Entrepreneurship Entrepreneurship DevelopmentDevelopmentDr M S Mamik

OverviewOverview

Entrepreneurship Development Perspective

Creating Entrepreneurial Venture Project Management Entrepreneurship Development and

Government Why do Entrepreneur’s fail- Four

Entrepreneurship pitfalls Women Entrepreneurs

Entrepreneurship Development Entrepreneurship Development PerspectivePerspective

Concept of Entrepreneurship Development Evolution of the concept of Entrepruneur. Entrepreneur vs Intrapreneur, Entrepreneurship, Entrepreneur Vs Manager Attributes and Charactership of a successful

entrepreneur Role of Entrepreneur in Indian economy and

developing economies with special reference to Self Employment Development.

Entrepreneurial culture.

Definition(Robert Ronstand)Definition(Robert Ronstand)

Dynamic process of creating incremental wealth by individuals who assume the major risk in terms of equity, time and /or career

commitment or provide value for some product or service, which may or may not be new or unique but value must be infused by the entrepreneur by receiving and locating the necessary skill and

resources

Entrepreneurship Entrepreneurship DevelopmentDevelopmentDr M S Mamik

OverviewOverview

Entrepreneurship Development Perspective

Creating Entrepreneurial Venture Project Management Entrepreneurship Development and

Government Why do Entrepreneur’s fail- Four

Entrepreneurship pitfalls Women Entrepreneurs

Entrepreneurship Development Entrepreneurship Development PerspectivePerspective

Concept of Entrepreneurship Development Evolution of the concept of Entrepruneur. Entrepreneur vs Intrapreneur, Entrepreneurship, Entrepreneur Vs Manager Attributes and Charactership of a successful

entrepreneur Role of Entrepreneur in Indian economy and

developing economies with special reference to Self Employment Development.

Entrepreneurial culture.

Definition(Robert Ronstand)Definition(Robert Ronstand)

Dynamic process of creating incremental wealth by individuals who assume the major risk in terms of equity, time and /or career

commitment or provide value for some product or service, which may or may not be new or unique but value must be infused by the entrepreneur by receiving and locating the necessary skill and

resources

Entrepreneurship Entrepreneurship DevelopmentDevelopmentDr M S Mamik

Venture Capital

Early stage funding is avoided by most funds apart form ICICI Ventures, SIDBI. Funding growth or mezzanine funding till pre IPO stage

Size of Investment – Upto $10 mn Value Addition –Hands on (Draper) or hands off

approach (Chase). Seed and start up funding sees closer interaction and advice on strategy

Concessions on Capital gains tax and dividends for technology and only for HNIs. Can invest upto 40% of paid up capital of invested co and 80 % inequity shares of unlisted cos.

SEBI is nodal agency for registeration

Tax Concessions -SSI

Tax Holiday –on profits upto 6% of invested capital for five years from start (unit not formed by splitting another exiting unit and employ 10 or more workers with power and 20 without power.

Depreciation – on block of assets at prescribed rate on actual cost of plant and machinery upto a max of Rs 20 lakhs.If working in double or triple shift “Extra Shift Allowance” is available

Rehabilitation Allowance in case of natural calamiies Expenditure on Scientific Research –revenue or

capital expenditure or amount paid to a university or institution for research

Tax Concessions

Amortisation of preliminary expenses - write off of expense for feasibility report, engineering expenses, legal charges in ten annual instalment

Deduction on Profits upto 20% if in Backward Areas or Rural Areas for 10 years

Expenditure on Acquisition of Patents and Copyrights is deductible form income

Tax Concessions

Business of Publication of Books – 20% of profits deductible form gross total income

Types of Lease Agreements

Capital lease – for life of an asset Operating lease – open end leasing

arrangement but shorter than life of equipment and can be terminated at option of lessee with prior notice. Caters for technology obsolescence

Sale and Lease back –firm sells to other party and gets cash and then pay rental for use

Leveraged lease – when three parties involved lessor ,lessee and lender. Lessor provides an equity investment say 25% and lenders provide the other 75%

Advantages of Leasing

Alternate use of funds Beneficial for small firms Free from restrictive clauses of debt

financing. Tax shielding- part of the tax benefit is

passed on the lessee India’s requirement for leasing for next

ten years estimated at $18.9 bn.

Hire Purchase

Agreement in which an owner called hire vendor gives delivery of goods to the buyer called hire purchaser who pays the price in certain number of instalments.

Hire vendor retains ownership till last instalment is paid

The amount of instalments paid till the last instalment is treated as hire charges.

Right to terminate agreement at any tme till property passes on.

Support System- Incentives

Fiscal Reservation Preference Infrastructure Entrepreneurship Development Collaborative programmes NGOs Quality Certification Technology Development Trust Fund Credit Policies

Market Research

Understanding of size, groups ,buying behaviour , decision making of potential and existing customers and the marketplace to allow effective targeting of customers effectively,compete successfully and locate newer opportunities and gaps

Measures customer loyalty, satisfaction levels

Credit Policies

Lending to SSIs considered a Priority sector Concessional/Fixed rates for working capital

loans upto Rs 2 lakhs Liberal treatment for working capital loans by

banks Working capital limits minimum 20% of annual

projected turnover upto Rs 100 lakhs 100 Special SSI branches set up in identified

districts Powers delegated to sanction loans to

managers for SSI at regional and branch levels

Credit Policies

Sample surveys to check credit satisfaction, composite loans (term plus working capital), meetings with entrepreneurs at zonal and regional levels

Sensitising managers to needs of the SSI sector

Procedural formalities simplified National Equity Fund Scheme to fund upto

25% of project cost as soft loan upto Rs 2.5 lakhs for a project cost of Rs 10 lakhs

Support Organisations

SIDO – Also known as Development Commissioner (SSI) under Dept of Small Scale, Agro and Rural Industries in Ministry of Industries.

NIESBUD (National Institute of Institute for Entrepreneurship and Small Business development ) – Apex Body for coordinating and overseeing enrepreneurship development.

EDI –Entrepreneurship Development Institute TCOs (Technical Consulting Organisations) STATE LEVEL ORGANISATIONS KVIC SIDBI NSTEBD –National Science and Technology

Entrepreneur ship Development Bment Board

SIDO

Small Industries Service Institutes/Branch Institutes (Economic consultancy, Trade and market information, project profiles, State/District Potential survey, study in modernisation of plant , training and workshop facilities

Regional Testing Centers – testing and training facilities

Tool Rooms/Tool Design Institutes Process –Cum Product Development centres

– R& D facilities in specified clusters

State level Institutions

Commissioners and Directors of Industries

District Industries Centres State Industrial Development

Corporation State Small Scale Industries

Development/Export Corporations

Incentives (Haryana)

Sales Tax Concessions – Upto 125% of investment for small and 100% for medium

Exemption for Payment of Electricity Duty – Exempt for 5 years

Incentives to Tiny units in Rural Areas – Exemption from electricity duty, price preference of 10%, marketing assistance.

Small and Medium Enterprises Renewal Fund.- for technology upgrade, quality consciousness, brand promotion, improved management practices, capacity building

Incentives to Sick units – No penal interest in case of default

Incentives

Tax reforms and Fiscal Discipline – Self assessment, abolition of forms, computerisation.

Rebate in cost of Land – Upto 20% if started in 3 years from date of possession.

Exemption for payment of electricity duty – all new units other than negative list for 5 years

Customised Package for prestigious project – projects above Rs 30 crs

Incentives for IT Industry – preferential allotment of land in industrial estates

Incentives (Haryana)

Continous Uninterrupted Power Supply - endeavour for IT industry and exempt them for power cuts

Facilities on Generator sets –captive power plants of IT industry will be exempt from electricity duty without any time limit.

Change of Land Use – no charges for change of land use levied for IT /industry/parks for three years.Licence for setting up STPs given liberally and on easy payment terms.

Floor Area Regulations – Relaxation upto 100% in areas notified by state govt for IT units and in all IT parks

Incentives for Industry

Registration and Stamp Duty Applicable – Rebate on registration and transfer of property and exemption on stamp duty on a tapering scale given for sale /lease of built up space to the IT industry establishing facilities in private STPs/ IT parks.

Applicable Rate of Sale Tax - IT software industry exempt from payment of sale tax. The applicable rate of sales tax on computers and computer peripherals shall be reduced to 0.25%

Exemption from Pollution Control – IT software industry shall be exempted from the purview of the Haryana Pollution Control Act except in respect of power generation sets of more than 10KVA capacity.

SIDBI

Refinancing of loans and advances extended by primary lending instituions

Discounting and resdiscounting of bills Extending financial support to SSIDC and

NSIC (Natl Small Ind.Corp) Technological upgradation and

modernisation services to the industries Promotes employment oriented industries

especially in the semiurban area.

Procedure for Borrowing from Various FI

Letter of Intent or provisional registration certificate Permission from govt. agencies Affidavit Prescribed loan application form Statement of industries financial standing Tax clearance certificate Partnership Deed Memorandum and Art.of Association in case of Co Registration Certificate Form A and C issued by registrar of firms Three years audited balance sheet and P& L ac Special qualification and experience certificate Power sanction letter from SEBs

Procedure for Borrowing loans Copy of letter addressed to bank Allotment letter of land Agreement on Industrial sheds NOC form Local authorities Sketch of site offered as securities Approved plans by concerned authorities Qoutations and catalogues from suppliers of machinery Copies of import lcence Assurance letter of marketing agreement A copy of feasibility report covering market study report Photographs of promoters Projected financial statements

Govt. Support

Office of Development Commisioner

( Micro, Small and Medium Enterprises) MSME takes care of entrepreneur ship and small industries as generally enterprises start small.

