CONVERTING BUSINESS OPPORTUNITIES

INTO REALITY

Process ofsetting up a Small-Scale Industry

Different Phases

1. Selection of a small industry and preparation of feasibility and project reports;

2. Accommodation, power and other infrastructural facilities;

3. Machinery;4. Finance;5. Marketing; and 6. Securing various incentives offered for the

development of small- scale industry.

Selection of a Small-scale Industry

The objectives of the promotional regulation are to provide an impetus to the growth of small-scale industry and regulate the supply of machinery, electricity, water, premises, finance, raw materials and markets. The process of production and marketing is governed by set rules and regulations. In a way these regulations are a boon to the small entrepreneur,

Starting a Small-scale Industryi. The entrepreneur should be fully conversant with the product

line. It is not enough that he knows the method of manufacture; he has to know how to operate the machines, etc.

ii. He should have adequate shop floor experience to guide the machine operators in tool-setting techniques or the die-marker on the specific needs of his press tools.

iii. He should be familiar with the raw materials he requires, their specifications, how to ensure their quality and where to get them at reasonable prices.

iv. He should know how to keep accounts, how to maintain stores, how to prepare the balance sheet. etc.

v. He should have knowledge of marketing channels, distribution network, agency practices, transport intricacies, and the economics of packaging

vi. He should know how to ensure the stipulated quality of his product.

vii. He should be well versed in taxation and other laws governing small-scale industries.

viii. He should be willing to put up with polluted environments and small inconveniences.

ix. He should be will to put up with bureaucratic regulations and insults, and move with the wind.

x. He should know how to avail himself of the various benefits available for the small-scale industry.

xi. He should prossess the following qualities—expertise, shrewdness, resourcefulness and most important, preseverance. There is no substitute for hard work.

xii. He should have the guts to withstand the polluted climate in which he has to build his unit.

Feasibility Analysis

i. A brief description of the market, including the market area, methods of transportation, existing rates of transportation. Channels of distribution, and general trade practices.

ii. An analysis of past and present demand, including the determination of quantity and the value of consumption, and identification of the major consumers of the product.

iii. An analysis of past and present supply, broken down as to source (whether imported or domestic), as well as information which will assist in determining the competitive position of the product, such as the selling prices, quality and marketing practices of the competitors.

Technical Analysis

i. A description of the product, including specifications relating to its physical, mechanical, and chemical properties, as well as the uses of the product.

ii. A description of the selected manufacturing process, showing detailed flow charts and presenting the alternative process which may have been considered and the justification for the adoption of the selected process.

iii. A determination of the plant size and production schedule, which includes the expected volume for a given time period on the basis of start-up technical factors.

iv. Selection of machinery and equipment, including specifications, equipment to be purchased and its origin, quotations from suppliers, delivery dates, terms of payment, and a comparative analysis of alternatives in terms of cost, reliability, performance, and spare parts availability.

v. An identification of plant’s location and an assessment of its desirability in terms of its distance from raw material sources and markets. For a new project, this part may include a comparative study of different sites, indicating the advantages and disadvantages of each

vi. A design of the plant layout and an estimate of the cost of the erection of the proposed buildings and land improvements.

vii. A study of the availability of raw materials and liabilities and utilities, including a description of physical and chemical properties, quantities needed, current and prospective costs, terms of payment, locations of sources of supply, and continuity of supply.

viii. An estimate of labour requirements, including a detailed breakdown of direct and indirect labour requirements, and the supervision required for the manufacture of the product.

ix. A determination of the type and quantity of waste to be disposed of, together with a description of the waste disposal method, its costs, and the necessary clearance from proper authorities.

x. An estimate of the production cost of the product.

Financial Analysis

i. For projects that involve new companies, statements of total project cost, initial capital requirements, and cash flows relative to the project time-table.

ii. For all projects, supporting schedules for financial projection, stating the assumption made as to the collection period of sales, inventory levels, payment period of purchases and expenses, and the element of production cost, selling, administrative, and financial expenses.

iii. For all projects, a financial analysis showing returns on investments, returns on equity, break-even volume, and price analysis.

iv. For all projects, if necessary, a sensitivity analysis to identify items which have a substantial impact on profitability or possibly a risk analysis.

Investment Proposal Normally

i. General information on the product, company history, the nature of the industry and the reputation and qualifications of the existing or proposed management.

ii. A description of the period, which usually consists of extracts from economic feasibility studies and includes information on such items as market, production, selected manufacturing methods (with detailed indication of the cost of equipment and operational expenses), and a financial statement.

iii. Miscellaneous information, such as the steps taken for the implementation of the project and the qualifications of the technical partners envisaged or selected.

Licences

i. An impressions seems to have gained ground among some people that there are some restrictions on the setting up of small-scale industrial units and that licences from either the Central or State Government have to be taken out before an entrepreneur can take steps to start a small-scale industrial unit. This impression is not correct.

ii. It is open to any entrepreneur to set up an industrial unit in small-scale sector; no formal permission from the State or Central Government is necessary for this purpose.

iii. Small-scale units have, however, to conform to the rules and regulations prescribed by State or local authorities under the Factories Act, the Commercial Establishments Act, the Town Planning Rules, and made for the issue of quotas of raw materials, etc.

