manage your business and enable you to achieve greater success. The plan also serves as an effective communication tool for financing proposals. At the completion of this exercise, you should be able to: Describe the importance of a business plan • Identify the elements of an effective business plan • Write a business plan • I. Why Write a Business Plan? Why should a business go through the trouble of constructing a business plan? There a re five major reasons: 1. The process of putting a business plan together forces the person preparing the plan to to look at the business in an objective and critical manner. 2. It helps to focus ideas and serves as a feasibility study of the business's chances for success and growth. growth. 3. The finished report serves as an operational tool to define the company's present status and future possibilities. 4. It can help you manage the business and prepare you for success. 5. It is a strong communication tool for your your business. It defines your purpose, your competition, your management and personnel. The process of constructing a business plan can be a strong reality check. 6. The finished business plan plan provides the basis for your financing proposal.

Planning is very important if a business is to survive. By taking an objective look at your business you can identify areas of weakness and strength. You will realize needs that may have been overlooked, spot problems and nip them before they escalate, and establish plans to meet your business goals. The business plan is only useful if you use it. Ninety percent of new businesses fail in the first two years. Failure is often attributed to a lack of planning. To enhance your success, use your plan! A comprehensive, well-constructed business plan can prevent a business from a downward spiral. Finally, your business plan provides the information needed to communicate with others. This is especially true if you are seeking financing. A thorough business plan will have the information to serve as a financial proposal and should be accepted by most lenders.

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What makes your product or service unique? What competitive advantage does the product or service have over its competition? Can you price the product or service competitively and still maintain a healthy profit margin?

3. The Market Investors look for management teams with a thorough knowledge of their target market. If you are launching a new product, include your marketing research data. If you have existing customers, provide an analysis of who your customers are, their purchasing habits, their buying cycle. For more information, see these companion articles: Conducting a Marketing Analysis and Prepare a Customer Profile. This section of the plan is extremely important, because if there is no need or desire for your product or service there won't be any customers. If a business has no customers, there is no business. This section of the plan should include: • A general description of your market • The niche you plan on capitalizing on and why • The size of the niche market. Include supporting documentation • A statement and supporting documentation as to why you believe there is a need for your product or offering by this market • What percentage of the market do you project you can capture? • What is the growth potential of the market? Include supporting documentation • Will your share of the market increase or decrease as the market grows? • How will you satisfy the growth of the market? • How will you price your goods or services i n the growing competitive market? 4. The Marketing Strategy Once you have identified who your market is, you'll need to explain your strategy for reaching the market and distributing

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ENTREPRENEURSHIP MANAGEMENT

8.

Anant Dhuri

Are there certain areas of the business where the competition surpasses you? If so, what are those areas and and how do you plan on compensating?

Analyzing your competitors should be an on-going practice. Knowing your competition will allow you to become more motivated to succeed, efficient and effective in the marketplace. Operations Now that you have had an opportunity to really sell your idea and wow potential investors, the next question on their mind is how you will implement the idea. What resources and processes are necessary to get the product to market? This section of the plan should describe the manufacturing, R&D, purchasing, staffing, equipment and facilities required for your business. You'll want to provide a roll out strategy as to when these requirements need to be purchased and implemented. Your financials should reflect your roll out plan. In addition, describe the vendors you will need to build the business. Do you have current relationships or do you need to establish new ones? Who will you choose and why? The Management Team For most investors the experience and quality of the management team is the most important aspect they evaluate when investing in a company. Investors must feel confident that the management team knows its market, product and has the ability to implement the plan. In essence, your plan must communicate management's capabilities in obtaining the objectives outlined in the plan. If this area is lacking, your chances for obtaining financing are bleak. If your team lacks in a critical area, identify how you plan on compensating for the void. Whether it is additional training required or additional management staff needed, show that you know the problem exists, and provide your options for solutions. When preparing this section of the business plan you should address the following five a reas: 1. Personal history history of the principals: a. Business background background of the principals b. Past experience -- tracking successes, responsibilities responsibilities and capabilities

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ENTREPRENEURSHIP MANAGEMENT

6.

Anant Dhuri

Will you pay overtime?