Small Industries Development Organisation SIDO – nodal development agency for small enterprises estd. 1954

Role of SMEs

MSME sector contibutes 45% of he total manufacturing output

33% of the total exports Employs 60 mn persons in Over 28 mn units across the country

SIDO

Assists Ministry of Small Industries in evolving policies and programmes and coordinates policies and programmes of State govts.

Provides a comprehensive range of extension services through its Field offices and allied institutions and monitors or implements large number fo Govt.sponsored programmes

Following glabalisation and requirment of competitiveness,it provides support in the field of credit, marketing,technology and infrastructure to SMEs

How

30 Small Industries Service Institutes in state capital and other cities

28 Branch SISIs in other industrial cities 4 Regional Testing Centers in metros 7 Field testing Units 21 Autonomous bodies – 11 Tool Rooms

and Tool Design Institutes 4 Production Cum Process development

centers located in UP towns

SIDO

2 Footwear Training Institutes in Agra and Chennai

I Electronice Service and Training Institute in RamNagar

! Institiute of Design and Electrical measuring Instruments in Mumbai

2 National Level Training Institutes in and 1 dep Level trg institute in ND,Hyd and Guwahati

Production center in Tiruvalla

Enterprises Classification

Manufacturing or Service Investment based classification

Manufacturing/Service Micro – investment upto Rs 25 Lakhs/10

lakhs Small – From Rs 25 lakhs to Rs 5 crs/ Rs

10 lakhs to Rs 2 crs Medium – from Rs 5crs to Rs10 crs/ Rs 2

to 5crs

Other Classification

Ancilliary – 50% output to another unit and investment upto Rs 1crs

Tiny enterprises –upto Rs 25 Lakhs Women Entrepreneurs – share of women

owners at least 51% Small Scale Service and Business

(Industry Related ) Enterprises (SSSBEs)- investment upto Rs 10 lakhs in fixed assets minus land and building

Facilities

Small Industry Cluster Development Programme

Credit Linked capital Subsidy Scheme for Technology Upgradation -15 % cost capital subsidy

Credit Guarantee Scheme- Collateral free loans upto Rs 25 lakhs for individual SSI’s.

ISO 9000 Certification Reimbursement Scheme- lower of 75% or Rs 75000

Financial Support

Commercial banks FIs IDBI IFCI

ICICI IRBI

LICUTISFC

SIDC SIDBI

EXIM BANK

Institutional Support

Need National Small Industries Corporation (NSIC) Small Industries Development Organisation

(SIDO) Small Scale Industries Board(SSIB) Small Scale Industries Development

Corporations (SSIDC) Small Industries Service Institutes(SISI) District Industries Centers (DICs) Industrial Estates SEZs

Specialised Institutions

Central Institute of Tool Design, Hyderabad Central Institute of Hand Tool,Jalandhar Central Tool Room Training Centers-

Bangalore, Calcutta ,Ludhiana and New Delhi National Institute of Entrepreneurship and

Small Business development (NISEBUD), New Delhi

National Institute of Small Industries Extension Training,Hyderabad

Sources of Finance

Self Family and friends Suppliers and trade credit Commercial banks Govt.loans programs R&D Limited partnerships –contract limited Venture Capital Private equity placements Public equity offerings Other govt. programs

Requirements of Finance

Start up expenses Operational Expenses Personnel Expenses Contingency expenses

Venture Capital

EntrepreneursInvestment

bankersVenture

Capitalists

PrivateInvestors

Corporation& Government

Public markets& corporations

$$

$$ $

$

IPO

$

Ideas

Venture Capital

Money provided by professionals who invest alongside the management in young ,rapidly growing companies that have the potential to develop into significant economic contributors.

Professionally managed pool of equity capital formed from the resources of wealthy limited partners- pension funds, endowment funds, institutions including foreign investors

Investment made in exchange for a percentage of the gain realised on the investment and a fee.

Promoters of Venture Funds

ICICI – TDICI renamed as ICICI Venture Funds Management Co or ICICI Venture

IFCI – IFCI Venture Capital Funds Limited(IVCF)

IL & FS – Pathfinder GIC- Gujarat Venture Capital Finance

(GVCFL) with all India coverage APIDC- APIDC Venture Capital Ltd with

coverage as Andhra Pradesh Canara Bank – Canfina VCF with focus on

southern states

Angel Investors

Angel investors are affluent high net worth individuals who provide capital for business start ups usually in exchange for convertible debt or ownership equity

Now angel investors organising themselves into angel networks or angel groups to share research and pool their investment capital.

Actual entity providing funds could be a trust or a business investment fund.

Angel Investors

Fills the gap between friends and family financing who provide seed funding and venture capital.

Most investment of the size of upto $500,000 and in Healthcare services, medical devices and equipment, software, and biotechnology

Bear very high risk and require very high return on investment –potential to return at least 10 or more times the capital invested in five years through a defined exit strategy such as an IPO or an acquisition

In such cases cheaper source of financing are not available

Venture Capitalists Requirements from Business Plan

Finance new and rapidly growing co’s. Purchase equity securities Assist in the development of new

products and services Add value to the company through

active participation Take higher risks with the expectation

of higher rewards.

Attributes sought by VCs

Business Plan – complete, fluid and market driven

Competition Analysis – Doing things competitor is not doing, and understanding that what you are doing is needed

Industry Knowledge- to finding a gap in the market, knowledge is required through experience and extensive industry research.

Team – Team assembled would be crucial to its success. Team consist of industry experts, technologists and domain specialist

Analysis of Venture Investments VC/PE funds invested about $1.1 bn in 66

Indian cos and exited about 30 cos during 2004 Investments in BPOs declined sharply

compared to 2003 ICICI Ventures emerged as the most active VC Cos based in South India cornered 50% of the

investments Six venture backed cos pulled off successful

IPOs during the year Contract electronics manufacturers emerged

as a major investor in and acquirer of Indian technology cos.

Exit Route for Venture Capital IPOs – go public through stock exchange Trade Sale –sells to a strategic buyer who

has a similar business Promoter Buy back – buys back at a

predetermined price Company Buy back – cos buys back the

VC stake Management Buy back – operating mgt

buys promoters equity

Comparison of Domestic and Offshore Funds

Base Guidelines –SEBI with registration Corpus Size- Small/large Invested Cos- SME/ Large Investment Size – Rs 0.5 to 2.5 crs/

Avg Rs 8 crs Structure- Regd. As trust under India

Trust Act 1882.

Venture Funds in India

Financial Institutions Led by ICICI Ventures, ILFS

Private venture funds like Indus Regional funds like Warburg Pincus, JF

Electra (operating out of Hong Kong) Regional Funds dedicated to India like

Draper, Walden etc Offshore Funds like Baring, HSBC Corporate ventures like Intel Sivan Securities

Venture Capital

Early stage funding is avoided by most funds apart from ICICI Ventures or SIDBI. Funding growth or mezzanine funding till pre IPO stage

Size of Investment – Upto $10 mn Value Addition –Hands on (Draper) or hands off

approach (Chase). Seed and start up funding sees closer interaction and advice on strategy

Concessions on Capital gains tax and dividends for technology and only for HNIs. Can invest upto 40% of paid up capital of invested co and 80 % in equity shares of unlisted cos.

SEBI is nodal agency for registration

IncrementalWealth

Creation

Entrepreneurship

RISK

VALUE CREATION

EFFORT

VALUEADDED

SKILLS RESOURCES

NEW or OLDProduct/Service

Entrepreneurship

PROCESS

NEW

OLD

TIME

MONEY

FIN

PSY

SOCIAL

REWARDMONEY

SATISFACTIONINDEP

VALUE +

PRODUCTSERVCE

EFORT

RISK

EVOLUTION Occupation to Person

MIDDLE AGES -Trading 17thCent –Projects Cleric 18th Cent –Contractor Fixed price 19th Cent- Capital provider 20th Cent –Manger 21st -Innovator

Why Entrepreneur?

Why Entrepreneur?

Leave present career or lifestyle Desire to do something External and internal factors helping

to make it possible

ENTREPRENEURSHIP DECISION PROCESS STEPS

LEAVE PRESENT

CAREER

OR LIFESTYLE -

DESIRE TO DO

SOMETHING

EXTERNAL&INTERNAL FACTOR

MAKING POSSIBLE

DISSATISFACTIONWORK ENVRTDISRUPTIONLAYOFFRELOCATION OF PARTNER

CULTURE/SUBFAMILY TEACHERSPEERSBACKGROUNDKNOWLEDGEROLE MODELS

PUSHINGPULLING

SOURCE OF GOVT SUPPORTGOOD IDEAEDUCATIONSKILLSRESOURCES

(UNFULFILLED NEED)

WHY STUDY

PRODCT EVOLUTION – KNOWLEDGE TO SOCIAL NEEDS

HELPS ENTREPRENEUR MEET SOC NEEDS

ECONOMIC CONTRIBUTION NATIONAL INCOME GROWTH EMPLOYMENT

Why Study Entrepreneurship?(2)

GOVT AS INNOVATOR- ORDINARY, TECHNOLOGICAL ,BREAKTHROUGH

BRIDGE INNOVATION AND MARKET PLACE

R&D TRANSFER TO PRODUCT AND SKILLS

BRING EXTRAORDINARY SKILLS TO DEVELOP INNOVATION

Role of Entrepreneurship in Role of Entrepreneurship in Economic DevelopmentEconomic Development

Increase output and income through change in structure of business and society, increase in wealth and better distribution.

