Entrepreneurship UNIT-2 ENTREPRENEURIAL PLANNING ClassXII

Activity, a symbol of human life may broadly be categorized into:

a) Economic Activities: Activities are undertaken to earn monetary gains are called economic i.e. activities primarily concerned with:

Production · Distribution and/or · Consumption of goods and services.

b) Non-Economic activities:

Activities are done out of love, care, affection, self-satisfaction, emotions, sympathy, patriotism etc. but not for money, which is known as non-economic.

Types of Economic Activities;

Activities which are inspired mainly by economic consideration can be classified in three broad categories:
1) Profession
2) Employment
3) Business

Types of Economic Activities

Profession	Employment	Business
The profession is that occupation in which one professes to have acquired specialized knowledge, which is used either in instructing, guiding, or advising others,” says the Webster’s Dictionary. Examples: Lawyers, Doctors, Chartered Accountants, Company Secretaries, etc. Thus, the occupation/activity which requires an individual to apply specialized knowledge and skills is said to be a profession	An activity in which an individual works regularly for others and get remuneration in return, undertaking personal services as per the agreement of employment	A state of being busy or occupied’, is what ‘Business literally means’. In a way, all economic activities related to the production and distribution of goods and services undertaken for monetary gains, are said to be business

Activities classified on the basis of Economic Consideration:

Manufacturing
Service
Trading

MANUFACTURING:

Production of merchandise for use or sale using labor and machines, tools, chemical and biological processing, or formulation, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale.

Manufacturing takes turns under all types of economic system.
In a free market economy, manufacturing is usually directed toward the mass production of products for sale to consumers at a profit.
In a collectivist economy, manufacturing is more frequently directed by the state to supply a centrally planned economy.
In mixed market economies, manufacturing occurs under some degree of government regulation.

Service: MEANING:

An intangible commodity a type of economic activity that is intangible is not stored and does not result in ownership. Examples of services include the transfer of goods, such as the postal service–delivering mail, and the use of expertise or experience, such as a person visiting a doctor. Service sector includes commercial firms engaged in banking, communication, transport, insurance, warehousing etc
SERVICES:
A service is consumed at the point of sale.
Services are one of the two key components of economics, the other being goods.
This sector constitutes the basic infrastructure which is a must for smooth flow of business activities
In the recent past, the role of service sector in the Indian economy is growing faster than agriculture and industry.

Trading

The trade that occurred among the most primitive humans has evolved considerably over time.
The activity or process of buying, selling, or exchanging goods or services.
The amount of things or services that are bought and sold : the money made by buying and selling things or services.
The act of exchanging one thing for another.

Different Authors, Different Opinions:

Business is “whole complex field of commerce and industry, the basic industries, process and manufacturing and the network of ancillary services, distribution, banking, insurance, transport and so on which serve and interpenetrate the world of business as a whole.” — F.C. Hooper
Business may be defined as “an activity in which different persons exchange something of value whether goods and services for mutual gain or profit.” — Peterson and Plowman
“An institution organized and operated to provide goods and services to the society under the incentive of private gain”, is said to be business. — Wheeler.

BUSINESS

Business is a continuous human economic activity with an objective to earn profit by producing, buying and selling of goods and services.
Irrespective of size, nature, scale or ownership, an activity is referred as business if it exhibits the following essential characteristics:

CHARACTERISTICS OF BUSINESS

Entrepreneur’s presence :
There must be someone/person to take initiative for establishing a business and undertake the risk associated with the same.
Economic activity
All those activities related to the production and/or distribution of goods and services, with economic motive i.e. profit can form part of business
Production or procurement of goods and services
A business which either produces or procures goods and services for offering them to consumers, could be: a) Consumer’s goods b) Producer’s goods c) Services
Sale or exchange of goods and services
A business must involve sale, exchange or transfer of goods and/or services for the satisfaction of human needs against a value/price. Goods/services purchased or produced for personal/self-consumption, is not a business.
Regularity One time transaction or dealing in goods and services is not business, even if one earns profit in return. Business must be done regularly.
Utility creation
Business activities result in creation of utilities i.e.
a) Form utility – Changing the form of raw material into finished product creates form utility.
b) Place utility – From the place of production, transporting goods to the place of consumption results in place utility.
c) Time utility – The process of storing the goods when not required to supplying them when required generates time utility.
Profit earning Profit is the reward for undertaking a business activity as no business can survive for long without earning profits.
Uncertainty of return
Business does not guarantee for the return of either principal amount invested in the business or the profit.
Element of risk
Business involves risk i.e., uncertainty. ‘Higher the risk, higher the profit’ goes the old proverb. The actual business situation is affected by a variety of uncontrollable external factors casting favourable or unfavourable impact on business. Thus, the risk element keeps a businessman vigilant and going.

Forms of business organisation:

Setting-up a business is not an easy task
An enterprise is a separate and distinct unit, institutionally arranged to conduct any type of business activity. It needs to combine the necessary things such as materials, tools, equipment, working space and bring together all of them in a systematic and effective manner to accomplish the entrepreneur’s desired objective.
Thus, every business entity needs to select an appropriate legal structure or framework to work in. This legal structure determines the extent of ownership and responsibility of proprietor(s). Appropriate form of organisation strongly influences the enterprise’s success and future prospects.
Once selected, changing the ‘form’ is quite a complex, time consuming and costly affair.
Thus, every business entity needs to select an appropriate legal structure or framework to work in. This legal structure determines the extent of ownership and responsibility of proprietor(s). Appropriate form of organisation strongly influences the enterprise’s success and future prospects.
From the point of view of ownership and management, business enterprises may be broadly classified under three categories. 1) Private sector enterprises 2) Public sector enterprises 3) Joint sector

1) Private sector enterprises

The enterprises which are owned, controlled, and managed by private individuals, with the main objective of earning profit comes under this category) Sole-proprietorship

b) Partnership

c)Joint Stock Company

d) Hindu Undivided Family

e) Co-operative Society

Public Sector Enterprise:

When business enterprises are owned, controlled and operated by public authorities, with welfare as primary and profit as secondary goals, they are called as public sector enterprises.
Either the whole or most of the investment in these undertakings is done by the Government(s). These enterprises have the following forms of organisation:

Departmental undertaking
Public corporations
Government companies

Joint Sector:

Joint sector is a form of partnership between the private sector and the government where management is generally in the hands of private sector, with enough representation on Board of Directors by the Government too.
Resources are mostly borne equally.
Imp. Point: 1) one of the first decisions that an entrepreneur will have to make for his new venture is how the business should be structured. We know all businesses must adopt some legal configuration that defines the:
a) Control, b) Personal liability, c) Rights and liabilities of participants in the business’s ownership d) Life span e) Financial structure.

2) This decision will have long-term implications. So an entrepreneur may consult experts and professionals and seek help to select the form of ownership that is right for him/her.

