Transcript Entrepreneurship – Meaning and Concept

Entrepreneurship – Meaning and Concept
• Entrepreneurship is the act of being an entrepreneur.
•French word ‘Entrependre’ and German word
‘uternehmen’ both referring to individuals who
undertakes an ‘endeavor’.
•Hence, anyone who exhibits the characteristics of
self-development, creativity, self-decision making and
risk taking.
• According to oxford dictionary Entrepreneur is ‘one
who organizes and manages enterprise involving high
risk’. But researches indicates that entrepreneurs need
not necessarily be high risk takers, however, they
Entrepreneur – Different Perspective-Nature
• An Economist defines an entrepreneur as one who
brings resources, labour, material and other assets in
to combinations that make their value greater than
before and also one who introduces changes,
innovations and a new order.
•A Psychologist defines an entrepreneur as a person
who is typically driven by a psychological force,
which create a desire to obtain or attain something.
•As per sociologist a person whose actions would
determine social status & contribute to societal dev.
•As per Management expert a person who has a
vision and generates action plan to achieve it.
Concept - Changing Definition
1. Richard Cantillon (1755)
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Entrepreneur is a person bearing risk.
First person to recognise the role of entrepreneur
in economy as a economic function than social
function.
Stated farmer as a entrepreneur, who promises to
pay fixed sum of money to landowner, with out
assurance of the profit he will drive.
Function of entrepreneur and not his personality
2. Jean Baptiste Say (1800)
• An Agent combining all factors of production.
• Special personal qualities
•Unlike, Cantillon, Say did not emphasize uncertainty
in his definition.
•Analysed central function of the entrepreneur
independent of any other social framework
3. Frank Knight (1921)
• Recipient of pure profits. Pure profit is bearing the
cost of uncertainty.
•Discusses uncertainty and risk.
•Involves primary and secondary part :
a. Primary problem or function is deciding what
to do and how to do
b.Doing things and actual execution of activity,
becomes in real sense a secondary part.
4. Max Weber (1930)
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Innovator with unusual will and energy, charity of
vision and ability to act.
5. Joseph Schumpter (1934)
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Ability to identify new opportunities
Bearer of the mechanism of change the economy
6. Kirzner (1973)
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Contributes to movement toward equilibrium by
pursuing opportunities.
Understanding human actions as active and creative
rather than passive, automatic & mechanical.
7. Mark Casson(1982)
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Specialize in making judgmental decisions for
coordinating scare resources.
Decision making as personal quality.
Motivated by self-interest.
8. Stevenson and Sahlman (1987).
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Relentless pursuit of opportunity without regard to
resources currently enrolled.
9. Gartner (1990)
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Actions taken to create organisations.
Accumulation and deployment of resources and
building Org Structure to pursue opportunities.
10. Bygrave and Hofer (1991)
•As a process involves all functions, activities and
actions associated with the perceiving of opportunities
and the creation of organizations to pursue them.
11. Recent Trends
• Societal and environmental issues
•As per Global Entrepreneurship Monitor (2005) more
mgt qualified and young achievers likely to be into
entrepreneurship in comparison to 1998 findings.
•EDP , Institutes, financing, CVF, separate discipline,
institutes, profession
•Quality, Service, IT as resource, sustainable,
strategist, moderate risk, collaborative relationship
Drucker’s Views on Entrepreneur
“Innovations is the specific tool of entrepreneurs, the
means by which they exploit changes as an
opportunity for a different business or a different
service. It is capable of being presented as a discipline,
capable of being learned and practiced. Entrepreneurs
need to search purposefully for the sources of
innovation, the changes and their symptoms that
indicate opportunities for successful innovation. And
they need to know and apply the principles of
successful innovations.”
• Innovation at work, must be market focused /driven,
Personal attributes of a successful entrepreneur
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“ The five essential entrepreneurial skills for
success are concentration, discrimination,
organisation, innovation and communication” Henry Reed
As early as1950s, researcher began looking
personal attributes common among sucessful
entrepreneur.
McClelland(1961) found that entrepreneurs have
higher need for achievement than nonentrepreneurs.
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Thomas Begley and David Boyed in mid 1980s
have identified five dimentions unique to
entrepreneurs:
Entrepreneurs are high in need-achievement
Entrepreneurs like to think, they pull their own
strings(Control their own lives, not luck or fate)
Entrepreneurs are willing to take moderate risk.