Innovation is the key in developing new products and markets and stimulating investment interest in new ventures

Increased investment expands capacity (supply) and results in new spending utilising new capacity (demand).

Economic Development

Product Evolution Process – developing and commercialisation of an innovation

Iterative Synthesis – the intersection of knowledge and social nbeed that starts the product development process

Ordinary innovations – new products with l;ittle technological change

Breakthrough Innovations – New products with major/some technological change

TYPE OF FIRMS (BASED ON DECISIONS STEPS)

LIFESTYLE –SUPPORT OWNERS AND NOT GROW

FOUNDATION –FROM R&D AND DO NOT GO PUBLIC

HIGH POTENTIAL – GREATER INVESTOR INTEREST

Types of Start UpsTypes of Start Ups

Lifestyle Firm- A small venture that usually supports the owners and does not grow. Privately held, , modest growth and objectives, limited money for R& D.

Foundation Co – A type of co formed from research and development that usually does not go public. Lays foundation for a new business area can grow from 40 to 400 in 5-10 years and revenues from $10 mn to $ 20 million per year in revenues, rarely goes public and draws interest of private investors only and not start up venture capitalists.

Type of Firms

High potential venture- greatest investment and publicity, may start as foundation but growth more rapid. Can be upto 500 employees in 5 years with revenues growing upto $30 –60 mn.

Gazelles – very high growth ventures

Requirement of entrepreneur

CREATION OF VALUE INITIATIVE RISK REWARD

INNOVATION

GOVT AS INNOVATOR-TECH TRANSFER

INTRAPRENEURSHP ENTREPRENEURSHIP

OBJECTIVES OF STUDY

ROLE OF SMALL FIRMS STRENGTH WEAKNESS OF DIFF

ENTREPRISES ENT PROCESS ASSESS OWN ENT. SKILLS METHODS OF IDENTIFYING AND

EVALUATING BIZ OPPORTUNITIES ABILITY TO FORM ORGANISATION AND

WORK IN TEAMS

Objectives of Study

MAKING A BUSINESS PLAN ENTRY STRATEGIES, SUCCESS AND

FAILURE IDENTIFYING AND OBTAINING

RESOURCES PLANNING –

MARKETING,FINANCIAL,OPERATIONS,

ORGANISATION,VENTURE LAUNCHING ROLE IN EXISTING ORGANISATIONS

SKILLS REQUIREMENT FOR ENTREPRENEUR

TECHNICAL BUSINESS MANAGEMENT PERSONAL & ENTEPRENEURUIAL

TECHNICAL

TECHNICAL BUSINESS MANAGEMENT

TECHNOLOGY

ORGANISATIONAL AND COMMUNICATION SKILLS WRITING ORAL MONITORING ENVRT INTERPERSONAL LISTENING ORGANISING ABILITY NETWORK BUILDING MANAGEMENT STYLE COACHING TEAM PLAYER

BUSINESS MANAGEMENT SKILLS PLANNING AND GOAL SETTING DECISION MAKING HUMAN RELATION MARKETING FINANCE ACCOUNTING MANAGEMENT CONTROL NEGOTIATION VENTURE LAUNCH MANAGING GROWTH

PERSONAL ENTREPRENEURIAL ATTRIBUTES INNER CONTROL/DISCIPLINE RISK TAKER INNOVATIVE CHANGE ORIENTED PERSISTENT VSIONARY LEADER ABILITY TO MANAGE CHANGE ETHICAL AND SOCIALLY RESPONSIBLE

Entrepreneurial process

Identification and evaluation of the opportunity

Development of the business plan Determination of the required resources –

needed, existing, gaps, access Management of the resulting enterprise –

style, key variables for success, potential problems, controls, growth strategy

Concept of Entrepreneurship Concept of Entrepreneurship DevelopmentDevelopment

“The combination of entrepreneurship education in schools and colleges, the hassle free growth of venture capital and evolution of good market will give momemtum for the National growth”

- Dr APJ Abdul Kalam

Entrepreneurship Entrepreneurship

Job seeking ------> Job giving

India-Entrepreneurial ActivityIndia-Entrepreneurial Activity

Software Automobile IT Enabled services

Importance of Importance of EntrepreneurshipEntrepreneurship

Job creation and economic development.

Strategic adjustment and realignments.

De regulation and privatisation of public utilities and state owned enterprises.

ResultsResults

High growth start ups Bread and butter earners

ConceptsConcepts

Who is an entrepreneur Nature and development of

entrepreneurship

Who is an EntrepreneurWho is an Entrepreneur

?

Can You Recall ?Can You Recall ?

Dhirubhai Ambani Narayayan Murthy Yash Raj Chopra

Profiles

Oprah Winfrey- Nature of Entrepreneurship Ewing Marion Kauffman – Intrapreneurship (Pharma) Robert Mondavi – Wine making in California Malachi Mixon III – Intl Opportunities Frederick W Smith – FEDEX Creativity & Biz Idea Daniel Schriber -Legal issues Belinda Guadarrama –GC Micro Corp, Biz woman Michael S Dell -Marketing Plan

Evolution of the concept of Evolution of the concept of EntrepreneurEntrepreneur

Individual who takes risk and starts something new – french for between taker and go between

Early Period -Marco Polo- go between or trader – trade to Far East -borrowed money @22.5% from money lender (modern venture capitalist-passive risk bearer) and merchant adventurer took active role bearing all physical and emotional risks. Profits divided 75% to money lender and 25% to adventurer trader

Concept – Three DefinitionsConcept – Three Definitions

Business Managerial Personal

Middle AgesMiddle Ages

Middle Ages- person actor and manager for production- projects mostly buildings using resources provided by govt. .Usually cleric incharge of great architectural works public buildings such as castles and fortifications, cathedrals.

17th Century17th Century

Re emergence of connection of risk with entrepreneurship

Contractual agreement with govt. To perform a service or to supply stipulated products- fixed price contracts with resulting profit or loss (risk)

John Law , A frenchman allowed to set up a bank and then a trading co. This led to Law’s down fall when he attempted to push the company’s stock price higher than the value of assets

Asymmetry in Price –Basis of Asymmetry in Price –Basis of Risk Risk

Richard Cantillon – in 17 th century understood Law’s mistake and is the author of the term entrepreneur.

Viewed entrepreneur as risk taker observing that merchants craftsmen and sole proprietors buy at a certain price and sell at an uncertain price thereby operating at a risk.

1818thth Century Century

18 th century person with capital ( present venture capitalist) was differentiated from the one who needed capital (entrepreneur).

Reason was industrialisation and inventions running during this time were reactions to the changing world as was the case with Thomas Edison. Inventors with new technologies unable to finance their inventions themselves.

1919thth and 20 and 20thth Century Century Innovation and newness now integral Entrepreneurs not frequently distinguished from

managers – economic perspective Entrepreneur organises and operates an enterprise

for personal gain contributing initiative , own skill and ingenuity assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances

Carnegie – not invent but adapted new technology-made the American steel industry

Contribution to ConceptContribution to Concept

Adam Smith – Capitalist and manager et foresight to recognise potential demand and transform into supply

Carl Menger – economic changes come from individual’s awareness of changes in circumstances and he creates the transformation of resources into goods and services that fulfill human needs

Joseph Schumpeter- reform or revolutionise the pattern of production, exploit innovation or untried technology .

Peter DruckerPeter Drucker

Getting and using resources Allocating to progressive opportunities instead of

allocation to solve problems or administrative efficiency in management

Entrepreneur always searching for cange ,responds and exploits the opportunity

Innovation instrument of entrepreneurship and he finds resources whose usefulness not thought of before and creates value form it

Manager can also be entrepreneur if he acts as in above

Other Views on Other Views on EntrepreneurshipEntrepreneurship

Frank Knight- profit is reward and the cost of uncertainty.

Kirzner- Alertness for new possible goals with new possible resources. Action should be active, creative and human rather than passive, automatic and mechanical.

Mark Casson – specialist on decision making on coordination of scarce resources.

Stevenson and Sahlman- relentless pursuit of opportunity from identification to harvestinng fruits of labour without regard to resources currently controlled

Views on EntrepreneurshipViews on Entrepreneurship Gartner – Eight themes- entrepreneur, Innovation,

organisation creation, creating value, profit/non profit, growth, uniqueness, owner –manager and expectation of return. Essence of entrepreurship in relentless pursuit of discontinous opportunity involving creation of an organisation with the expectation of value creation to participants

Byrave and Hofer – focus of field of entrepreneurship changes from the characteristics of the entrepreneur to the characteristics of the enterpreneurial process. “ All functions, activities and actions associated with the perceiving of the opportunities and the creation of organisations to pursue them.