Factors to be considered while selecting form of organisation:

Vision regarding the size and nature of the business.
The level of control the entrepreneur wishes to have.
The level of “structure” entrepreneur is willing to deal with.
The business vulnerability to lawsuits.
Tax implications of the different organizational structures.
Expected profit (or loss) of the business

Imp. Point: Assertion: From the entrepreneur’s point of view the most commonly opted out forms for starting a new venture are: 1) Sole proprietorship 2) Partnership 3) Company

Reason: As entrepreneurs are strongly motivated by monetary gains and independence, these three forms fulfill the basic requirement of entrepreneurs well, making them the most desirable structure to commence a venture.

Sole proprietorship (As ‘sole’ means single and ‘proprietor’ means owner)

The one-man control is the best in the world if that man is big enough to manage everything.” – W.R. Basset.

Meaning: forms of business organization which is owned financed, controlled, and managed by only one person is called a sole proprietorship, single entrepreneurship, or Individual proprietorship.

1) Historically, it appears that business first started with this form of organization

2) One of the oldest, simplest, and most commonly used forms of business organization

Different authors:

“Sole proprietorship is a business initiated and operated by one individual who carries all financial and administrative responsibilities, employing such assistants as may be necessary. — E.T. Elbourne

“Sole proprietorship is a business unit whose ownership and management are vested in one person. The individual assumes all risks of loss or failure of the enterprise and receives all profits from its successful operations. — Edward Elbourne

Characteristics of the sole proprietorship 1) Individual ownership: This business is exclusively owned by a single person.

2) Individual management and control: “What is to be done, how it is to be done, and when it is to be done‖ – all affairs are managed and controlled by the sole proprietor. Though, competent people can also be employed for efficient management.

3) Individual financing: All investment is made by the proprietor. Though, if required he/she has access to loans and debts to procure funds for business.

4) No separate legal entity: Legally, the proprietor and proprietorship are one and the same business and owner exists together, thus with owner’s death, business too dies.

5) Unlimited liability: The proprietor is liable/responsible for all losses arising from the business. In case the business assets are insufficient to pay off liabilities, his/her personal property can be called upon to pay his business debts.

6) Sole beneficiary: The sole proprietor alone is entitled to all the profits and losses of the business. So he/she puts his/her heart and soul to increase his/her profits.

7) Easy formation and closure: Sole proprietorship is subjected to minimum legal formalities and regulations both at the time of commencing and/or closing.

8) Limited area of operation: This form of business generally has a limited area of operation due to: · limited finance availability · limited managerial abilities

1) Individual ownership: This business is exclusively owned by a single person.

3) Individual financing: All investment is made by the proprietor. Though, if required he/she has access to loans and debts to procure funds for business.

4) No separate legal entity: Legally, the proprietor and proprietorship are one and the same business and owner exists together, thus with the owner’s death, the business dies.

6) Sole beneficiary: The sole proprietor alone is entitled to all the profits and losses of the business. So he/she puts his/her heart and soul to increase his/her profits.

7) Easy formation and closure: Sole proprietorship is subjected to minimum legal formalities and regulations both at the time of commencing and/or closing. 8) Limited area of operation: This form of business generally has a limited area of operation due to: · limited finance availability · limited managerial abilities.

Suitability of sole proprietorship form of business:

The success or failure of an enterprise depends upon the intelligence, competence, and sensible decision-making capacity of the entrepreneur. Before opting for a sole proprietorship, an entrepreneur should carefully compare and evaluate the pros and cons of this form. Basically, this type of form is suitable when:

1. Capital requirement is limited

2. Confidentiality/secrecy is important

3. Market is local

4. Goods are of artistic nature or demands a customized approach

5. Quick decision–making is necessary

6. Size of the venture is small.

Legal formalities involved: A sole proprietorship does not need to be registered therefore an inexpensive manner of commencing business. However, in order to start a sole proprietorship, an entrepreneur requires certain industry-specific licenses. A few general factors are:

1. Business name: free to select a trading name

2. Service tax registration: Form ST 1 is to be filled for registration if the taxable services are more than 10 lakh for a financial year.

3. VAT/CST registration: If proprietorship is selling tangible goods within a state then VAT applies,

if it is inter-state then CST applies (its imperative). (CST – Central sales tax) (VAT- value-added tax.

4. Others: PAN Card no. of the sole proprietor, bank account no. in the name of sole proprietorship business, Shops & Establishment License, Employee Provident Fund Registration, or Importer Exporter Code (if in export-import business) as and where applicable, have to be complied with.

5. Payment of taxes: A sole trader has to ensure his/her business meets the state and federal taxation requirements. Due to the fact that legally, a sole tradership and a sole trader are a single entity, the sole trader bears the taxes of the business.

Partnership (“TWO HEADS BEING BETTER THAN ONE.)

LIMITATIONS OF SOLE PROPRIETORSHIP:

Partnership form of organization has developed due to the inherent limitations of sole proprietorship i.e. a) Limited capital

b) Limited managerial ability

c) Limited continuity

Assertion: In this era of specialization, expansion and diversification, expecting one man to combat them all is not possible.

Reason: Business acumen and wealth seldom (desirable combination ) meet in one person. This, desirable combination probably led to the emergence of a Partnership form of business

Partnership:

Meaning:A partnership is an association of two or more persons to carry on, as co-owners, a business and to share its profits and losses. Thus, two or more persons may form a partnership by making a written or oral agreement called a partnership deed to carry a business jointly and share its proceeds.

To Quote Authors:

“Two or more individuals may form a partnership by making written or oral agreement that they will jointly assume full responsibility for the conduct of business.” — John A. Shubin

“The relationship between persons who agree to carry on a business in common with a view to private gain is a partnership.” — L.H. Haney

“Partnership is a relationship between persons who have agreed to share the profits of a business carried on by all, or any of them acting for all.” — Indian Partnership Act, 1932.

Characteristics of partnership: ( U – CRAME- IT- Please)

1) Two or more persons:

The partnership is the outcome of a contract. Thus:

There must be at least 2 persons to enter into a contract to form a partnership. b) Minors cannot form a partnership firm as they are incompetent to enter into a contract but can be admitted to the benefits of a running firm. c) If these people intend to do banking business, the maximum number can be ten otherwise twenty for the other business.

Agreement: The relation of partnership arises from contract and not from status. Though the oral agreement is even acceptable in practice, written agreement is much more advisable as disputes can be resolved better with it.

Profit-sharing: The objective of the business is to make profits and distribute the same amongst partners. Any association initiated to do charity work is not a partnership.

Unlimited liability: Mostly, the liability of the partners of a firm is unlimited. Their personal properties can be disposed of off to pay the debts of the firm if required. The creditors can claim their dues from any one of the partners or from all of them, meaning partners are liable:

Individually

Collectively

Implied authority: There is an implied authority that any partner can act on behalf of the firm. The firm stands bound by the acts of partners.

Mutual agency: The business of partnership can be carried on by all the partners or any one of them acting for all. Thus, every partner is principal as well as an agent of other partners and of the firm. Thus, (i) Each partner is liable for acts performed by other partners, (ii) Each partner can bind other partners and the firm by his acts done in the ordinary course of business.