This enable to earn higher returns on assets.
Entrepreuners have the ability to tolerate ambiguity,
as may be doing certain things for the first time.
Entrepreneurs have the drive to get more done in
less time and if necessary, despite the objections of
others.
•Timmons(1994) conducted more than 50 studies and
found consensus for six general characteristics –
1.Commitment and determination
2.Leadership
3.Opportunity Obsession
4.Tolerance of Risk, ambiguity and uncertainty
5.Creativity, self-reliance and ability to adapt
6.Motivation to excel
•Bianchi(1993) review indicates following
characterstics:
1.Being an offspring of self-employed
2.Being fired from more than one job
3.Being an immigrant or a child of immigrant
4.Previous employment in a firm with more than 100
people.
5.Being a eldest child in the family.
6.Being a college graduate.
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John Hornday of Bobson College has developed a
composite list of entrepreneurial traits:
Self Confidence and optimism
Positive response to challenges
Ability to take calculated risk
Flexibility and ability to adapt
Knowledge of markets
Ability to get along with others better
Independent mindedness
Versatile knowledge
9. Energy and efficiency
10. Creativity, need to achieve
11. Dynamic leadership
12. Response to suggestions
13. Take initiatives
14. Resourceful and persevering
15. Perceptive and foresight
16. Response to critisism
Entrepreneurial Characteristics – Indian Perspective
1. Vision : Dream and visualizing the ways and means to
achieve, visualizing market demands, socio-economic
and technological environment
• Without the vision of making a big mark on the mobile
industry Dhirubhai and now Anil Ambani could not
have made what Reliance Communication (An Anil
Dhirubhai Ambani Group) is today.
2. Knowledge : Conceptual knowledge and technicalities
of technological, operational, financial & market
dynamics.
• Without sound knowledge of computers Naryanmurthy
could not have made Infosys.
3. Desire to Succeed
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Constantly work to achieve higher goals.
Without a desire to succeed constantly Mukesh
Ambani would not have planned to ventured into
Retail, Real Estates and Biotech.
4. Independence
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Needs independence in work and decision making
without following rules of thumb and make their
own rules and destiny.
Without a desire for independence, Sabeer Bhatia
would not have quit his job to start enterprise own
his own and created Hotmail.com and Arzoo.com
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5. Optimism
Highly optimistic about achieving their vision.
Without optimism Narayanmurthy (who took loan
from his wife as not having enough finances) would
not have left a lucrative job and created Infosys.
6. Value Addition
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Not rule of thumb , but a constant desire to introduce
something new to existing business.
Create, innovate or even add value to the existing
products.
Without alue addition of ‘life time free incoming
calls’ Tata Indicom would not have been able to
create space in already saturated mobile markets.
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Leadership
Exhibits qualities of a leader -Good Planners,
Organizers, Good Communication Skills,
Empathetic toward their employees, good decisionmakers, initiative to implement plans, result oriented
8. Hard working
• At time also called as workaholics.
• Continuous efforts to achieve success and know
that there is no substitute for hard work
9. Desire to control over their own fate
• Do not move in herds like sheep but pave own paths.
• Do not believe in luck or destiny but create their
own destiny.
10. Risk-Taking Ability
• Frank Night has identified risk-taking ability as the
most integral element in defining entrepreneurial
characteristics.
•View risk as Career risk, financial risk, psychological
risk(Stress).
Attributes and Skills
• These so called entrepreneurial characteristics can be
looked at to determine a set of skills useful for
entrepreneur to possess.
•Group Skills –work and learn together, task force,
project teams
•Technical Skills – technological, writing, mgt,
organising.
•Business mgt skills, DM and analytical skills
•Personal Entrepreneurial Skills- risk, innovative,
visionary, persistent, manage change.
•Behavioral Skills – Motivation, judgment,. Initiative,
confidence, discipline etc.
•Communication Skills and Listening skills
•Soft Skills - eg PEOPLE•Problem solving, ethics, open mindedness,
persuasiveness, leadership, educational interest.
• After qualitative assessment of the skill-set,
entrepreneur may try to access by forming foundation
team or by attracting partner or employees.