Entrepreneurship in India Entrepreneurship in India

Rig veda- metal handicrafts entrepreneurship as old as civilisation

Trading –Gupta and Chola dynasties Craftsmen –performed duty towards society. Economic and social system –stratification

based on economic activity and profession-villages and towns had different exclusive structures.

Most enterprises of craftsmen around river banks in Karkhanas for transport and town cluster- Banaras(silk, metal wares), Kashmir (shawls)Allahabad,Gaya ,Puri etc for Royal patronage

Entrepreneurship Development Entrepreneurship Development In IndiaIn India

East India Company and fall of handicraft s Swadeshi Movement –ship building,gun and

textiles , steel. 43 % of textiles mills set up by Parsis

Increase in trade Managing agency system Partition – demography(82% popualtion vs 77%

area,90% industry with 93% workers), minerals -97% of value ,manpower and managerail skills – great loss, transport 83% of routes, major ports lost.

Iindustrial Policy resolution of 1948

“If you want to blossom like a rose in the garden,you have to learn the art of adjusting with the thorns”

OpportunityIdentificationEvaluation

Business Plan

ResourcesRequirement

ManagementOf

Enterprise

ENTREPRENEURIAL PROCESS

UnlimitedTo Ltd Growth

PotentialCompetitors

NIL To Unlimted access to

capital MarketsAnd resources

TeamZero to

One of the best

Opportunity Resources

Biz plans Fits and Gaps

Creativity Leadership

Communication

AmbiguityExogenous Forces

UncertaintyCapital Market context

TIMMONS MODEL OF ENTREPRENEURIAL PROCESS

Founde

Founder

Sustainability

Business Plan

EntrepreneurEntrepreneur

Need for Achievement-Strong desire to win Perseverance-An approach to never say die Moderate Risk takers-Entrepreneurs prefers

a middle of the road strategy on tricky issues

Ability to find and explore opportunity. Analytical Ability- dispassionate approach to

problems Using feedback- how faring on goals Facing uncertainty- Not deterred by

unfamiliar situations.

EntrepreneurEntrepreneur

Independence-Dislike working for others Flexibility Planner – think ahead and plan for future Interpersonal skills Motivator – influence others Stress Taker - work long hours and multi

task Positive self concept Orientation for Future- think ahead

Behavioural AspectsBehavioural Aspects

Initiative taking Organising of social and economic

mechanisms to turn resources plus situations into results

Acceptance of risk of failure

Role Demands and Role Demands and RequirementsRequirements

Accomodation to the Venture Total Immersion and Commitment Creativity and Innovation Knowledge of the Business People and Team building Economic Values Integrity and reliability

Functions of EntrepreneurFunctions of Entrepreneur

Risk bearing Organisation Innovation

Idea generation Determination of

business objectives

Product analysis and market research

Form of ownership

Promotion formalities

Fund raising

Procurement of machinary

Recruitment

Business operations

EntrepreneurshipEntrepreneurship

Opportunity sensing Idea generation Innovation

Add initial capital – angel and venture capital funding.

EntrepreneurialActivity

Need of Society

Capability of Entrepreneurs Resources available in The Environment

Dynamics of Project identification

Bridging the science Bridging the science Marketplace gapMarketplace gap

Government as Innovator Intraprenuership Entrepreneurship

Government as Innovator Government as Innovator

Government active as in commercialising technology through technology transfer

Inventions require modification to be useful.

Govt. lacks business skills especially marketing and distribution

Bureaucracy and red tape inhibit timely business formation

Opportunity Identification and assessment Opportunity assessment Creation and length of opportunity Real and perceived value of

opportunity Risk and return of opportunity Opportunity vs personal skills and

goals Competitive environment

Opportunity Assessment

What market need does it fulfill What personal observations have you

experienced or recorded for market need

What social conditions underlie this market need

What market research data can be mustered to describe the market need

Opportunity Assessment

What patents might be available to fulfill market need

What competition exists in the market and its behaviour

What does the international market and competition look like

Where is the money to be made in this activity

Entrepreneurial decision making

Strategic orientation Commitment to opportunity Commitment to resources Control of resources Management structure

XEROX

Creative employees should Stay or Leave the organisation?

IntrapreneurshipIntrapreneurship

Intrapreneurship is entrepreneurship within the existing business structure

Existing business have financial resources business skills frequently the marketing and distribution system

Intrapreneurship(2)

Creativity inhibited by bureaucratic structure, short term profit vision, organisation hierarchy prevents development of new products and services.

Corporations realising these inhibiting factors and need for creativity attempt to establish the intrapreneurial spirit in their organisations.

OCTAPAC Culture

Openess Confrontation Trust Autonomy Proactiveness Authenticity Collaboration

Building Competence Basic Biz Mgt Training

Development of LeadershipNetworking

Building Self directed ,self sustaining work teams

Building Culture and ClimateTop mgt. SupportDeveloping OCTAPAC cultureFlat Orgn. StructureFlexible Job descriptionDevelopment of Active Creative cellDevelopment of Venture Capital Fund

Relationship managementReward ManagementGrievance Management

Building And Nurturing Intrapreneurs

Building and Nurturing Intrapreneurs

Creative EnterprisesCreative Enterprises

Open channels of communication Problem solving teams Decentralised structure – promote risk

taking Culture and freedom to discuss ideas

and long term plans of the enterprise Allocating resources for creative

pusuits and rewarding such efforts

Entreprenuer vs Intrapreneur

Entrepreneur – Individividuals who establish a new organisation without the benefit of corporate sponsorship

Intrapreneurs – new venture creators working inside big companies(corporate entrepreneurs)

Entrepreneur Entrepreneur

Creating something of value- to entrepreneur, and for the audience addressed

Devotion of necessary time and effort Assumption of the necesssary risk –

financial psychological and social Rewards- independence, satisfaction High failure due to poor sales, intense

competition, lack of capital, lack of managerial ability

Entrepreneur vs Entrepreneur vs IntraprenuerIntraprenuer

Independent in his operations

Raises funds himself for the enterprise

Bears the risk involved in the business

Operates within the overall industry and environment

Dependent on the entrepreneur /management

Funds are provided but not raised by him

Does not fully bear the risk involved

Operates within the organisation that he belongs to.

Entrepreneurship -Entrepreneurship -DifficultiesDifficulties Difficult to create new ventures by individuals Lack of managerial skills, marketing capability or

financial resources. Inventions are unrealistic, requiring modifications to be

marketable Difficulty in interfacing with necessary entities such as

banks, suppliers, customers, venture capitalists distributors and advertising agencies.

Still best bet and effective in bringing new products to the market place.

However entrepreneurship effects economy of the area and build jobs but has to follow tough labour laws

Types of EntrepreneursTypes of Entrepreneurs Innovating – new goods, methods, new market, re

organises enterprise – requires certain level of development

Imitative – readiness to adopt successful innovations by using techniques and technology innovated by others. Suitable in underdeveloped regions.

Fabian – greatly cautious and skeptic in experimenting change in organisation and will imitate only if failure to do so would result in a loss of the relative position in the enterprise.

Drone – refuse to adopt opportunities to make changes in production formulae even at cost of severely reduced returns

Inventor Entrepreneur

Promoter ManagerAdministrator

High

Creativity andInnovator

General management skills, business know how and networks

Low

LowHigh

High InnovationHigh Risk

High InnovationHigh Risk

Low InnovationLow Risk

Low InnovationHigh Risk

Low Risk High

Probability of Major Loss Entrepreneurial Strategy

Innovation

(Creating A Unique & DifferentiatedProduct/Service

Entrepreneur vs ManagerEntrepreneur vs Manager

Motive –Start an enterprise Status – owner Risk bearing – assumes all

risks Rewards- all the profit but

uncertain Innovation – decides what

and how to produce by innovation

Qualifications-achiever, originality, risk bearing ability

Renders services in enterprise set up by others

Manager is an employee Does not bear any risk

except his own performance

Gets salary which is certain Executes plan given by

owner Possess distinct

qualification of management theory and practice

Idea

Just whatever comes to mind when one thinks

Representation of an image Innate ideas – those that are general

and abstract and already exist Adventitious ideas – images or

concepts that are accompanied by judgement that are caused by some object outside the mind

Innovation

Is a change in the thought process for doing something or the useful applications of new inventions.

Can be incremental, emergent or revolutionary

Can be in thinking, products, processes or organisations

Creativity

Ability to generate innovative ideas and manifest them from thought to reality

Invention

Is a new composition, device or process

May be derived from existing model or idea or be independently conceived.

Invention is a creative process

Entrepreneurship -FacetsEntrepreneurship -Facets

Innovation (act of introducing something new)

Newness Ability to create Conceptualise Ability to understand all the forces at

work in the environment Product distribution system, financing

method, reorganising

EntrepreneurEntrepreneur

Economist – combines 4MsI to increase value and introduces change ,innovation/new order

Psychologist – sees person driven by forces – need to attain or achieve, experiment, accomplish or to escape authority of others, act alone, inventors,

Business man –may see him as challengers,competitor or ally, supplier ,customer, wealth creator

InnovationInnovation

New Quality of product New product New source of material New market New organisation structure Combination of means of production

Business IdeaBusiness Idea

Opportunity in the market Needs or wants for product or service Utilise existing skills Use locally available raw materials Make products that have demand but not

freely available Enable use of any technical know how or

specific tools or machines entrepreneur is aware of

Solve a current problem existing in the market.