1. Registration of Small-scale Industries

2. Infrastructure

i. Apply to the Industries Commissioner, Industries and Labour Department, Government of Maharashtra, and obtain a “NoObjection Certificate.”

ii. With a copy of the above NOC, apply in Factory Form “A”, to the Ward Engineer of B.M.C.

iii. Clarifications and submission of further details on the information supplied in Form “A” may follow.

iv. The Sub-Engineer will inspect the premises and submit Form No. ‘2’ to his Assistant Engineer.

v. The Assistant engineer will scrutinise and confirm if the applicant’s activity conforms to the zone and will intimate to the application in Form No. ‘3’ if there is no objection or in Form No.’4’ if there is any objection.

vi. Form ‘B’ will be received by the applicant if Form No. ‘3’ is issued to him. This form should be filled in and submitted.

vii. Within 21 days after the submission of Forms ‘A’ , ‘B’ and the factory plans in triplicate, the Assistant Engineer will issue Form Nos. ‘5’ and ‘6’ in which he will specify:

a. The electric power sanctioned (thereafter, the BEST provides current);

b. Adequate water facilities provided:

c. The various requirements, requisitions and conditions for operating the factory, including those required by the Chief Inspector of Factories.

Machinery

i. The scheme for the supply of indigenous and imported machines on hire-purchase basis was lunched in March 1956 to enable small entrepreneurs without substantial means to avail themselves of assistance.

ii. The scheme is different from the credit operations scheme for entrepreneurs. The NSIC has acquired the necessary experience and expertise in the procurement of machines from the right sauces. It also takes care of the problems up to the stage of delivery of machineries to the entrepreneurs.

Raw Materials

i. Raw material components and spares, both indigenous and imports;

ii. Non-ferrous materials-both indigenous and imported;

iii. Iron and steel- both indigenous and imported; and

iv. Chemicals- indigenous and imported

Finance

i. Purchase and installation of machinery;

ii. Procurement of raw materials and components and the manufacture of products.

iii. Wording funds;

iv. Availability of funds until the realization of sales.

Marketing

i. The small scale units, desiring to avail themselves of assistance, have to enlist themselves with the NSIC.

ii. Instead of purchasing tender sets from the DGS & D, the small units enlisted with the NSIC automatically gets them from it and its branches fee of cost.

iii. It their prices are acceptable to the DGS & D, they are not required to pay a security deposit on the issue of a competency certificate by NSIC;

iv. Price preference up to 15 per cent over the quotations of large-scale units is considered by the Purchasing Agency, depending on the merits of each case;

v. Wherever they feel that injustice has been done to them, the NSIC takes up their cases with the DGS & D and other Government Departments such as defense, the Railways and the P & T Department in order to find out the reasons for non-placement of the contract with the units, and tries to redress their grievances.

MARKETING OF PRODUCTS OF SMALL-SCALE INDUSTRIES

GOVERNMENT LARGE

INDUSTRIES

WHOLESALE

TRADE

CONSUMER

RETAIL TRADE

EXPORTS

P & TDEFENCE STORES

NSIC SIDE

The Winning Edgei. The most important aspect of successful business is leadership. It

calls for clear vision, goals and objectives, well defined mission, dash and employees participation.

ii. Adequate but well-orchestrated control. Constant feedback of results as well as setting and adherence of high standards gives an organization a cutting edge over others. Planning, foresight and analysis are also important qualities.

iii. To able to extract the best from its employees through total involvement, the organizations put a lot of emphasis on proper internal communication and on training employees.

iv. The successful organization is one which is very close to the market place. The process of systematic market research is used to develop products or process and to provide value for money to the customers. This helps to gain the market share.

v. The next most important characteristic of a winning business organization is “Zero Basing” or sticking to the last – knowing what business the company is in the swiftly recognizing when it has diverted into an unsuitable path.

vi. Another important characteristics for success is a commitment to innovation which is vital in keeping ahead of the competition and perhaps the most difficult one to achieve. Yet, most of the organizations just pay lip service to creativity and innovation. They ask for new ideas and then quickly reject them and even when a new idea is accepted, the employee rarely gets a reward proportionate to the idea’s worth.

Incentivesi. The small Industries Development Organization (SIDO), Ministry

of Industry, Nirman Bhavan, New Delhi, co-ordinates policies and programmes at the national level and provides a comprehensive range of extension services through its net work of sixteen small Industries Dervice Institutes, nineteen Branch Institute and forty-five Extension Centres.

ii. At the State level, organizations like State Directorates of Industries, Small Industries Development Corporations and Finance Corporations, cater to the need of small industries; these needs include land, sheds, credit, power, raw materials, etc.

iii. The National Small Industries corporation (NSIC), Okhla, New Delhi, provides machines and equipment of hire purchase basis to entrepreneurs, assist units to participate is stores purchase programmes and provides training and prototype development facilities.

iii.The small entrepreneur should enlist himself as a member with the NSIC. His application form should be accompanied with the Registration Certificate and report of the Director of Industries.

iv.The application form for hire-purchase machinery calls for information regarding the organizational set-up of a unit, its programme of production, and the marketability and profitability of the enterprise