In addition to the skills entrepreneur also make some
attitudinal adjustments such as adaptability to lifestyle
changes, patience to start from scratch, confrontations,
dealing with failure, willingness to learn.
Classification of Entrepreneurs
• Entrepreneurs are broadly classified according to the
types of business, use of profession skills, motivation,
growth and stage of development.
•Clearence Danhof classifies entrepreneurs on the
basis of stage of economic development; some other
have classified on the basis of their functions and
characteristics.
•In fact, differentiating between entrepreneurs is to
study similarity in grouping, differences in various
groups and factors and consequences of
entrepreneurship in different population.
1. According to timing of venture creations
a. Early Starters
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Start venture with little or no full-time work experience
Often from family business
Suhas Gopinath started his company Gopals Inc. at
the age of 14, in USA as Indian laws do not permit a
minor to run a company.
b. Experienced
• Spent a few yrs in family business or a large company.
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Usually, the venture is related to the same business
as previously engaged in.
Narayan Murthy together with his like minded
professionals started Infosys at the age of 35 years
c. Mature
• Very senior professionals, some at the level of
CEO
• Very high confidence and desire to do things in a
way that may not be totally acceptable to their
earstwhile employers.
• Ashok Soota and Subroto Bagchi quit Wipro to
start Mindtree.
• BVR Subbu, ex-CEO of Hyundai India, recently
started a venture that brought the plant of Daewoo
in India.
2. According to type of business
a. Business Entrepreneurs :
• Conceive an idea for a new product/service and
then create business to materialise idea in reality.
• Tap both production and material resources to
develop new business opportunity.
• Oftenly small business entrepreneurs with small
business units eg. Printing press, advertising
agency, textile processing house, readymade
garments or confectionary.
b. Trading entrepreneur
• Trading Activities not manufacturing work
• Identifies potential markets, stimulates demand
and creates interest and demand among buyers to
go in for his product.
• Can be engaged in both domestic &overseas trade.
• Whole sale trade, retail trade, Mall trading,
exporters, importers, stock trading, real estate.
c. Industrial Entrepreneur
• Ability to convert economic resources and
technology into profitable venture
• Essentially a manufacturer, identifies potential
needs and starts industrial units for new products.
d. Corporate Entrepreneur
• Individual who plans, develops & manages a
corporate body.
• Corporate body is a form of business organisation,
one body of many individuals, large corporations,
which are registered as separate legal entity under
some statute or act eg. Company regd under
companies act, or trust under trust act.
e. Agricultural entrepreneur
• Agricultural activities such as raising & marketing
of crops, fertilizers and other inputs of agriculture.
• Motivated to raise the productivity through
mechanization and technology.
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Plantation, horticulture, dairy, forestry, floriculture,
animal husbandry, poultry, seeds.
3. According to use of technology
a. Technical Entrepreneur
• Essentially an entrepreneur of craftsman type,
develops high quality goods due to craftsmanship.
• Concentrates more on production than marketing.
• Introduction techniques, innovations for production.
b. Non-technical Entrepreneur
• Not concerned with technical aspect of production,
but developing alternative distribution strategies to
promote their business.
c. Professional Entrepreneur
• Interested in establishing a business but does not
have interest in managing or operating once it
established.
• Professional entrepreneur sells out running
business and starts another venture with the sales
proceeds.
• Such an Entrepreneur is dynamic who conceives
new ideas to develop new projects.
4. According to Motivation
a. Pure Entrepreneur
• Motivated by psychological and economic
rewards.
• Undertakes entrepreneurial activities for personal;
satisfaction in work, ego or status.
b. Induced Entrepreneur
• Induced to take entrepreneurship due to policy
measures of the govt that provides assistance,
incentives, concessions and overhead facilities to
start ventures.
c. Motivated Entrepreneur
• Desire for self-fulfillment is the motivation
• Making and marketing new products for
consumers
• If successful, further motivated by reward in term
of profit.
d. Spontaneous Entrepreneurs
• Start business out of their natural talents
• Initiative, boldness and confidence as motivation
• Strong conviction and confidence in their ability.
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According to Growth
Growth Entrepreneur
Takes up a high growth industry
Chooses an industry which has sustained growth
prospects.
b. Super-Growth Entrepreneur
• Those entrepreneur who have shown enormous
growth of performance in their venture.