Utmost good faith: Every partner is supposed to act honestly and give proper accounts to other partners. Thus, mutual faith and confidence in one another is the main strength of the partnership.

8) Restriction on transfer of shares: No partner can sell or transfer his share to anybody else without the consent of the other partners. By giving notice for the dissolution of the firm, a partner can show intention to discontinue as a partner.

9) Continuity: A partnership continues up to the time that all partners desire to continue it. Legally, a firm dissolves on the retirement, death, bankruptcy lunacy, or disability of a partner if not otherwise provided for in the partnership deed.

TRUST AND CONFIDENCE ARE THE PILLARS FOR GREAT PARTNERSHIP

Suitability of Partnership:

The use of better-sophisticated production techniques has necessitated more investments. The complex nature of businesses needs expert managerial hands. Thus, partnership form of a business is an ideal choice for starting a new venture, if the entrepreneurs–

capital and managerial requirements are higher as compared to that of a sole proprietorship,

enterprise falls in the category of either being a small or a medium scale enterprise,

direct contact with the customers is essential

Consequences for non–registration of a partnership firm:

Partnership firms in India are governed by the Indian Partnership Act, 1932. While it is not compulsory to register your partnership firm as there are no penalties for nonregistration, it is advisable since the following rights are denied to an unregistered firm:

1) A partner cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.

2) A right arising from a contract cannot be enforced in any Court by or on behalf of the firm against any third party.

3) Further, the firm or any of its partners cannot claim a set-off (i.e. mutual adjustment of debts owed by the disputant parties to one another) or other proceedings in a dispute with a third party.

Partnership deed:

Meaning: Partnership is an agreement between persons to carry on a business, entered into either orally or in writing.

1) It is always desirable to have a written agreement so as to avoid misunderstandings and unnecessary litigations in the future.

2) When the agreement is in written form, it is called a ‘Partnership Deed’.

3) It must be duly signed by the partners, stamped, and registered.

Any alteration in one partnership deed can be made with the mutual consent of all the partners.

Content of partnership deed:

1. Name of the firm. 2. Nature of the business. 3. Name of partners. 4. Place of the business. 5. Amount of capital to be contributed by each partner. 6. The profit-sharing ratio between the partners. 7. Loans and advances from the partners and the rate of interest thereon. 8. Drawings allowed to the partners and the rate of interest thereon. 9. Amount of salary and commission, if any, payable to the partners. 10. Duties, powers, and obligations of partners. 11. Maintenance of accounts and arrangement for their audit. 12. Mode of valuation of goodwill in the event of admission, retirement, and death of a partner. 13. Settlement of accounts in the case of dissolution of the firm. 14. Arbitration of case of disputes among the partners. 15. Arrangements in case a partner becomes insolvent.

Registration procedure:

Imp. Points:

1) A partnership firm can be registered whether at the time of its formation or even subsequently.

2) Entrepreneur needs to file an application with the Registrar of Firms of the area in which his/her business is located.

3) It may be noted here that, the name of the partnership firm should not “contain any words which may express or imply the approval or patronage of the government except where the government has given its written consent for the use of such words as part of the firm’s name.”

4) Once the Registrar of Firms is satisfied that the application procedure has been duly complied with, he/she shall record an entry of the statement in the Registrar of Firms and issue a Certificate of Registration.

Registration procedure:

Step: 1 Application for partnership registration should include the following information:

1) Name of the firm 2) Name of the place where business is carried on 3) Names of any other place where business is carried on 4) Date of partners joining the firm 5) Full name and permanent address of partners. 6) Duration of the fir

Step: 2: Every partner needs to verify and sign the application. Ensure that the following documents and prescribed fees are enclosed with the registration application. a) Application for registration in the prescribed form-I. b) Duly filled specimen of affidavit c) Certified copy of the partnership deed d) Proof of ownership of the place of business or the rental/lease agreement thereof

Common limitations of sole proprietorship and partnership:

1) limited Resources and

2) the limited life span of both sole proprietorship and partnership form of organization stands limited with

3) liabilities being unlimited.

To comply with these growing needs, the demand was on rising for: 1) Capital 2) Managerial talent and skills 3) Limited liability

Thus, the joint-stock company as a modern form of business organization emerged to meet the requirements of the large-sized businesses.

Joint Stock Company

In common prevalence, a company means a voluntary association of a person formed for some common object with capital divisible into units of equal value called ‘shares’ and with limited liability. Company is a creation of a law that is the birth of this artificial human being is by law and it can be put to death by law only.

According to section 3 of the Indian companies act, 1956, “A company means a company formed and registered under this act or any previous act.”

Thus, a company is an association of persons who contribute money in the shape of shares and the company gets a legal entity and enjoys a permanent existence.

Characteristics of a Company: (VC-WALT-DSN)

1) Voluntary association:A single person cannot constitute a company. At least two persons, voluntarily, must join hands to form a private company, while a minimum of seven persons are required for a public company.

2) Artificial person: A company is created by law. Though it has no body and no conscience, it still exists as a person, having a distinct personality of its own. Because like a human being it can buy, sell and own property, sue others, be sued by others, its called as an artificial person.

3) Separate legal entity:A company has an independent status, different from its members. This implies that a company cannot be held liable for the actions of its members and vice-versa. The company has a distinct entity separate from its members.

4) Common seal: Being an artificial person, the company cannot sign the documents. Hence, it uses a common seal on which its name is engraved. Putting the common seal on papers, is equivalent to that of signatures of a human being, making them binding on the company.

5) Limited liability The liability of the shareholders of a company is normally limited to the amount of shares held or guarantee given by them.

6) Transferability of shares No shareholder is forever wedded to the company. Subject to certain conditions, the shares are freely transferable. The private companies do impose some restrictions on the transfer of shares7) Diffusion of ownership and management In this form of organization, entrepreneurs should clearly understand there exists separation of ownership from management. As the shareholders could be scattered across the country here, they give the right to the directors to manage the company’s affairs.

8) Number of members Private company: Minimum required members: 2 Maximum members : 50 (excluding employees) Public company: Minimum requirement: 7 Maximum number: No limit

9) Limitation of action The scope of this artificial person is determined by: a) The Indian Companies Act b) Memorandum of Association c) Articles of Association. Any work done beyond what is stated in these documents can lead to the winding up of the process of the company.

10) Winding-up

The mode of incorporation and termination (winding up) is both as per the Companies Act only. It’s born out of law and can be liquidated only by law.

The choice to be made

An entrepreneur, under the ‘Company’ form of organization has a further choice to incorporate an enterprise either as either a:

a) Private company or,

b) Public company

Private company

A private company: 1) has a minimum of two and a maximum of 200 members excluding its past and present employees.

2) restricts the right of its members to transfer shares.

prohibits an invitation to the public to subscribe for any shares or debentures of the company, or accept any deposits from persons other than its directors, members or relatives.

has a minimum paid-up capital of one lakh rupees (subject to change)

uses the word ‘Pvt. Ltd.’ at the end of its name.