IntrinsicMotivation

SkillsTask

Domain

Creative Thinking

Diverse Alternatives

CriticalEvaluation

CreativeProcess

Components of Creative Components of Creative processprocess

Intrinsic motivation – processing diverse information, seeing non obvious sides of an issue and exploring alternate solution paths.

Skills in task domain – knowledge of he problem and technical skills or area expertise.

Skills in creative thinking – random association between ideas, see divergent views of a single idea, access one’s subconscious, visualise potential solutions.

Generate a number of diverse alternatives Hold back critical evaluation till full range of

possibilities.

Core Elements of InnovationCore Elements of Innovation

Creativity and innovation

Ability to apply that creativity

Belief in the ability to change the status quo

Focus on creating value Risk taking

Creativity Creativity

Ability to bring something new into existence

Useful to society Ability not activity

Innovation Innovation

Process of doing new things Different from creativity as that is the

ability to conceive and innovation is the ability to do things to convert/transform the ideas into useful products or services

TaskPresentation Preparation Incubation

IdeaGeneration Idea

ValidationOutcome

Assessment

CREATIVITY PROCESS STAGES

Creative ProcessCreative Process

Task presentation – specific problem or area of study Preparation – search for solutions Incubation – subconscious assimilation of information

or mulling over a problem Idea generation – multiple ideas and solutions giving

different approaches to the problem using experience, insight and fears

Idea validation – ideas generated verified for being translatable into realistic and useful applications

Outcome assessment – achievement of goal or solution to problem

Creativity Stages Creativity Stages

Task presentation Preparation Stage Incubation stage Idea generation stage Idea validation stage Outcome assessment Process complete or go back to task

presentation

Sources of Innovative and Creative Sources of Innovative and Creative IdeasIdeas

Present and potential customers Existing companies Raw material providers Distributors and retailers Research and development Existing employees

Sources of Business IdeasSources of Business Ideas

Discussion Observation Literature Visiting Exhibitions, Fairs, Trade

shows Research Institutes Brainstorming

Opportunity

Technological discoveries Demographic changes Lifestyle and taste changes Economic dislocations Calamities Govt. initiatives and rule changes Franchises

New Ideas- Sources and New Ideas- Sources and MethodsMethods

Consumers /Customers

Existing Companies Research and

development Employees Dealers/Retailers

Brainstorming Group discussion Data collection Invitation for ideas form

advertisements ,mails, Internet

Value addition to current products/services

Market research Contests Commercialising

inventions

Entrepreneurship Entrepreneurship

Creation Of value by people working together to implement an idea through the application of drive and A WILLINGNESS TO TAKE RISK

An INDIVIDUAL WHO BEARS THE RISK OF OPERATING A BUSINESS IN THE FACE OF UNCERTAINTY ABOUT FUTURE CONDITIONS ( Encl Britannica)

Creating Entrepreneurial Creating Entrepreneurial VentureVenture

Business Planning Process Environmental Analysis –Search and

Scanning Identifying Problems and

Opportunities Defining Business Ideas Basic Government Procedures to be

complied with

Franchising

An entrepreneurial alliance between an franchisor (an innovator who has created at least one successful store and wants to grow) and a franchisee (a partner who manages a new store of the same type in a new location).

Food retailing, service business, sports and recreation.

Entrepreneurship ProcessEntrepreneurship Process

Identify and Opportunity – right time , first mover, sense opportunity

Establish Vision – dream for the future Persuade others –form the foundation

team, business plan Gather Resources – Financial, operating,

Human, Information and intangibles (image procedures, transport, management).

Create new venture product or market Change adapt with time

Feasibility Study

Is the evaluation of the proposal designed to determine the difficulty in carrying out a designated task.

Is the evaluation or analysis of the potential impact of a proposed project.

Will the idea work and should you proceed with it ?

Feasibility Study

Before writing business plan need to identify how ,where and to whom you

intend to sell a service or product assess competition figure out how much money is needed to

start a business and keep it running until established

Determine if and how it can succeed and serves to develop a business plan

Feasibility Study

Is conducted during the deliberation phase of the project development cycle prior to obtaining project financing business process

It is an analytical tool that includes several scenarios for the decision maker of the group to utilise in determining if they should continue the project

If the would be entrepreneur decides to proceed further then he /she makes a business plan

Normally done independently by people outside the project group

Feasibility study is only at the developmental stage of the project

Feasibility Study –Why Important

Lists requirement of essentials to do to make business work

Identify logistical and other business related problems and solutions

Develop marketing strategies to convince bankers and investors to ensure their consideration

Serves a foundation for business plan

Feasibility AnalysisFeasibility Analysis Done to check the feasibility of the project

itself in the particular environment on great detail. More descriptive than environmental appraisal.

Market Analysis –estimate demand of proposed product/service and target market share.

Technical/Operational Analysis – operational ability of the project and cost and availability of the technology-material and plant parameters.

Feasibility Study

Contains comprehensive ,detailed information about your business structure,

your products and services, the market, logistics of how you would deliver a product

or service, resources needed to make the business run

efficiently as well as other information about the business

Business plan

Sets out objectives, estimates and financial forecasts

Helps establish where you are, where you are going and how you intend to get there.

Demonstrates determination to start a successful business

Only half the new businesses survive more than five years – the better the planning is, the more likely you are to succeed.

Should be updated on an annual basis at least- ongoing process – monitor and update.

Business plan Basic structure should follow a format to

facilitate an efficient way of meeting evidence requirements like National Vocational Qualification (NVQ) Level 3 Business Planning Qualification.

Summary of units and Elements of Owner Manager NVQ Standards

Assess the potential of the proposed business –Describe, review market,evaluate

Assess your own skills and capabilities for running the business- identify

Investigate requirements of any legislation to be complied with Assess finance requirements Develop marketing and sales strategy Quality standards Customer service policy Dedicated premises Physical resources Additional personnel in first year Comprehensive business plan Leading the team of individuals Manage information for action

Business PlanBusiness Plan Is a roadmap for starting and running a

business. Is a blue print of the step by step

procedure to be followed to convert a business idea into a successful business venture.

Identifies an innovative idea, researches the external environment for SWOT, assess the feasibility of the idea and then allocates resources in the best possible manner to make the plan successful.

Business Plan

Efficient method of focusing ideas in terms of defining objectives and assessing abilities to organise and run the business.

Establishes parameters and specific targets which provide a yardstick to measure progress and profitability

Prerequisite to both planning and starting as well as running a business

Good business plan necessary for raising finance.

Preliminary InvestigationPreliminary Investigation

Review available business plans Draw key business assumptions (e.g

inflation exchange rates, market growth, competition, taxes)

Scan external and internal environment

Seek professional advice from some one already in business

Objectives of Business PlanObjectives of Business Plan Direction to vision of entrepreneur Objectively evaluate prospects of business. Monitor progress of implementation. Persuade others to join business Seek loans form fin. institutions. Visualise the concept in terms of market availability, organisational and

financial feasibility Guide in actual implementation Identify strengths and weaknesses in the plan Check on management information about competitors and the market Identify resources required to implement the plan Document ownership arrangement ,future prospects and projected

growth of the venture

Business Planning ProcessBusiness Planning Process

Preliminary Investigation Idea generation Product Development and selection Environmental Scanning Feasibility Analysis Project report preparation Evaluation, Control and Review

Business Idea

Nature and purpose of business, new business or purchase of existing, franchise.

Legal format –Sole trader/proprieter, partnership, private co, public co, cooperative

Way it will operate i.e trading status Legislation that will effect the business. Intended market and range of products or

services, customer needs External influences- PESTLE analysis (political,

economic, social, technological, legislative, environmental

Environmental ScanningEnvironmental Scanning

Socio –cultural Technological Economic Demographic Governmental

Raw material Production/

Operations Finance Market Human resources

Feasibility AnalysisFeasibility Analysis Done to check the feasibility of the project

itself in the particular environment on great detail. More descriptive than environmental appraisal.

Market Analysis –estimate demand of proposed product/service and target market share.

Technical/Operational Analysis – operational ability of the project and cost and availability of the technology-material and plant parameters.

Feasibility Analysis (2)Feasibility Analysis (2)

Financial feasibility -assess the financial issues of the venture e.g cost estimates of land , plant and machinery, market survey , cost of capital, registering, contingencies, profitability, break even point, projections of cash flows, balance sheet multi year projections

Functional PlanFunctional Plan Gives the outline plan for all the functional areas Marketing plan-marketing mix,demand, cusomer profile,

market segmentation, target market and strategies Production /Operational plan –locatio, layout,cost

availability of equipment, machinery, raw materials, list of suppliers, manufacturing/running cost, quality management, production scheduling,capacity and inventory management

Organisational Plan- ownership,structure, HRM practices Financial Plan – cost incurred in smooth running of other

plans (above),projected cash flows, income statement, break even point,balance sheet, ratios(projected

Project ReportProject Report Cover, Table of Contents, Executive summary, The Business- Objectives, brief history, form of ownership, name

and qualification of owners, proposed headquarters and capital structure.