IV. Financial Data At the heart of any business operation is the accounting system. It is important to have a certified public accountant establish your accounting system before the start of business. At times there is a tendency to do it yourself. Remember that an incredible number of businesses fail due to managerial inefficiencies. Leave it to the trained professional to help you in the area of accounting and legal matters. If your business can't afford a public accountant to establish your books, then you are undercapitalized. You need to secure additional resources before starting. One of the first steps to having a profitable business is to establish a bookkeeping system which provides you with data in the following four areas: Balance Sheet - indicates what the cash position of the business is and what the owner's equity is at a given point • (the balance sheet will show assets, li abilities and retained earnings). Break-Even Analysis - is based on the income statement and cash flow. All businesses should perform this analysis •

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Anant Dhuri

Working capital (the stocks needed by the business –e.g. r raw materials + allowance allowance for amounts that will be owed by customers once sales begin) Growth and development (e.g. extra investment in capacity) One way of categorising the sources of finance for a start-up is to divide them into sources which are from within the business (internal) and from outside providers (external).

INTERNAL SOURCES The main internal sources of finance for a start-up are as follows: 1. Personal sources - These are the most important sources of finance for a start-up, and we deal with them in more detail in a later section. 2. Retained profits - This is the cash that is generated by the business when it trades profitably – another important source of finance for any business, large or small. Note that retained profits can generate cash the moment trading has begun. For example, a start-up sells the first first batch of stock for £5,000 cash which which it had bought for £2,000. That

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ENTREPRENEURSHIP MANAGEMENT

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1. Savings and other “nest-eggs” An entrepreneur will often invest personal cash balances into a start-up. This is a cheap form of finance and it is readily available. Often the decision to start a business is prompted by a change in the personal circumstances of the entrepreneur – e.g. redundancy redundancy or an inheritance. Investing personal savings maximises the control the entrepreneur keeps over the business. It is also a strong signal of commitment to outside investors or providers providers of finance. Remortgaging is the most popular way way of raising loan-related capital for a start-up. The way this works works is simple. The entrepreneur takes out a second or larger mortgage on a private property and then invests some or all of this money into the business. The use of mortgaging like this provides access to relatively low-cost low-cost finance, although the risk is that, if the business fails, then the property will be lost too. . 2. Borrowing from from friends friends and family This is also common. Friends and family who are supportive of the business idea provide provide money either directly to the entrepreneur or into the business. This can be quicker and cheaper to arrange arrange (certainly compared with a standard bank loan) and the interest and repayment terms may be more flexible than a bank loan. However, borrowing in this way can add to the stress faced by an entrepreneur, particularly if the business gets into difficulties.

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entrepreneur, the most attractive word in your vocabulary is growth. You want high growth because in your mind, that denotes a successful business. It makes perfect sense – if you were unsuccessful you definitely wouldn’t grow… so the opposite must be true! 1. To hire or not not - One pitfall (or opportunity) in continuous growth is that at some point you will run out of capacity to handle everything personally, so you have to decide whether this is an ongoing trend or just a spike. Do you take on people to help or do you ‘get ‘ get through’ the blip and continue to manage m anage by yourself? 2. Choosing where to focus -  Often a fast-growing business has more profitable options to pursue than it has resources and a decision has to be made as to which options should be pursued. One way to determine which avenues offer the best opportunities for success are to select those with the highest return on investment (ROI). 3. Balancing the books - The other big issue facing a fast-growing fast-growing business is managing cashflow. As you grow, you will almost automatically have a lag between spending money and generating funds to put back into the business, and the faster the growth, the bigger the gap. Ensuring that you have the cash to back your growth is a major

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Anant Dhuri

Strengths and weaknesses of the venture's major competitors need also to be assessed. Having that exercise completed, you must position your company and its first products against its prime competitors. Positioning is very hard work, and you may need to call for help from a start-up consultant, a marketing expert, or an experienced business executive. Your strategic thinking, vision, and business strategy development exercise need to be supported by a set of analytical techniques. Michael Porter, a professor at the Harvard Business School, points out the five major elements of strategic business planning: an analysis of the industry in which the firm competes sources of competitive advantage an analysis of the existing and potential competitors who might affect the company an assessment of the company's competitive position selection or ratification of strategy, built on competitive advantage, advantage, and how it can be sustained. • • • • •

The currently dominant view of business strategy - resource-based theory - is based on the concept of economic rent and the view of the company as a collection of capabilities. This view of strategy has a coherence and integrative role

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Access to angel investors or venture capital Comprehensive business training programs

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3. License your product This can be an effective, low-cost growth medium, particularly if you have a service product or branded product, notes

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auction block was the easy part; then came the integration of the two companies. "The process was intense and exhausting," says Fasciano, who notes four keys to their success:

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Dearborn and Simon study may also have limited the range of problems identified. The study by Walsh employed a larger sample that consisted of 121 middle- and upper-level managers that had been selected by their organizations to attend a master's degree program at a large university. But again, the range of problems initially identified may have