B) Public company: Under Section 3(i) (ii) of the Companies Act, a public company is a company which is not a private company. By implication, a public company:

1) has a minimum of seven people to commence with no upper limit to membership

2) does not restrict any transfer of shares

3) invites the public to subscribe for its shares, debentures, and public deposits.

4) has a minimum paid-up capital of five lakh rupees.

uses the word ‘Ltd.’ at the end of its name

Why the private company is more desirable
(privileges)

1) Only two members are required to form a private company.

2) Only two directors are required to constitute the quorum to validate the proceedings of the meetings.

3) Such a company can file a statement in lieu of a prospectus with the Registrar of Companies.

4) It can commence its business immediately after incorporation.

5) Holding of a statutory meeting or filing of a statutory report is required by a private company.

6) A non-member cannot inspect the copies of the profit and loss A/c filed with the Registrar.

7) Limit on payment of maximum managerial remuneration does not apply to a private company.

8) Restrictions on appointment and reappointment of managing director do not apply. 9) Maintaining of the index of members is not required by a private company.

10) Directors of the private company need not have qualification shares. The company form of organization has shown a phenomenal increase in almost all countries of the world in the twentieth century.

Suitability:

1) Venture is a heavy and basic industry type

2) Large-scale operations are involved

3) Business requires huge funds

4) Enterprise involves heavy risks

Enterprise is technologically complex and sophisticated, banking heavily upon experts and professionals

To commence a “Company” in India:

Promoters: The idea of forming a company is conceived either by a person or by a group of persons known as promoters. Our entrepreneurs are basically the promoters as they are the ones who:

a) Conceive the idea.

b) Scan it against the environmental forces to establish its feasibility and viability.

c) Procures the resources essential for its commencement.

d) Ensure the incorporation of the enterprise.

e) Arrange for commencing of the business.

g) Plans out expansion and diversification strategies

Imp. Point:

The concept of the company is born in the entrepreneur’s mind –

they investigate the potential

and take a lead for bringing human resources, money, materials, machinery, and methods together for

converting his/her dream into reality.

Stages for the formation of a Company

Stage1: Promotion stage

Stage 2: Incorporation stage

Stage 3: Capital Subscription

Stage 4: Commencement of business

Private companies can start their business after Stage 2: Incorporation stage because they don’t have to issue shares to the general public.

A public company can start a business only after completing all the four stages

Legal formalities are expected to be complied by the entrepreneur

1. Obtain PAN number from Income Tax Department: Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department.

A) PAN enables the department to link all transactions of the ―person‖ with the department. These transactions include tax payments, TDS/TCS credits, returns of income/wealth/ gift/FBT, specified transactions, correspondence, and so on. PAN, thus acts as an identifier for the ―person‖ with the tax department. It is mandatory to quote PAN in all documents pertaining to financial transactions.

B) Who must have PAN? All existing assesses or taxpayers, ii) Any person carrying on any business or profession whose total sales, turnover, or gross receipts are or is likely to exceed five lakh rupees in any previous year: The Assessing Officer may allot PAN to any person either on his/her own or on a specific request from such person

2. Open current account i) Any person, competent to contract and satisfactorily introduced to the Bank may open an account in his/her own name. He/she may not open more than one such account. Accounts may be opened in the names of two or more persons and may be made payable to. ii) Accounts can be opened for sole proprietorship firms, partnership firms, private limited and public limited companies, Joint Hindu families, trusts, clubs, associates, etc. satisfactorily introduced to the Bank and on fulfilling laid down procedures and tendering required credentials. iii) Accounts can be opened by minors of 14 years and above, if able to read and write, in their sole names.

Basic common documentation · Proof of Identity: PAN Card, Voter Id Card, Passport, Driving License · Proof of Address: Latest Telephone Bill or Electricity Bill

Public or private limited companies documentation

2. Certificate of incorporation and commencement of business · Memorandum and Articles of Association · Board resolution authorizing the opening and operation of the account · PAN or GIR No. or completed Form 60 · List of directors with residential addresses

3. Register your company (Pvt. Ltd/Public limited Company) The following steps are involved in incorporating a private or public company in India

1. Name of the business entity

2. Register for e-filing at MCA (Ministry of Corporate Affairs) portal 3. Apply for Director Identification Number (DIN) 4. Obtain Digital Signature Certificate (DSC) 5. Register DSC at MCA website 6. Apply for approval of the name of the company 7. Formulate Memorandum of Association 8. Formulate Articles of Association 9. Verify, stamp and sign Articles of Association 10. Verify the various forms required for incorporation of the company

4. Register for service tax: Service tax is, as the name suggests, a tax on Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994. It is an indirect tax (akin to Excise Duty or Sales Tax), which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.

5. Register for VAT/sales tax Value added tax (VAT) · VAT is a multi-point destination-based system of taxation, with tax being levied on value addition at each stage of transaction in the production/ distribution chain. · The term ‘value addition’ implies the increase in value of goods and services at each stage of production or transfer of goods and services. · VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer

Imp. Point: For identification/registration of dealers under VAT, the Tax Payer’s Identification Number (TIN) is used.

TIN consists of 11 digit numerals throughout the country. Its first two characters represent the State Code and the set-up of the next nine characters can vary in different States.

Sales tax is levied on the sale of a commodity, which is produced or imported and sold for the first time. If the product is sold subsequently without being processed further, it is exempted from sales tax. Sales tax is paid by every dealer on the sale of any goods made by him in the course of inter-state trade or commerce, despite the fact that no liability to tax is raised on the sale of goods under the tax laws of the appropriate state. Sales tax ID number A state Sales Tax ID number is essentially a business version of your PAN number, under which you collect and pay tax for any service or product you sell, which in turn, qualifies for taxation in your state

6. Excise duty (If applicable: Excise duty is a tax on the manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty. The Excise duty on the rest of goods is called “Central Excise” duty and is collected in terms of Section 3 of the Central Excise Act, 1944. Sales Tax is different from the Excise duty as the former is a tax on the act of sale while the latter is a tax on the act of manufacture or production of goods.,

7. Customs duty is a type of indirect tax levied on goods imported either in or to India, not both, as well as on goods exported from India.

8. File entrepreneurship memorandum at DIC (optional) Although not mandatory, you may file part I of the entrepreneurs memorandum to the district industries center. This may be necessary for claiming certain incentives/subsidies and for certain formalities at the state level.

9. Apply for TAN: TAN or tax deduction and collection account number is a 10 digit alphanumeric number required to be obtained by all persons who are responsible for deducting or collecting tax.

10. Permissions required at the construction stage These are some permissions which are required to be obtained from the government: · Application for plot/shed, offer letter, payment of earnest money deposit · Allotment of plot/shed, payment of balance occupancy price, taking over possession thereof · Application for issuance of NOC/SSI registration · Execution of lease agreement · Application for grant of connection for construction water · Application for grant of connection for construction power

Post clearance: Building completion/drainage completion/tree plantation certificate · Permission for mortgage · NOC from Pollution Control Board · Final fire clearance · NOC from environment department · Industrial safety permit · Sanction of permanent power · Sanction of permanent water and sewerage connection

11. Employee’s Provident Fund (EPF) Applicable for establishments employing 20 or more persons and engaged in the industry.