Funding Requirement- Debt and equity Product /Service- description, comparative analysis, patents,

trademarks, copyrights, licenses Plan- Marketing (Demography, Competitors SW, Market SWOT,

marketing Mix), Operational Plan, Organisational plan, Financial plan (2 -5 years)

Critical Risks Exit Strategy Appendix – CV of Owners, Ownership Agreement, Certificate for

Pollution Control Board, MOU, Articles of Association, Other documents for feasibilty of project and its viability

Identifying Relevant Identifying Relevant LegislationLegislation

Health and Safety related legislation Environmental and trading legislation’ Employment law Financial and company law Anti discrimination Law

Personal Skill and Abilities Business Needs to make it Successful Analyse and identify current and foreseeable

skills- Technical, marketing, sales, organisational ,decision making, financial, customer service, staff management, information management and computer skills.

Identify own goals and objectives

Producing a realistic personal development plan

Monitoring ongoing performance as owner manager

Self evaluation

Intellectual Property Rights -IPR Refers to a number of distinct types of

creations of the mind for which property rights are recognised.

Under Intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical literary and artistic works, discoveries and inventions, and words phrases symbols and designs

Financial Controls

Basic Accounts and Double entry book keeping

Monitoring budgets and cash flow Profit margins and mark up Stock control Aged debtor accounts Credit control procedures Accounting ratio

Common types of IPR

Patents Trademarks Copyrights Industrial design Trade secrets Geographical Indication

Legal issues for the Entrepreneur Distinguish Intellectual property (any patents, trademarks

copyrights and trade secrets held by entrepreneur) assets of new venture including software and websites

Nature of patents (contract between government and inventor giving exclusivity of invention for a period of time- after that public domain) Purpose and procedure of trademarks

Purpose of copyright Identify procedures that can protect trade secrets Value of licenses in starting or expanding business Implications of new legislation that affects Board of Directors and

internal audit processes Issues related to contracts insurance product safety and liability WTO Agreement on Trade Related Aspects of Intellectuual

Property Rights (TRIPS) the duration of patents should be twenty years

Patent

Is a set of exclusive rights granted by a state to an inventor or assignee for a limited period of time in exchange for a public disclosure of an invention

Application to be made for a claim defining the invention as new or useful process, machine,or composition of matter and any improvement thereof , non obvious and useful or industrially applicable,

Certain subjects like business methods and mental acts are excluded generally

Exclusive right is the right to prevent others from making, using, selling or distributing the patented invention normally for a period of twenty years.

May be given to individual or corporate identity

Trademark A word, identity, symbol, design or

some combination of such and even could be a slogan or a particular sound that identifies the source or sponsorship of certain goods and services

Can last indefinitely as long as the mark continues to perform its indicated function –initially given for 20 years with 20 years renewable terms.

Copyright

Protects original works of authorship –does not protect the idea itself but its usage

Music, literary work, pictures videos, software

Trade Secret

Maintaining an idea or process as confidential and to sell or license it as a trade secret.

Life as long as the idea or process remains a secret.

Confidential information agreement

Geographical Indication

Is a name or sign used on certain products which corresponds to a specific geographical location or origin.

The use of GI acts as a certification that the product possesses certain qualities or enjoys a certain reputation , or other characteristic attributable due to its geographical origin

To use GI, a product or its constituents materials emanate from a particular area or meet certain standards

Protected Designation of Origin (PDO), Protected Geographical Indication(PGI) and Traditional Speciaility Guaranteed ((TSG) . Wines of France, Banarasi Silk, Hyderabad Benami.

Industrial Design

Is an intellectual property right that protects the visual design of objects that are not purely utilitarian.

An industrial design consists of the creation of a shape , configuration or composition of pattern or colour or combination in three dimensional form containing aesthetic value.

An industrial design can be a two or three dimensional pattern used to produce a product, industrial, commodity or handicraft.

Indian Design Act 2000 enacted to consolidate and amend protects of design under Art 25 and 26 of TRIPS agreement.

Protecting Trade Secrets

Employee training refer sensitive questions to one person

Provide escorts to office visitors Avoid discussing business in public places Keep travel plans secret Control information presented at conferences Physical protection of documents Non disclosure agreements by employees and

consultants Debrief departing employees on confidential

information Marking document confidential. Keep track of outgoing and incoming electronic traffic

Others

Product Safety and Liability – consumer protection

Insurance –property ,casualty, life, worker’s compensation, bonding (employee theft of funds, subcontractor failure to complete work on time)

Licensing

Arrangement between two parties where one party has proprietary right over some information, process or technology protected by patent , trademark or copyright for use of which the licensee pays a royalty or some specified sum in return for permission to copy the patent, trademark or copyright.

Licensing a trademark requires a franchising agreement.

Enterprises Classification(MSMED Act 2006) Manufacturing or Service Investment based classification

Manufacturing/Service Micro – investment upto Rs 25 Lakhs/10 lakhs Small – From Rs 25 lakhs to Rs 5 crs/ Rs 10

lakhs to Rs 2 crs Medium – from Rs 5crs to Rs10 crs/ Rs 2 to

5crs Take advantage of Credit Linked Capital

Subsidy Scheme

Schemes in MSME Sector

National Manufacturing Competitiveness Programme 2005

Micro and Small Enterprises Cluster Development Programme – holistic development of selected MSE clusters through value chain and SCM management on cooperative basis

Scheme for Capacity Building – strengthening of database and advocacy by industry/enterprse associations, as envisaged by promotional package for MSEs

Schemes in MSME Sector

Credit Linked Capital Subsidy Scheme for Technology Upgradation Max loan –Rs 100 lakhs

Credit Guarantee Scheme – Collateral free loans upto Rs 50 laks

ISO 900/ISO 14001 certification Reimbursement Scheme

MSME MDA- for participation in trade fairs abroad and producing publicity materials

Schemes for MSME

Financial Assistance for using Global Standards in barcoding

Purchase and Price Preference Policy- Under single point registeration Scheme ,358 items are reserved for exclusive purchase from MSME by Central Govt. No tender fee, no Ernest money or security deposit and 15% price preference for purchases from individual MSMEs

Schemes for MSMEs

Mini Tool Rooms – Assistance upto Rs 9 crs or 90% for setting up

National Awards –for exports,innovation,quality ,product development, import substitution in MSMEs

Basic Govt. Procedures

Industrial Licensing -Industrial (Development and Regulation) 1951 Act. – Applicable to where 50 or more workers are employed with power in preceding 12 months and 100 or more workers without power(no part with power).

Industries (Devp and Reg) Act

1. Registration of Industries

2. Licensing of Expansion

3. Production of new articles

4. License is a written permission issued by the central govt. to an industrial undertaking stating details as location, articles of manufacture, capacity etc.

Legislation -Factories Act 1948 Factories Act (10 or more persons in

manufacture with motive power or 20 without motive power, competent person -18 years qualified and recognised

Hours of work – adult male and female(48 per week and 8 per day) and wages double for overtime.

Health – clean, floor clean once a week, whitewashing once in 14 months

Ventilation and temperature ,water facilities, toilets and spitoon

Factories Act

Safety provisions – safety guards where moving machinery, fencing

Welfare – washing facility, place for storing dry clothes (changing rooms), first aid boxes for every 150 workers

Safety condition of building and machinery

Penalty for breach – imprisonment upto 3 months

Legislation

Shop AND Establishment Act 1948 Payment of Wages Act 1936 EPF Act Workmen Compensation Act Employment of Women Legal Provisions Employment of Children Protective Legal Provisions Payment of Gratuity Act Employees State Insurance Act Payment of Bonus Act 1985 Trade Union Act 1926 Water (prevention of Pollution ) Act 1974 Environment Protection Act 1986 Industrial Disputes Act 1947 Delayed Payments Act 1993

Shop and Establishment Act

Regulates conditions of work and employment in shops, commercial establishments, residential hotels, restaurants, eating houses, theatres, other places of public entertainment and other establishments.

Provisions include regulation of establishments, employment of children, young persons and women, leave and payment of wages, health and safety.

Shop and Establishment Act

Register for lime washing Opening and closing hours Employment Register Leave register Visit Book

Legislation (2)

Sale of Goods Act and Consumer Protection Act

Advertising Standards Information Technology Act Employment and Labour Regulations Employment Protection Act Working Hour Directives Contracts of Employment Act Employer Compulsory Insurance Regulation PF Act Minimum Wage regulations

Legislation (3)

Finance Act Customs Excise and VAT regulation Law of Taxation Companies Act Partnership Act Business Names act Copyright Design and Patents Act Consumer Credit Act

Legislation (4)

Insolvency Act Contract Law (Debt Recovery) Property law Disabled Person Employment Act Disability Discrimination Act Trade Union Act

Sources of Finance- Factors influencing suitable sourcing of finance-

purpose, size of borrowing required, anticipated repayment period, affordability of payment, availability of security.