• The growth performance is identified by the
profitability and liquidity of funds.
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According to stage of development
First-generation Entrepreneur
One who starts not from family business
Innovator, combining different skills and
technologies to produce marketable products or
service.
b. Modern Entrepreneur
• One who undertakes those ventures which go well
along with changing demand and suit in the
current marketing needs.
c. Classical Entrepreneur
• Concerned with customer and marketing needs
through the development of self-supporting
ventures.
• Stereotype who aims to maximize economic
returns at a consistent level with the survival of the
firm with or without the element of the growth.
7. Classification based on Socio-cultural Variables
a. Entrepreneurs from business family
• Few socio-cultural groups have dominated
business scene in India, prominently , Marwadi,
Gugrati, Parsee, Sindhi communities. Tatas, Birlas,
Wadias and Singhanias are all from business
community.
• Entrepreneurship is easier for someone from
business family or business community as having
solid support structure.
b. Women entrepreneurs
• Progressive laws & incentives have boosted women
presence in entrepreneurial activities in diverse fields.
• Kiran Majumdar Shaw founded Biocon, which is now
a leading Biotech firm in India.
c. Social Entrepreneurs
• As per Ashoka – Innovators, a global non-profit
organization, a social entrepreneur is one who
recognizes the part of society which is stuck and
provides new ways to get it unstuck.- child upliftment,
environment, women empowerment, blind, social
unprivileged.
• Verghese kurien of Amul, Rippan Kapur of CRY,
8. Other Categories
a. Innovative Entrepreneurs
• Aggressive assemblage of information and
analysis of results from combination of factors.
• Aggressive in experimentations and one who see
and explore opportunity.
b. Adoptive or Imitating Entrepreneurs
• Readiness to adopt successful innovation.
• Follow innovators,imitate techniq & technologies.
c. Fabian Entrepreneurs
• Great caution and scepticism in practicing change.
• Shy & lazy, no will to introduce change or new
d. Drone Entrepreneurs
• Refusal to adopt and use new opportunities to
make changes in production methods.
• Traditional ways, products losses its marketability
and operations becomes uneconomical.
e. Aspiring Entrepreneurs
• Have dream of starting a business, yet not made
the leap from their current employment into the
uncertainty of a startup.
f. Lifestyle Entrepreneurs
• Develop an enterprise that fits their individual
circumstances and style.
• Basic intention is to earn an income for themselves
& their families.
g. Mompreneurs
• Homemaker entrepreneur
h. IT Entrepreneurs
• DBMS, WWW, hotmail, kundli, portals, KIOSKs.
i. Entrepreneurs - intra+entrepreneur
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Person within large corporations who takes direct resp
-onsibility for turning an idea into profitable finished
products through innovations & assertive risk taking
Business Plan
• Blueprint of step-by-step procedure
followed
successful
to convert business idea into a
business venture.
• First of all Identify an innovative idea,
researches external environment to list O&T,
identifies internal strength and weakness,
assesses feasibility of the idea and than allocate
resources( production /operation, finance, HRs)
•A business plan is a written description of the
goals and objectives of the business and how
they are going to be achieved. It includes the
mission of the business along with the
production, organizing, marketing, and
financing intentions –
•Is it feasible to operate my own business?
•Is my business idea feasible?
Why Develop a Business Plan? Or objectives of a business plan
A business plan is a very important tool if you are starting a new business or
expanding an existing one.
 The business plan communicates to others how successful you are
going to be.
 Lending institutions require them to support loan applications.
Experience shows that successful businesses have a plan; the majority
that fail do not.
A good business plan is your road map to success!
 Implementing the plan
Objective evaluate the prospects of the business - TOWS
Resource requirement for implementation
To document owenership arrangement, future prospects, and projected
growth rate.
BP Process
Preliminary Investigation
Idea Generation
Environmental Scanning
Feasibility Analysis
Project Report Preparation
Evaluation Control and Review
1. Idea Generation
• Innovative idea, new concept, product or service also
incremental value addition.
•Sources of new ideas – consumers, existind
companies, R&D, employees, dealers, retailers.