12. Employee’s State Insurance (ESI) scheme The Act is applicable to non-seasonal factories employing 10 or more persons. The scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road-motor transport undertakings, and newspaper establishments employing 20 or more persons.

WHICH FORM OF COMPANY IS MORE DESIRABLE?

PRIVATE COMPANY BECAUSE OF PRIVILEGES

BUSINESS PLAN

Meaning and features of Planning:

Meaning: Planning, can thus be defined as “thinking in advance, what is to be done when it is to be done, how it is to be done, and by whom it should be done.”

1) the entrepreneur must make some important decisions and gather information about the external and internal factors so as to address the integration and coordination of effective business objectives and

2) planning is a process that never ends.

3) It’s an intellectual thinking process, with organized foresight, the vision based on facts and experience, which is quite essential for intelligent action.

4) Planning bridges the gap between where we are standing and where we want to reach.

Imp. Points

Entrepreneurship is personal. It is what you can do almost by yourself.” – John H. Johnson American publisher of Ebony and Jet magazines.

An entrepreneur needs to work out in detail all the relevant external and internal elements involved in starting a new venture and then running it successfully. He/she needs to develop a road map for himself/herself called a “Business Plan”.

Business Plan

The business plan is a comprehensively written down document prepared by the entrepreneur describing formally all the relevant external and internal elements involved in starting a new venture.

It’s a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals along with the background information about the organization or/and team attempting to reach those goals.

A business plan is a comprehensive project report which not only encompasses the entire range of activities that are being planned in the business but also:

a) helps to understand the feasibility and viability of the proposed venture,

b) facilitates in assessing and making provisions for the bottlenecks in the progress and implementation of the idea,

discusses the potential for success of the project along with the risk factors involved

Business plans are decision-making tools:

Describe all necessary inputs for the enterprise.

2) Explaining the mode of utilization of the resources.

3) Detailing the strategies for the execution of the project.

4) Outlining the desired goals

5) Assessing market sensitivity and the profitability of the venture.

Thus, the content and the format of the business plan is such which is able to represent all these aspects of the business planning process.

Sub Plans of Business plan

· Marketing

· Finance

· Operations

· Human resources

· Legal compliance

· Intellectual property rights, etc.

Who should write the plan?

As such preparing a business plan draws on a wide range of knowledge from many different business disciplines, requiring, the entrepreneur to consult with many other expert professional sources in its preparation like:

i) Lawyers, ii) Accountants, iii) Marketing consultants iv) Engineers v) Internet sites vi) Officially appointed or/and set-up Banks, Specialized financial institutions or Agencies to promote entrepreneurship vii) Friends, relatives, mentors etc

h the business plan should be prepared by the entrepreneur, to determine whether to hire a consultant or to make use of other resources, the entrepreneur can make an objective assessment of his her own skills, to determine where is he/she lacking and needs assistance.

Importance of the business plan

a) helps in determining the viability of the venture in a designated market

b) helps in providing guidance to the entrepreneur in organizing his/her planning activities as such:

i) identifying the resources required

ii) enabling obtaining of licenses if required etc.

iii) working out with legal requirements as desired by the government

c) helps in satisfying the concerns, queries, and issues of each group of people interested in the venture.

d) provides room for self-assessment and self-evaluation, requiring entrepreneurs to think through various scenarios and plan ways to avoid obstacles.

e) though not desirable, at times, a business plan helps to realize the obstacles which cannot be avoided or overcome, suggesting to terminate the venture while still on paper without investing further time and money

f) as the investors/lenders focus on the four Cs of credit: character, cash flow, collateral, and equity contribution, it is the business plan which reflects the entrepreneur’s credit history, the ability to meet debt and interest payments, and the amount of personal equity invested thus serving as an important tool in funds procurement

Role / Scope of the business plan

1) determining the viability of the venture

2) guidance to the entrepreneur in organizing his/her planning activities

3) satisfying the concerns, queries, and issues of each group

4) self-assessment and self-evaluation

5) suggesting to terminate the venture

6) tool in funds procurement

Imp. Points

1) The business plan is valuable to the entrepreneur, potential investors, venture capitalists, banks, financial institutions, new personnel’s suppliers, customers, advisors, and others who are trying to familiarize themselves with the venture, its goals, and objectives.

2) a business plan gives adequate clarity to the entrepreneur, investor(s), and the government of · What an entrepreneur is doing · Why he/she is doing it · How he/she will do that

3) It’s well said that “writing a good business plan can’t guarantee success, but it can go a long way toward reducing the odds of failure.”

Formats of a business plan (WIPE)

i) Elevator pitch: It is a three-minute summary of the business plan’s executive summary. This is often used as a teaser to awaken the interest of potential funders, customers, or strategic partners.

ii) A pitch deck with oral narrative: A hopeful, entertaining slide show and oral narrative that is meant to trigger discussion and interest potential investors in reading the written presentation, i.e. the executive summary and a few key graphs showing financial trends and key decisions making benchmark.

iii) A written presentation for external stakeholders: A detailed, well written, and pleasingly formatted plan targeted at external stakeholders

iv) An internal operational plan: A detailed plan describing planning details that are needed by management (for internal stakeholders) but may not be of interest to external stakeholders.

Imp. Points

1) The depth and detail in the business plan depend on the size and scope of the proposed new venture.

2. There is no fixed content for a business plan as it varies according to the entrepreneur’s goals and audience (i.e. who is being targeted).

3) it is common for especially start-ups to have three or four formats

Components of business plan (9 components)(MAP OF OBAMI)

Depending upon the entrepreneur’s experience, knowledge and purpose, generally a business plan outlines sequentially the following components or parts:

1) Introductory cover page/general introduction

2) Business venture

3) Organisational plan

4) Production plan

5) Operational plan

6) Human resource plan

7) Marketing plan

8) Financial plan

9) Miscellaneous/appendix

I. Introductory profile /general introduction (PICE)

This is the title or cover page that provides a brief summary of the business plan’s contents. The information of general nature contained in the introductory profile includes:

a) Entrepreneur’s bio-data: · Name and address of the promoter · His/her qualifications, · Experience and other capabilities · In case of partners – their names, number, addresses, designation, etc. individually.

b) Industry’s profile: · The name and address of the enterprise. · Telephone numbers/Fax/e-mail/website address. · The nature of business. · Any branches/sister concerns.

Executive summary – Three to four pages summarizing the complete business plan The executive summary highlights in a concrete and convincing manner the key provisions in the business plan, yet stimulating the potential investors that the entire plan is worth reading.

c) Constitution and organization: The constitution and organizational structure of the enterprise i.e. the legal form of the proposed enterprise-sole, partnership, company or any other form, along with registrations details.

d) Product details: · Product utility · Product range · Product design · Precise USP of product

II. Description of venture/business venture (SP)

This section of the business plan generally begins with the “mission statement” by the entrepreneur describing the size, scope, and nature of the enterprise.