Funding Options

equity or debt unsecured loans, Overdrafts loan guarantee schemes, short/ medium/long term bank loan, share capital from private investors or

ordinary/preference shares, debentures, mortgage debentures, grants, commercial mortgages

High Potential Firm

Foundation Firm

5 10

Life style firm

Equity

Personal Savings

Risk Capital

Sales

20 mn

R&D START Up

EARLY GROWTH

RAPID GROWTH EXIT (LBO,MBO)

FINANCIAL LIFECYCLES

Value creation

Slicing Value Pie

Covering Risk

shareholders

customers

employees

suppliers

Risk and return

Cash –risk -time

Debt :take control

Equity staged commitments

CENTRAL ISSUES IN ENTREPRENEURIALFINANCE

Physical Resources

Identify need Transport Plant and machinery Furniture and office equipment Fixtures and fittings Resale stock Raw materials Componens ,materials and consumables Public utilities Vetting list and costing Cash flow and payment schedule Supplier relationsips

Customer Service

What do customers expect- from the business, from staff, from the product, goods or services

Customer service essential for retention, improve confidence of existing customers, enhance reputation of business and quality standards,increase job satisfaction of staff

Sell solutions not systems Customer care policy- response, standards,

achievement

Premises Requirements What type are needed – nature of business

planned, customer access, appearance, easy access, regulatory approval , need for customer facilities like parking, security, affordability, space requirements, convenience, access for staff

Size Options for acquiring premises- free hold or

leasehold,rental agreements,insurance cover –product,public, employers professional indemnity,motor vehicel health, disability,key person

Sales and Marketing

Market research –size, growth, projected/targeted market share, barriers, resources and time, problems anticipated, effort vs rewards assessment, competitors, other comparable products, key features looked for by customers, prevailing pricing

Market segmentation Marketing Plan

Recruiting and Employing Staff Need for full time or casual or temporary and

affordability to pay as well as productiveness of additional workers.

Pay as you earn (PAYE) system for insurance and income tax liabilities.

Define the requirements, attract candidates and carry out selection process

Job description, personnel specification, terms and conditions of employment, advertising the position

Discipline and grievance procedures Staff Appraisal

Taxation

Allotment of PAN,TAN( Tax Deduction Account Number)

Opening of Bank Account Registration with Sales tax, VAT, Trade

Tax, Excise, Service Tax, Customs No Objection from Pollution Control Dept. Linking with Tax information Network (TIN) Import Export Code (IEC) from RBI Regd. with concerned Chamber of

Commerce and Industry

Other Govt. Dept.

Clearance from Police, Fire Labour Health

Utility Arrangements

Electricity Water Sewage Any other registration/ legality

required due to specific nature of the venture

Financial Support

Commercial banks FIs IDBI IFCI

ICICI IRBI

LICUTISFC

SIDC SIDBI

EXIM BANK

Institutional Support

NEED- Network of Entrepreneurship and Economic Development (brings together underpriveleged communities with teams of social entrepreneurs in oreder to maximise HR potential and create positive change in their socio economic and political environment .Located in Lucknow

National Small Industries Corporation (NSIC) facilitates growth of small entreprises

Institutional Support

District Industries Centers (DICs) – to promote Cottage and Smal Scale Industries in the District . Fin,Assistance Scheme (PMRY, Nomal bank Finance, BSAI (Bengal State Aid to Ind. Act), Regd, Project Scheme vetting, Marketing Assisstance,Special Assisstance, Bio Gas development,Pllution Control,Training Programme,Rural Employment Generation programme,

Industrial Estates SEZs

Plant and Machinery

Domestic or import Imports regulated by Foreign Trade (Devp. And

Regulation ) Act 1992 –DGFT Process provides specifications of machinery required Techno –economic survey Trade fairs Consult experts/dealers Second hand machinery NSIC provides machinery and equipment to SI offering

them long term repayment period with moderate rate of interest.Also gives it on hire purchase and lease basis

HR

Availability at different skill levels productivity and cost of labour Flexibility of labour Attitude and behaviour of labour Nature of trade unionism Right no of emplyees for the right job Manpower planning,

recruitment,selection, placement

Institutional Support

Small Industries Development Organisation (SIDO) – Nodal development agencies for SSIs (Laghu Udyog)

Small Scale Industries Board (SSIB)- apex body the of Govt to render advise on all issues pertaining to the small scale sector

Small Scale Industries Development Corporations (SSIDC)

MSME Development Institute -Formerly Small Industries Service Institutes(SISI). There are 30 such Institutes provide assistance for the promotion of MSMS in respective states.

Govt. Support

Office of Development Commisioner( Micro, Small and Medium Enterprises) MSME takes care of entrepreneur ship and small industries as generally enterprises start small.

Small Industries Development Organisation SIDO – nodal development agency for small enterprises estd. 1954

Requirements of Finance

Start up expenses Operational Expenses Personnel Expenses Contingency expenses

Financial Needs –Start Up Expenses

Land and building Machinery ,equipment and tools Furniture and office equipment Raw material and inventory Power connection and back up Advertising and promotion Requirements like legal certificates Partnership agreements

Considerations for Sources of Financing

Length of time – short or long term Cost – Fixed rate, floating rate,% of

profits Control- Equity, covenants

(agreement or contract), voting rights

Sources of Finance

Internal –Personal Savings, retained earnings, Working Capital, Sale of Assets

External- Ownership capital –ordinary /preference shares

External –non ownership capital (Debentures,other loans, Overdraft, Hire purchase,Lines of credit from creditors,grants, venture capital

Factoring and Invoice Discounting Leasing

Sources of Finance

Self Family and friends Suppliers and trade credit Commercial banks Govt.loans programs R&D Limited partnerships –contract limited Venture Capital Private equity placements Public equity offerings Other govt. programs

Line of credit

Is a credit source extended to a govt., business or individual by a bank or other fin. institution.

Can take several forms- overdraft protection, demand loan, export packing credit, term loan, discounting, purchase of commercial bills

It is effectively a bank account that can be readily tapped at the borrower’s discretion.

Interest is only paid on money actually withdrawn

Can be secured by collateral or be unsecured A maximum loan balance a bank will permit the

borrower to maintain

Factoring and Invoice Discounting Factoring is the sale of account receivables

by a business to a third party called a factor on a continual basis. (Receivable is a fin. Asset associated with a debtor’s liability to pay money owed to seller)

Forfaiting – is a one time transaction of sale of recievables

Invoie Discounting – is borrowing where recievables are used as collateral

Other Classification

Ancilliary – 50% output to another unit and investment upto Rs 1crs

Tiny enterprises –upto Rs 25 Lakhs Women Entrepreneurs – share of women

owners at least 51% Small Scale Service and Business

(Industry Related ) Enterprises (SSSBEs)- investment upto Rs 10 lakhs in fixed assets minus land and building

Facilities Small Industry Cluster Development

Programme Credit Linked capital Subsidy Scheme for

Technology Upgradation -15 % cost capital subsidy

Credit Guarantee Scheme- Collateral free loans upto Rs 50 lakhs for individual SSI’s.

ISO 9000 Certification Reimbursement Scheme- lower of 75% or Rs 75000

Specialised Institutions

Central Institute of Tool Design, Hyderabad Central Institute of Hand Tool,Jalandhar Central Tool Room Training Centers-

Bangalore, Calcutta ,Ludhiana and New Delhi National Institute of Entrepreneurship and

Small Business development (NISEBUD), New Delhi

National Institute of Small Industries Extension Training,Hyderabad

Environmental Barriers

Raw Material Labour Machinery Land and Building Other infrastructure Requirements Financial barriers

Project

A scheme, design, a proposal of something intended or devised to achieve a specified objective within a specified time

Unique, non routine and non repetitive ,one off undertaking/activity which systematically coordinates inputs in direction of intended outputs with discrete time, financial and technical performance goals.

Well planned activity that includes a correct consideration of alternatives, identification of key issues, broad participation, compactness and enforceability.

Project Formulation

Is the systematic development of a project idea for the eventual purpose of arriving at an investment decision.

Project Report

A written document pertaining to an investment proposal containing data on the basis of which data has been appraised and found relevant to the entrepreneur.

Venture Capital

EntrepreneursInvestment

bankersVenture

Capitalists

PrivateInvestors

Corporation& Government

Public markets& corporations

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IPO

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Ideas

Environmental Factor’s Support

Entrepreneur

Support Systems

Supportive

Systems

Basic Attributes

Non EntrepreneurialCharacteristics &Environments

Venture Capital Money provided by professionals who invest

alongside the management in young ,rapidly growing companies that have the potential to develop into significant economic contributors.

Professionally managed pool of equity capital formed from the resources of wealthy limited partners- pension funds, endowment funds, institutions including foreign investors

Investment made in exchange for a percentage of the gain realised on the investment and a fee.

Promoters of Venture Funds

ICICI – TDICI renamed as ICICI Venture Funds Management Co or ICICI Venture

IFCI – IFCI Venture Capital Funds Limited(IVCF)

IL & FS – Pathfinder GIC- Gujarat Venture Capital Finance

(GVCFL) with all India coverage APIDC- APIDC Venture Capital Ltd with

coverage as Andhra Pradesh Canara Bank – Canfina VCF with focus on

southern states

Angel Investors

Angel investors are affluent high net worth individuals who provide capital for business start ups usually in exchange for convertible debt or ownership equity

Now angel investors organising themselves into angel networks or angel groups to share research and pool their investment capital.

Actual entity providing funds could be a trust or a business investment fund.

Angel Investors

Fills the gap between friends and family financing who provide seed funding and venture capital.