•Methods of generating new ideas – brain storming,
GD, data collections, feedback, invitation of ideas
through advertisements, mails or internet, market
research, commercializing inventions, business
contests, fests, business bazigar on Star TV- contest
business plans
2. Environmental Scanning
•After idea generation, next phase,
•Environment scanning - both external and internal
that includes analysis of perspective TOWS of
business enterprise.
•Sources of information can be both informal(family,
friends and colleagues) and formal(bankers,
magazines, newspapers, govt deptts, seminars,
suppliers, competitors, dealers.
•Environment scanning focus on maximizing
information because more supportive the information,
greater is the confidence regarding the success of the
business.
External Environment
1. Socio-cultural Appraisal : Social and cultural
norms, beliefs, value system, open or close culture,
level of rigidity/flexibility of a society toward product
/service/concept. Eg Americans are experimenting
and adventurous whereas Arabs are conservative.
For a innovative product like Bungee jumping
acceptability would be more in USA than UAE.
2. Technological know-how to convert the idea into a
product, modern technologies expected in the
future. Eg. Idea of manufacturing tobacco-free
cigarettes, technological appraisal can assess
whether this kind of a product is possible or not.
3. Economic Appraisal : Assessment of economy in a
given society in terms of inflation, per capita
income and consumption pattern, balance of
payment, consumer price index etc. Healthy
economy offers greater opportunities for growth
and development of industry together with
confidence to the entrepreneur about the success of
his business venture.
4. Demographic Appraisal : OA population pattern in
a given geographical region. It includes variables
like age, profile, distribution, sex, education
profile, income distribution etc. Demographic
appraisal help in identifying size of target market
5. Government Appraisal : Assessment of legislation,
policies, incentives, subsidies, grants, procedures
etc. formulated by government for a particular
industry. For eg. Government policies of subcidised
electricity in Uttranchal is an added advantage for
setting up industry due to its heavy dependence on
power. Whereas in UP, electricity is not only
expensive but is also of acute shortage, which led
entrepreneurs to depend on personal generators,
increases cost of the product. Uttranchal is a
proffered state for setting up manufacturing units in
comparison to UP.
• Outcome of the other policies too be taken in to
consideration while conducting govt appraisal.
Internal Environment
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Raw Material : Assess availability of raw material
at present and future, if not adequate/ shortage,
serious concern, where is the nearest source and
cost involved therein.
Production/Operation : Availability of
machineries, equipments, tools and techniques
required for production/ operations.
Finance : Assessment of total requirement of
finances in terms of start-up expanses, fixed
expanses and running expanses. It also indicates
source of finance that can be approached for
funding
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Market : It asses the present, potential and future
demands of the market.
Human Resource : Assessment of the kind of the
human resources required and its demand and
supply in the market. This helps in estimating the
cost and level of competition in hiring and
retaining the human resources.
Objective of the environment scanning should be
Maximizing information from maximum sources
for enhanced possibility of success in the business.
3. Feasibility Analysis
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Feasibility study is done to find whether the
proposed project (considering the above discussed
environment appraisal) would be feasible or not.
Feasibility study is dependent on environment
appraisal yet it is far more descriptive.
The variable/dimensions of feasibility analysis Market Analysis
Technical/Operational Analysis
Financial feasibility
Drawing functional plan
1. Market Analysis
•M A is conducted to estimate the demand and market
share of the proposed product/service in future.
•Demand analysis and market share is based on number
of factors - consumption pattern, availability of substitute
goods/service, competition etc.
•A preliminary discussions with consumers, retailers,
distributors, competitors, suppliers is carried to
understand consumer preferences, existing and potential
demands, strategy of competitors, and practices of
distributors, retailers etc., present and prospective
consumers, geographic and seasonality distribution of the
demand, marketing mix of competitors, accepted
marketing mix of consumers.
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Technical/Operational Analysis
Done to assess operational ability of the proposed
business enterprise.
Key questions to be answered are- what are the
technological and equipments needs, from where
this technology and equipments be obtained, from
where the raw material be obtained.
T/O analysis collects information about :
Material availability & requirement planning
Plant location
Plant capacity
Machinery and equipment
Plant layout
a) Material availability & requirement Planning
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Assessment of the raw material required for
production of goods/service.
Quality and quantity of raw material
Factors influencing availability of raw material
Price sensitivity of raw material
Perishable time of raw material
Material Requirement Planning i.e. quantity of
material required to let the production run
smoothly.
b) Analysis of choice of technology
•Identify whether product developed at the idea
generation stage is technologically feasible or not.