Mission statement: What the entrepreneur hopes to accomplish with that business, along with a clear description of the following key elements is covered under the project description.

a) Site: Location of enterprise, owned or leasehold land, industrial area, no objection certificate from the Municipal Authorities if required, needs to be determined.

b) Physical infrastructure: The availability of the following items of infrastructure should be mentioned in the business plan.

i) Raw material: Whether indigenous or imported, sources of supply, etc.

ii) Labour: Type of labor required, provision for their training, number of manpower required, etc. iii) Utilities: These include: power, fuel, water, gas, electricity, etc. The business plan needs to clearly state: (a) type of utilities required, (b) load sanctioned (c) sources and quality of water used quantum of coal, coke, oil, etc. required, and the suppliers of the same.

iv) Pollution control: The sewage system, the sewage treatment plant, water harvesting system, arrangement for dumping and disposing of the other types of waste or emission all need to be discussed in the plan

v) Transport and communication system: Requirements for transportation and communication facilities, modes and means opted for, bottlenecks etc. are duly covered in by the business plan.

vi) Machinery and equipment: A complete list of items of machinery and equipment required indicating their size, capacity, type, cost and sources of their supply should be disclosed.

vii) Production process: A mention of the process involved in the production, the installed licensed capacity of the plant, the technology to be used, whether available locally or imported, shifts involved, needs to be present in the business plan.

The objective of Description of venture/business venture

Target / Objective of this element

1) to save the entrepreneur from a potential disaster of time and cost later on

2) the entrepreneur is able to assess and evaluate whether the idea is feasible or not

III. Production Plan(Plan your work)

“The planning of industrial operations involves four considerations, namely, what work shall be done, how the work shall be done and lastly, when and by whom the work shall be done.” — Kimball and Kimball Jr

Imp. Points:

1) Production, is the most important activity of an enterprise because it is here that the transformation of raw material into a finished product takes place with the help of energy, capital, manpower, and machinery.

2) Being highly complex and tedious, the manufacturing operation needs to be well planned.

3) nature of venture which will decide the magnitude of importance and disclosure required under the production plan.

Elements of Production Plan (Plan your work)(NPC)

Most likely there are three situations before the venture viz.

a) No manufacturing involved: If the new venture does not include any manufacturing function, say it’s a trading firm or a service provider, then this section will stand eliminated from the plan.

b) Partial manufacturing: If some or all the manufacturing process is to be subcontracted or outsourced, then the production plan should describe: i) Name and location of subcontractor(s) ii) Reasons for their selection iii) Cost and time involved iv) Any contracts that have been completed, etc.

In such cases, a clear mention of what the entrepreneur intends to do himself and what he plans to get done from outside is required.

c) Complete Manufacturing:

If the manufacturing is to be carried out in whole by the entrepreneur, he/she will need to describe: i) the physical plant layout, ii) the machinery and equipment required to perform the manufacturing operations, iii) raw materials and suppliers’ names, addresses, terms and conditions, iv) cost of manufacturing v) any future capital equipment required etc.

The objective of a production plan.

Picturizing ahead every step in a long series of separate operations, each step to be taken in the right place of the right degree, and at the right time and each operation to be done at maximum efficiency”, quoted Alford and Beathy, These lines show the objective of the production plan.

The objective of production plan: each step to be taken in the right place of the right degree, and at the right time and each operation to be done at maximum efficiency”,

a production plan helps to plan the work in such a manner that one can clearly form an idea about:

a) Production schedule and/or budget

b) Machinery, equipment requirement

c) Manufacturing method and process involved

d) Plant layout

Scope of Production plan

a production plan helps to plan the work in such a manner that one can clearly form an idea about:

a) Production schedule and/or budget (Production planning)

b) Machinery, equipment requirement (to plan which machinery and equipment are required)

c) Manufacturing method and process involved (to plan the Technique of production)

d) Plant layout (To plan the arrangement of machines, equipments in the factory)

e) Time, motion, and work-study (Time study to plan how much time is needed to complete a task, Motion study to eliminate unnecessary movements while doing production)

f) Manpower requirement (To calculate how many people are required to do production activity)

g) Inventory requirement (To plan in advance how much raw material is to be arranged for production)

IV. Operational plan(work your plan)

The operational plan is a system whereby there is achieved a smooth and coordinated flow of work within the factory so that, by planning and control of all the productive operations in all the stages of manufacture, the final product is completed in accordance with the plans. — Wright

An operational plan is actually a blueprint prepared right in advance of actual operations —

The operations plan is the soul of the business plan

Objectives of Operational plan

i) Ensuring the orderly flow of materials in the manufacturing process from the beginning (raw state) to the end (the finished products

(ii) Facilitating continuous production, lesser work-in-progress, and minimization of wastage.

iii) Coordinating the work of engineering, purchasing, production, selling, and inventory management.

iv) Describing the flow of goods/services from the production point to the consumers.

v) Introducing a proper system of quality control

vi) Undertaking the best and most economic production policies and methods.

Imp. Points

the operational plan organizes for the movement of material, performance of machines, and operations of labor, however sub-divided, into a defined direction, coordinating for the desired manufacturing results in terms of:

a) Quantity

b) Quality

c) Time

d) Place and e) Cost

Elements of the operational plan:

The operation plan, in a way is planning:

i) For production in advance of operations.

ii) Establishing the exact route of each individual item, part of the assembly.

iii) Setting starting and finishing dates for each important assignment/work.

iv) Regulating the orderly movement of goods through the entire manufacturing cycle i.e. right from procurement of all materials to the shipping of finished goods.

Elements of the operational plan: ( RSDFIS)

1) Routing: Routing is a process concerned with determining the exact route or path a product/ service has to follow right from raw material till its transformation into a finished product.

2) Scheduling: Scheduling, simply means the fixation of time, day, date when each operation is to be commenced and completed. In general, it’s the determination of the time that should be required to perform each operation.

3) Dispatching The process of initiating production in accordance with the pre-conceived production plan is said to be dispatching. This includes issuing necessary orders instructions, guidelines and/or information to work pertaining to giving practical shape to the production plan.

4) Follow-Up: Follow-up or expediting function relates to evaluation and appraisal of work performed. A properly planned follow-up procedure is helpful in dispatching errors and defects in the work. Follow-up element helps the entrepreneurs in:

a) Developing ways to review the present situation with regard to materials, work-in-progress and finished goods.

b) Evolving ways to expedite the performance of those departments which lag behind.

c) Removing obstacles in the way of production by suggesting remedial measures.

(Expedite means make something happen faster)

5) Inspection Inspection is the art of comparing materials, products, or actual performance with established standards. This element helps the entrepreneur to set up laboratories or evolve strategies/methods to ensure the predetermined quality of product/service.