Most investment of the size of upto $500,000 and in Healthcare services, medical devices and equipment, software, and biotechnology

Bear very high risk and require very high return on investment –potential to return at least 10 or more times the capital invested in five years through a defined exit strategy such as an IPO or an acquisition

In such cases cheaper source of financing are not available

Venture Capitalists Requirements from Business Plan

Finance new and rapidly growing co’s. Purchase equity securities Assist in the development of new

products and services Add value to the company through

active participation Take higher risks with the expectation

of higher rewards.

Attributes sought by VCs

Business Plan – complete, fluid and market drives

Competition Analysis – Doing things competitor is not doing, and understanding that what you are doing is needed

Industry Knowledge- to finding a gap in the market, knowledge is required through experience and extensive industry research.

Team – Team assembled would be crucial to its success.Team consist of industry experts, technologists and domain specialist

Analysis of Venture Investments VC/PE funds invested about $1.1 bn in 66

Indian cos and exited about 30 cos during 2004 Investments in BPOs declined sharply

compared to 2003 ICICI Ventures emerged as the most active VC Cos based in South India cornered 50% of the

investments Six venture backed cos pulled off successful

IPOs during the year Contract electronics manufacturer emerged

aas a major investor in and acquirer of Indian technology cos.

Exit Route for Venture Capital IPOs – go public through stock exchange Trade Sale –sells to a strategic buyer who

has a similar business Promoter Buy back – buys back at a

predetermined price Company Buy back – cos buys back the

VC stake Management Buy back – operating mgt

buys promoters equity

Comparison of Domestic and Offshore Funds

Base Guidelines –SEBI with registration Corpus Size- Small/large Invested Cos- SME/ Large Investment Size – Rs 0.5 to 2.5 crs/

Avg Rs 8 crs Structure- Regd. As trust inder India

Trust Act 1882.

Venture Funds in India

Financial Institutions Led by ICICI Ventures, ILFS

Private venture funds like Indus Regional funds like Warburg Pincus,JF

Electra (operating out of Hong Kong) Regional Funds dedicated to India like

Draper,Walden etc Offshore Funds like Baring,HSBC Corporate ventures like Intel Sivan Securities

Venture Capital

Early stage funding is avoided by most funds apart form ICICI Ventures, SIDBI. Funding growth or mezzanine funding till pre IPO stage

Size of Investment – Upto $10 mn Value Addition –Hands on (Draper) or hands off

approach (Chase). Seed and start up funding sees closer interaction and advice on strategy

Concessions on Capital gains tax and dividends for technology and only for HNIs. Can invest upto 40% of paid up capital of invested co and 80 % inequity shares of unlisted cos.

SEBI is nodal agency for registeration

Tax Concessions -SSI

Tax Holiday –on profits upto 6% of invested capital for five years from start (unit not formed by splitting another exiting unit and employ 10 or more workers with power and 20 without power.

Depreciation – on block of assets at prescribed rate on actual cost of plant and machinery upto a max of Rs 20 lakhs.If working in double or triple shift “Extra Shift Allowance” is available

Rehabilitation Allowance in case of natural calamiies Expenditure on Scientific Research –revenue or

capital expenditure or amount paid to a university or institution for research

Tax Concessions

Amortisation of preliminary expenses - write off of expense for feasibility report, engineering expenses, legal charges in ten annual instalment

Deduction on Profits upto 20% if in Backward Areas or Rural Areas for 10 years

Expenditure on Acquisition of Patents and Copyrights is deductible form income

Types of Lease Agreements

Capital lease – for life of an asset Operating lease – open end leasing

arrangement but shorter than life of equipment and can be terminated at option of lessee with prior notice. Caters for technology obsolescence

Sale and Lease back –firm sells to other party and gets cash and then pay rental for use

Leveraged lease – when three parties involved lessor ,lessee and lender. Lessor provides an equity investment say 25% and lenders provide the other 75%

Advantages of Leasing

Alternate use of funds Beneficial for small firms Free from restrictive clauses of debt

financing. Tax shielding- part of the tax benefit is

passed on the lessee India’s requirement for leasing for next

ten years estimated at $18.9 bn.

Hire Purchase

Agreement in which an owner called hire vendor gives delivery of goods to the buyer called hire purchaser who pays the price in certain number of instalments.

Hire vendor retains ownership till last instalment is paid

The amount of instalments paid till the last instalment is treated as hire charges.

Right to terminate agreement at any tme till property passes on.

Support System- Incentives

Fiscal Reservation Preference Infrastructure Entrepreneurship Development Collaborative programmes NGOs Quality Certification Technology Development Trust Fund Credit Policies

Support Organisations

SIDO – Also known as Development Commissioner (SSI) under Dept of Small Scale, Agro and Rural Industries in Ministry of Industries.

NIESBUD (National Institute of Institute for Entrepreneurship and Small Business development ) – Apex Body for coordinating and overseeing enrepreneurship development.

EDI –Entrepreneurship Development Institute TCOs (Technical Consulting Organisations) STATE LEVEL ORGANISATIONS KVIC SIDBI NSTEBD –National Science and Technology

Entrepreneur ship Development Bment Board

Credit Policies

Sample surveys to check credit satisfaction, composite loans (term plus working capital), meetings with entrepreneurs at zonal and regional levels

Sensitising managers to needs of the SSI sector

Procedural formalities simplified National Equity Fund Scheme to fund upto

25% of project cost as soft loan upto Rs 2.5 lakhs for a project cost of Rs 10 lakhs

Credit Policies

Lending to SSIs considered a Priority sector Concessional/Fixed rates for working capital

loans upto Rs 2 lakhs Liberal treatment for working capital loans by

banks Working capital limits minimum 20% of annual

projected turnover upto Rs 100 lakhs 100 Special SSI branches set up in identified

districts Powers delegated to sanction loans to

managers for SSI at regional and branch levels

SIDO

Small Industries Service Institutes/Branch Institutes (Economic consultancy, Trade and market information, project profiles, State/District Potential survey, study in modernisation of plant , training and workshop facilities

Regional Testing Centers – testing and training facilities

Tool Rooms/Tool Design Institutes Process –Cum Product Development centres

– R& D facilities in specified clusters

Incentives (Haryana)

Continous Uninterrupted Power Supply - endeavour for IT industry and exempt them for power cuts

Facilities on Generator sets –captive power plants of IT industry will be exempt from electricity duty without any time limit.

Change of Land Use – no charges for change of land use levied for IT /industry/parks for three years.Licence for setting up STPs given liberally and on easy payment terms.

Floor Area Regulations – Relaxation upto 100% in areas notified by state govt for IT units and in all IT parks

Incentives (Haryana)

Sales Tax Concessions – Upto 125% of investment for small and 100% for medium

Exemption for Payment of Electricity Duty – Exempt for 5 years

Incentives to Tiny units in Rural Areas – Exemption from electricity duty, price preference of 10%, marketing assistance.

Small and Medium Enterprises Renewal Fund.- for technology upgrade, quality consciousness, brand promotion, improved management practices, capacity building

Incentives to Sick units – No penal interest in case of default

Incentives

Tax reforms and Fiscal Discipline – Self assessment, abolition of forms, computerisation.

Rebate in cost of Land – Upto 20% if started in 3 years from date of possession.

Exemption for payment of electricity duty – all new units other than negative list for 5 years

Customised Package for prestigious project – projects above Rs 30 crs

Incentives for IT Industry – preferential allotment of land in industrial estates

Incentives for Industry

Registration and Stamp Duty Applicable – Rebate on registration and transfer of property and exemption on stamp duty on a tapering scale given for sale /lease of built up space to the IT industry establishing facilities in private STPs/ IT parks.

Applicable Rate of Sale Tax - IT software industry exempt from payment of sale tax. The applicable rate of sales tax on computers and computer peripherals shall be reduced to 0.25%

Exemption from Pollution Control – IT software industry shall be exempted from the purview of the Haryana Pollution Control Act except in respect of power generation sets of more than 10KVA capacity.

State level Institutions

Commissioners and Directors of Industries

District Industries Centres State Industrial Development

Corporation State Small Scale Industries

Development/Export Corporations

SIDBI

Refinancing of loans and advances extended by primary lending instituions

Discounting and resdiscounting of bills Extending financial support to SSIDC and

NSIC (Natl Small Ind.Corp) Technological upgradation and

modernisation services to the industries Promotes employment oriented industries

especially in the semiurban area.

Procedure for Borrowing loans Copy of letter addressed to bank Allotment letter of land Agreement on Industrial sheds NOC form Local authorities Sketch of site offered as securities Approved plans by concerned authorities Qoutations and catalogues from suppliers of machinery Copies of import lcence Assurance letter of marketing agreement A copy of feasibility report covering market study report Photographs of promoters Projected financial statements

Role of SMEs

MSME sector contibutes 45% of he total manufacturing output

33% of the total exports Employs 60 mn persons in Over 28 mn units across the country

Personal barriers

Emotional issues Lack of confidence Lack of dependability on others Lack of motivation Lack of Patience Inability to Dream Sense of pride or embarrassment

Barriers to Entrepreneurship

Environmental barriers Personal barriers Societal barriers

Tax Concessions

Business of Publication of Books – 20% of profits deductible form gross total income

The ExorcistThe Exorcist movie movieDr M S Mamik