• Answers whether a technology for the product exists
or not, if exists in more than one form, which one
would be more profitable to the company.
•Choice of the technology would be affected by ;
capacity of the plant, amount of investment,
production cost, latest development, quantity of
planned production, impact of environment.
b) Analysis of choice of technology
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Identify whether product developed at the idea
generation stage is technologically feasible or not.
Answers whether a technology for the product
exists or not, if exists in more than one form,
which one would be more profitable to the
company.
Choice of the technology would be affected by ;
capacity of the plant, amount of investment,
production cost, latest development, quantity of
planned production, impact of environment.
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Plant location : Area(broad) where the enterprise is
to be established, like city, industrial zone or
coastal area. Plant location is the physical layout
of the business and is affected by process of
production, safety of personnel, minimum
production cost, scope of expansion, proper space
utilization etc. Location choice is influenced by
following factors :
i) Proximity to raw material and markets
ii) Availability of infrastructure like power,
transportation, water, communication means.
iii) Favorable government policies
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Other factors like climate conditions, availability
of manpower etc.
Machinery and equipment : Machinery and
equipment is dependent on production technology,
plant capacity, investment cost of buying, ,
maintenance and running cost.
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Financial Feasibility
Financial feasibility is done for financial
assessment of the proposed business venture.
Following cost estimates have to be carried out :
i) Cost of land and building – depending upon the
requirement and availability of funds, the land and
building can be hired, taken on lease or purchased.
ii) Cost of plant & machinery-estimating cost of plants
& machineries and their running & maintenance.
iii) Preliminary cost estimation – cost required for
conducting market survey, preparing feasibility
report, registration expenses, expenses involved in
raising capital from public & other misc expanses.
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Financial Feasibility
Financial feasibility is done for financial
assessment of the proposed business venture.
Following cost estimates have to be carried out :
i) Cost of land and building – depending upon the
requirement and availability of funds, the land and
building can be hired, taken on lease or purchased.
ii) Cost of plant & machinery-estimating cost of plants
& machineries and their running & maintenance.
iii) Preliminary cost estimation – cost required for
conducting market survey, preparing feasibility
report, registration expenses, expenses involved in
raising capital from public & other misc expanses.
iv) Provision of Contingencies : Needs to be made to
cover certain unexpected expanses which can
emerge due to change in external environment like
increase in the price of the raw material, petrol
price, transportation costs.
v) Working capital estimates for running the business
are also made.
vi) Cost of Production – It include raw material cost,
labour cost, overhead expanses, utilities like
power, water, fuel etc.
vii) Sales and Production estimates : Based on the
plant capacity the production and sales estimates
are made which help in estimating profitability.
vii) Profitability projections are made on the following
parameters
a. Cost of production
b. Sale expenses
c. Administrative expanses
d. Expected sales
e. Calculation of the above gives gross profit
Drawing Functional Plan
• After feasibility study, functional plans are drawn
which means developing plans and strategies for all
operational areas : marketing, finance, HR and
production.
a) Marketing Plan : MP lays down the strategies of
marketing (Marketing mix) which can lead to success
of business. From the market feasibility study and
marketing research, potential/present demand of
customers, which helps in laying down the strategies
for market segmentation, identification of target
market and laying down strategies for the target
market.
b) Production/operation Plan : Production plans are
drawn for manufacturing whereas operational
plans are for service sector. It includes strategies
for following parameters :
1. Location and reasons for selecting the locations
2. Physical layout
3. Cost & availability of machinery, equipments, raw
material
4. List of suppliers and if possible, distributors.
5. Cost of manufacturing / running operations
6. Quality management
7. Production scheduling, capacity mgt,inventory mgt
c) Organisational Plan : Defines the type of
ownership, organization structure and proposes
HRM practices that would govern the successful
running of proposed business enterprise.
d) Financial Plan : Financial Plan indicates the
financial requirement of the proposed business
1. Cost incurred in smooth running of all the plans –
financial, marketing, operations and HRs.
For eg. Cost incurred in the marketing plan would
include forecasting sales, for production plan it
includes cost of goods, for organizational plans it
includes cost of compensation to employees.