6) Shipping: This section goes beyond the manufacturing process and describes the flow of goods/services from production to the consumers. This part is a detailed presentation by the entrepreneur explaining the chronological steps in completing a business transaction efficiently and profitably. The operation plan is greatly affected by:

Factors affecting operational plan:

a) Nature of venture b) Type of product/service c) Scale of operation and d) Technology involved

An operational plan is a detailed presentation by the entrepreneur explaining the chronological steps in completing a business transaction efficiently and profitably.

The operation plan is greatly affected by:

a) Nature of venture

b) Type of product/service

c) Scale of operation, and

d) Technology involved

V. Organizational plan

(Categories of business)

CATEGORIES OF BUSINESS:

You may start any kind of business, but surprisingly, all of them will fall into one of the four basic categories:

a) Manufacturing – a business that makes a tangible product.

b) Wholesale – a business that buys products in bulk from the manufacturers to be sold in smaller lot to retailers.

c) Retail – a business that sells directly to the final consumer for final satisfaction.

d) Service – a business that sells intangible such as time or expertise.

Organisational plan (Legal structure of business)

the entrepreneur has access to the following forms to choose from to start his/her venture:

a) Sole proprietorship b) Partnership c) Joint Hindu family d) Cooperative or e) Corporation.

each of these forms has important implications on (i) Taxes (ii) Liability (iii) Continuity (iv) Financing (v) Ownership.

Elements of Organisational plan

i) the terms and conditions associated with the selected form

ii) lines of authority and responsibility of members of the new venture (Who will report to whom, who will be the boss, and who will be the subordinate)

iii) the names, designation, addresses, and resumes of the members

iv) stake of members in the organization (part of the capital invested by each of them)

v) roles and responsibilities of each member (Power, responsibility, work of each member)

vi) procedure for solving conflicts/disputes amongst members

vii) forms of payment for the members of the organization (Percentage of profit or salary)

viii) voting rights, managerial and controlling rights of the members.

Importance of Organisational plan

Both the entrepreneur and the potential investors stand to gain from the organizational plan as the design of the organization so opted helps even in:

i) Specifying the types of skills needed and the roles that must be filled by the members i.e. helps to decide the enterprise’s formal organization, and

ii) representing the attitudes, behaviors, dress, communication styles, etc., thus chalking out informal organization or culture.

VI. Financial plan

A financial plan is a projection of key financial data about a) The potential investment commitment needed for the new venture, and b) the Economic feasibility of the enterprise.

To simplify, the financial plan is so designed that the entrepreneur and the investors could have a clear picture of:

a) How much funds are required?

b) Where will funds come from?

c) How are they disbursed?

d) The amount of cash available

e) General financial well-being of the new venture i.e. probable revenue forecast for the first year at least.

1) Availability of finance facilities the entrepreneur to bring together men, materials, machines, and methods to produce goods/services.

2) As timely availability of funds in the right volume is key to entrepreneurial success, the entrepreneur should develop a sound financial plan discussing:

a) Financial requirements

b) Sources of raising funds

c) Exact assessment of the revenue, cost, profits, cash flow dynamics, stock of inventory loans, etc.

3) As the financial plan must explain to any potential investor how the entrepreneur plans to meet all financial obligations and maintain its liquidity in order to either pay off debt or provide a good return on investment, several financial projection techniques and tools are made use of by the entrepreneur.

4) In general, the financial plan will need three years of projected financial data to satisfy any outside investors

Components of the financial plan (IFCI BEB)

Major financial items that should be included in the financial plan are:

a) Proforma investment decisions

b) Proforma financing decisions

c) Proforma income statements

d) Proforma cash flow

e) Proforma balance sheet

f) Break-even analysis

g) Economic and social variables

A) Proforma investment decisions:

1) This part of the financial plan relates to how the enterprise’s funds are invested in different assets so that the enterprise is able to earn the highest possible returns on investment.

2) An estimate of various components of capital nature i.e. fixed assets and of working capital should be clearly mentioned in this part of the business plan.

3) This part helps to understand the total amount of finance required by the entrepreneur

4) Inadequate funds or excess funds, both have the capacity to severely damage the financial fortune of a business. Therefore, these decisions must be taken with utmost care.

Sequence of Investment

clearly and sequentially the entrepreneur should mention investment required in for:

i) Land and building

ii) Machinery and plant

iii) Installation cost

iv) Preliminary expenses

v) Margin for working capital

vi) Expenses on research and development

vii) Investment in short-term assets viz. raw material, level of cash, etc

B) Proforma financing decisions

1)This section summarizes all the projected sources of funds available to the venture to raise finance, It determines from where to arrange the funds.

2)Typically, sources of funds are: i) owners i.e. Owner’s funds ii) outsiders i.e. Borrowed funds

3)The entrepreneur’s job is to ensure the selection of the best overall mix of financing for the enterprise so that: a) the cost of capital and the financial risk stands minimized, b) return on investment and profitability stands maximized.

NOTE: The owner’s fund is costly but its less risky.

Borrower’s fund is cheaper but riskier

So an entrepreneur has to select that combination of debt and equity that there should be a balance of cost and risk.

C) Proforma income statement

) The proforma income statement is the projected net profit calculated from projected revenue minus projected costs and expenses.

2) it summarizes all the profit data during the first year of operations of the new enterprises.

3) In preparing the proforma income statement, ‘sales by month‘ must be calculated first, making use of forecasting techniques as the basis.

4) While calculating the projected sales and expenses, it is not important to be conservative for initial planning purposes. A reasonable profit that is earned with conservative estimates lends credibility to the potential success of the new venture.

The Conservative approach means planning more expenses than they seem to be and planning less income than it seems to be.

Techniques of sales forecasting

Following are the most commonly adopted techniques for forecasting:

1) Marketing research

2) Industry sales

3) Survey of buyers’ intentions

4) Expert opinions

5) Financial data on similar start-ups

6) Some trial experience of self or others.

D) Proforma cash flow:

1) Profit and cash flow are not the same, when from sales we subtract expenses, the result is profit and when from cash receipts we subtract cash payments, the resultant figure is the cash flow

Profit = Sales – Expenses

Cash flow= Cash receipts – Cash payments

2) For simplification and internal monitoring of cash flow purposes, many new entrepreneurs prefer a simple determination of “Cash in LESS cash-out”, giving them a fast indication of cash position.

3) while working out the cash flows, an entrepreneur normally follows a conservative approach, making some necessary assumptions so that enough funds could be maintained to cover the negative cash months.

D) Proforma cash flow

Meaning: Proforma cash flow reflects the projected cash available with the enterprise as a result of subtracting projected cash disbursements from projected cash accumulations.

Cash flows only when actual payments are received or made. Mere sales which might be on credit, will not generate cash. Similarly, all bills are not paid immediately by the enterprises

E) Proforma balance sheet

1) A summary of the projected assets, liabilities, and net worth of the entrepreneur is depicted through a proforma balance sheet.

2) This document helps the enterprise to reflect the position of the business at the end of its first year

F) Break-even point

1) The Breakeven point is the level of volume of production at which a firm neither makes a profit nor a loss.

2) Total Revenue = Total cost (at the given level of capacity.)

3) the break-even analysis is a useful technique for determining how many units must be sold or how much sales volume must be achieved in order to break–even.