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Projected cash flows.
Projected income statement
Projected break-even point
Projected ratios.
Projected Balance sheet.
Project Report Preparation
•Written document that describes sep-by-step,
strategies involved in starting and running a business.
•Project report helps to understand the opportunities,
problems and weakness of the business.
• It guides the entrepreneur in actually starting up and
running the business venture.
• Helps to monitor whether the business is going to be
as projected in the business plan or not.
• Helps in documenting cost estimates of the business.
•Handy tool to persuade investors and financial
institutions to fund a project.
Essentials of a Project Report
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The project report should be sequentially arranged.
It should be exhaustive(covering all the details).
Should logically & objectively explain projections
Projections should be appropriately for 2 to 10 yrs
Should professionally made to demonstrate that
promoters posses entrepreneurial acumen, experience.
Should justify financial needs & financial positions
Should also justify market prospects and demands
Should be attractive to the financial agencies and
investors.
Should also have a high aesthetic value.
Preparing a Project Report
1. Cover Sheet : It mentions the name of the project,
address of the headquarters (if any) and name and
address of the promoters.
2. Table of Contents : A Good Project report should
be divided in to sections eg. 1,2,3 or I, II, III or
A,B,C and each section into subsections eg. 1.1,
1.2, 1.3 or I-i, I-ii,I-iii or A-a.A-b,A-c. No matter
which method is used for classification but once a
method is selected than uniformly adopted for
entire project report.
3. Executive Summary : A brief summary should
about 2 to 3 pages. Briefly describe the company,
mention some financial figure and some salient
figures of the project. Generating interest in the
minds of the readers is the prime motive of the
executive summary.
4. The Business : This will give the details about the
business concept. It will discuss the objective of
the business, brief history about the past
performance, form of ownership along with the
proposed headquarters.
5. Funding Requirement : To address to the investors
and financial institutions, a careful, well planned,
funding requirement should be documented. It is
also necessary to project how these requirements
would be fulfilled. Debt equity ratio can give an
indication about how much finance would
company require and how it would like to fund the
project.
6. The Product/Services : Description of product/
service, features, product range, and advantages in
comparison to available product in market.It also
give details about patents, trademarks, copyrights,
franchise & licensing agreements.
7. Function plans : Functional plans for Marketing,
finance, human resources, and operations.
a. Marketing Plan : Marketing mix strategies on the
basis of MR MR – market characteristics and
demography, SWOT of market and competitors.
Marketing mix strategies for product/service,
price, promotion, distribution. The budget for the
marketing plan are drawn at an end.
b. Operational plan : Give information about i) plan
location, reason for the selection thereof – vicinity
of the market, suppliers, labour, availability of raw
material, machinery, or does it have advantages of
the govt. subsidies or any other. ii) Plant layout to
provide a pattern of arrangement of the
organisation and would indicate exhaustive
planning of the business. iii) Plan for material
requirement, inventory management and quality
quality control are drawn for identifying further
costs and intricacies of the business. Finally the
budget for operational plan is also drawn.
c. Organisational Plan : The organisationa plan
indicates the pattern of flow of responsibilities and
duties amongst people in the org. Detail about the
BOD, it can also enlist the manpower plan that
would be required to put life into the company and
it will also enlist laws that would be governed in
managing the employees of the org. In the end the
org plan is also budgeted.
d. Financial Plan : Usually drawn for 2 to 5 years for
a existing company. A summary of financial data is
given, whereas for new org, the following
projections are drawn ;
i) Projected sales
ii) Projected Income and expenditure statement.
iii) Projected break even point
iv) Projected profit and loss statement.
v) Projected Balance sheet.
vi) Projected cash flows.
vii) Projected fund flow.
viii)Projected ratios.
8. Critical Risks : The investors are interested in
knowing the tentative risks to evaluate the viability
of the project and to measure the risk involved in the
business.
9. Exit Strategy : Details about how the organization
would be dissolved, what would be the share of the
each stakeholder in case of winding-up of the
organization. It further help in measuring the risk
involved in investing.
10. Appendix : Information about the CV of the owners,
ownership agreement, certificate from pollution
board, MOU, AOA and all other supporting
agreements/documents that can help in marketing
the project viability at large.