4) It helps to indicate the volume of sales needed to cover total variable and fixed expenses by the new enterprise

Uses/ Importance of BEP

BEP helps in assessing:

1) The minimum level of output to be produced.

2) The effect of change in the quantity of output upon the profits.

3) The selling price of the product.

4) The profitable options in line of production

G) Economic and social variables

In view of the social responsibility of business, the abatement costs, i.e. the cost of controlling the environmental damage should also be stated in the plan.

Abatement costs, i.e. the cost of controlling the environmental damage

t’s always advisable to mention in the business plan, the socio-economic benefits expected to acquire from the proposed investment like 1) Employment generation 2) Import substitution 3) Ancillarisation 4) Export promotion 5) Local resource utilization 6) Development of the area

Wherever it is not possible to quantify the expected benefits, they should be analyzed and their importance emphasized.

VII. Manpower planning (WMH)

“The people working in a firm make it what it is.” — Hicks and Gullet

Human resource is of paramount importance for the success of any organization. “The people working in a firm make it what it is.

An organization’s performance and resulting productivity are directly proportional to the quantity and quality of its manpower. Rich qualified personnel leads to better performance

In order to build up loyal, efficient, and dedicated personnel, an entrepreneur needs to pay adequate and proper attention to human resource planning.

Meaning: Human resource planning is a process by which an entrepreneur ensures that he/she has the right number of people, and the right kind of people with appropriate skills, at the right place and the right time to do work for which they are economically most suitable.

Manpower planning thus helps to assess:

1) What kind of people are required?

2) How many people are required?

3) How will they be selected?

I) What kind of people are required:

To carry on its work, each organization needs personnel with the necessary qualifications, skills, knowledge, experience, and aptitude for work so the most basic thing, the entrepreneur must clearly state:

(a) What kind/type of person is required to be hired for getting his work done.

(b) as each person would have different positions, duties, and responsibilities, it becomes imperative for the entrepreneur to clearly work out a wide range of personnel ranging from managers, supervisors, administrators, engineers, technical, skilled, and unskilled classes.

2) How Many people are required?

deals with the quantity of personnel the enterprise needs. The number of people required for various positions throughout the enterprise gets affected by:

a) The total work to be done. (how much production, purchasing, sales, marketing, etc)

b) How much work can an average person do in a specified period of time.(let’s say a worker can make 2 units in an hour)

c) Level of absenteeism expected.

d) Rate of labour turnover. (the rate at which old employees leave and new join the organization)

e) The present number of employees.(number of employees actually working if its already working)

f) The future plans for expansion and diversification (If the plan for expansion, how much more labor may be required).

3) How to procure personnel?

As the next step in manpower planning, entrepreneur clearly mentions the strategies, methods, policies, rules, and regulations pertaining to personnel:

· Recruitment (the process of inviting people to apply for the job, which method is to be used for recruitment)

· Selection : (Selecting the right person for the right jobs after recruitment, which method to be used for selection)

· Training. (method to give training to new employees)

the objective of human resource plan: Procurement of “right person, at the right job, at right time” .

VIII. Marketing plan

A marketing plan document is a guideline regarding the marketing objectives, strategies, and activities to be followed by the new enterprise.

The marketing plan answers to three basic questions:

1) Where have we been? This segment focuses on · Some history of the marketplace, · Marketing strengths and weaknesses of the new venture, · Market opportunities, and threats.

2) Where do we want to go? This primarily addresses the marketing objectives and goals of the enterprise in the next 12 months.

3) How do we get there? This question discusses a) the specific marketing strategy that will be implemented, b) when it will occur, c) who will be responsible for the monitoring of activities

1) Normally, each year the entrepreneur should prepare an annual marketing plan so as to gel well with the changing business environment and its forces.

2) Potential investors regard the marketing plan is critical to the success of the new venture.

3) The entrepreneur should make every effort to prepare it as comprehensive and detailed.

Steps in preparing the marketing plan (BICEDI)

1) Business situation analysis ‘Where we have been?’ – is the question responded to as the first step in designing the marketing plan. Mostly a review of past performance and achievements of the enterprise are stated herein

but for a new venture, focus shifts rather towards: a) Personal profile of the entrepreneur b) Emphasis on products development c) What ‘need’ it satisfies d) Any other enterprise/experience of the entrepreneur e) Any marketing segmentation, if planned.

2) Identify the target market For a new venture, it’s very essential to define clearly the specific group of potential customers whose needs the enterprise aims to fulfill. This identification of the “target market” is a pretty tedious task as it involves:

a) Deciding what the general market or industry entrepreneur wishes to pursue is based, on market research or industry analysis done and complied with by competent people or the entrepreneurs.

b) Divide the market into smaller groups based on: i) Consumer’s characteristics viz. · Geographic (State, Country, etc.) · Demographic (Sex, age, etc.) · Psychographics (Personality, lifestyle, etc.(ii) Buying situations viz. · Buying conditions (time available etc.) · Usage · Desired benefits (features of the product)

c) Select segment or segments to target.

d) Develop a marketing plan integrating according to product, price, distribution, promotion.

3) Conduct SWOT analysis It is important for the entrepreneur to consider in the ‘target market’ his/her enterprise’s: a) Strengths b) Weaknesses c) Opportunities d) Threats Marketing plan needs to consider the strengths and weaknesses of the new venture to ensure its success.

4) Establish goals “Where do we want to go?” is answered well by establishing – a) realistic, attainable and well-defined goals and objectives for the enterprises, b) quantifying the goals so that they could be measured for control purposes. c) setting standards to measure those goals which are qualitative in nature. d) limiting the goals to a specific number so that there is no chaos, confusion or overlapping. Otherwise, even controlling and monitoring will be difficult.

5) Define marketing strategy “How do we get there?” demands specific activities to be outlined to meet the enterprise’s so established goals and objectives. The marketing strategy and action plan comprise of decisions pertaining to the following 4 P’s: a) Product b) Price c) Promotion d) Place

6) Implementation and monitoring of the plan Evolving a marketing plan is not a mere formality. It is meant to be a commitment by the entrepreneur to a specific strategy. It is important for the entrepreneur to be flexible and be prepared to make adjustments if necessary in the plan.

IX. Assessment of risk (ID)

There are some hazards, risks, or/and obstacles always present in the competitive environment. In a business plan, an entrepreneur should:

1) identify potential hazards

A) Evaluate weakness of business

B) New technologies

2) develop alternative strategies to either prevent minimize or respond to the risk. -. Contingency plans

X. Appendix (LDC)

The appendix of the business plan generally contains any backup material that is not necessary for the text of the document as:

a) Letters from customers, distributors, etc.

b) Any primary or secondary research data (Market research data)

c) Copies of contracts, agreements (Leases or contracts), or any price lists if received.

At times, businesses fail because of the entrepreneur’s inability to plan effectively. Intelligent planning is not difficult or impossible for an experienced entrepreneur. With the proper commitment and support from many experts, these days preparing an effective plan is no more a Herculean task.