Key Components of a Business Plan
The business plan covers six key areas:
The Industry, the Company, and the Products
Market Research and Analysis
Marketing Plan
Operating Plan
Management Team
Financial Plan
The Industry, the Company, and the Products
This section of the business plan describes the business venture in a
detailed but concise manner. You must clearly describe:
 The nature of the industry
 The proposed business
 The product the business
plans to offer
The Industry
Present the current status and outlook for the industry in which the
business will operate.
 New products and developments
 New markets and customers
 General trends affecting the business
 Identify sources of information used to describe trends
The Company
Write a detailed description of the proposed business venture, the
products and services it will offer, and the principal customers.
 Mission statement with goals and objectives
 Ownership and legal form of the company
 Reasons why the business will be successful
The Products or Services
Describe in detail the products or services to be sold, as well as the
application of the product or service.
 Benefits to the customers
 Competitive advantages
 Unique features
 Current state of development
Market Research and Analysis
This section of the business plan presents enough facts obtained
through market research and analysis to determine if the product
or service has a substantial market in a growing industry despite
a competitive market.
 Customers
 Market Size and Trends
 Competition
 Market Share and Sales
Types of Market Research
PRIMARY RESEARCH = DO IT YOURSELF:
 Observation
 Surveys
 Interviews
SECONDARY RESEARCH = USE EXISTING DATA:
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Public Library
College or Universities
Chamber of Commerce
Business Publications
Trade Shows
The Internet
Census Information
Sales Tax Data
Types of Market Analyses
The information obtained through primary and secondary research
techniques can be analyzed in a variety of ways.
 Economic Trend Analysis
 Political and Social Analysis
 Customer Analysis
 Market Potential Analysis
 Competitive Analysis
Customers
Identify your target market and develop a customer profile.
 Demographic profile
 Lifestyle patterns
 Expectations
Customer Profile
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Age
Income
Education
Gender
Stage of business
Type of business
Size of business
Location
Behavior patterns
Customer expectations
Other ???
 Who is your target audience?
 How will you reach this audience?
Market Size and Trends
Describe the primary market for the product, both geographically and
in terms of sales volume.
 Describe seasonal fluctuations
 Discuss potential for growth
 Discuss factors affecting growth
Competition
List the strengths and weaknesses of competitive products and
services and list the companies that supply them.
 Identify and list current and future competitors
 Assess the competition on the basis of price, quality,
performance, service, etc.
 Discuss advantages and disadvantages of competing
products or services
Market Share and Sales
Summarize what it is about your product or service that will make it sell
in the face of current and future competition.
 Identify and list major customers and estimate potential sales
 Estimate share of the market
 Estimate sales in units and dollars for the next two to five years
Marketing Plan
This section of the business plan describes the company’s marketing
goals and objectives and how they will be achieved.
 Overall Market Strategy
 Pricing
 Sales Tactics
 Advertising and Promotion
 Packaging
 Marketing Plan Outline
Overall Market Strategy
Describe the general marketing philosophy and strategy of the
company.
 Derived from market research and analysis results
 Include discussion of markets targeted for sales promotions
 List short-term and long-term marketing objectives
 Discuss specific marketing tactics
Pricing
The pricing strategy selected can mean the difference between
success and failure.
 Provide a detailed description of the pricing strategy for each
product or service
 Outline factors considered in developing pricing strategies
 Discuss wholesale vs. retail pricing strategies
 Discuss price levels, geographic terms, discount policies, etc.
Sales Tactics
Describe specific actions that will be taken to generate sales and
distribute the product or service to customers.
 Analyze effectiveness of everything available within the sales
system
 List channels such as salespeople, agents, dealers, and
direct mail services
 Describe methods that will be used to distribute products
to customers
 Describe merchandising techniques
Advertising and Promotion
Describe approaches the company will use to bring the product or
service to the attention of the target market.
 List advertising methods along with benefits and costs
 Discuss promotional efforts and strategies
 Publicity
Packaging
Describe how the product will be packaged for the target market.
 Package design
 Package labeling
 Packaging materials
Marketing Plan Outline
A marketing plan outline is a useful tool for pulling together information
related to the marketing plan. The marketing plan outline should include
information on the following:
 Marketing situation
 Marketing objectives
 Marketing Strategies
 Budget
 Action plan
 Evaluation