1.

INTRODUCTION TO RURAL ENTREPRENEURSHIP

ENTREPRENEUR
Entrepreneurs are people who create and grow enterprises. Entrepreneurship is the process
through which entrepreneurs create and grow enterprises. Entrepreneurship development refers
to the infrastructure of public and private policies and practices that foster and support
entrepreneurship.

ENTREPRENEURSHIP
The concept of entrepreneurship has a wide range of meanings. On the one extreme an
entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics
found in only a very small fraction of the population. On the other extreme of definitions, anyone
who wants to work for himself or herself is considered to be an entrepreneur. The word
entrepreneur originates from the French word, entreprendre, which means "to undertake." In a
business context, it means to start a business. The Merriam-Webster Dictionary presents the
definition of an entrepreneur as one who organizes, manages, and assumes the risks of a business
or enterprise.

WHAT IS RURAL ENTREPRENEURSHIP?

The problem is essentially lop-sided development which is development of one area at the cost
of development of some other place, with concomitant associated problems of under
development. For instance, we have seen unemployment or underemployment in the villages that
has led to influx of rural population to the cities. What is needed is to create a situation so that
the migration from rural areas to urban areas comes down. Migration per se is not always
undesirable but it should be the minimum as far as employment is concerned. Rather the
situation should be such that people should find it worthwhile to shift themselves from towns and
cities to rural areas because of realization of better opportunities there. In other words, migration
from rural areas should not only get checked but overpopulated towns and cities should also get
1

decongested. The question is, is it really possible? If it is so, ways can always be found out. One
is by forcibly stopping villagers from settling in the slums of towns and cities, making use of all
powers to clear the slums so the villagers are forced to go back. But such practices have not
achieved the desired results in the past. Apart from causing suffering to the poor people and
adding to the expenditure for the Government, social tensions and economic hardships created by
the government officials and their staff in every demolition of slums is not desirable from a sane
government. Moreover, when a slum is demolished people do not move out of urban locality.
They only relocate to a nearby place because they are entrenched in the economy of the town or
city. Though governments have tried out various schemes for generating incomes in the rural
areas such government initiatives have not stopped people from moving out of villages to cities.
This is because such government initiatives are not on their own capable of enabling people to
earn adequately and ameliorate their conditions. There has to be some committed enterprising
individual or a group of people who should be capable of making use of the government policies
and schemes for the betterment of rural people. Some individuals who happen to be local leaders
and NGOs and who are committed to the cause of the rural people have been catalytic agents for
development. Though their efforts need to be recognized yet much more needs to be done to
reverse the direction of movement of people, i.e. to attract people to the rural areas. It means not
only stopping the outflow of rural people but also attracting them back from the towns and cities
where they had migrated. This is possible when young people consider rural areas as places of
opportunities. Despite all the inadequacies in rural areas one should assess their strengths and
build on them to make rural areas places of opportunities. This is much to do with the way one
sees the reality of the rural areas. The way a survivor or a job seeker would see things would be
certainly different from those who would like to do something worthwhile and are ready to go
through a difficult path to achieve their goals. It isn't that there is a dearth of people with such
mindset. But with time they change their minds and join the bandwagon of job seekers due to
various compulsions. Enabling them to think positively, creatively and Entrepreneurship
purposefully is utmost for the development of rural areas. Young people with such perspective
and with the help of rightly channelized efforts would usher in an era of rural entrepreneurship.
In this country successful rural entrepreneurs would solve many of the chronic problems within a
short time.

To promote entrepreneurs who would take to rural entrepreneurship in utmost earnestness and
sincerity is to ensure rural development. Such enterprising people who prefer rural
entrepreneurship may or may not themselves belong to rural areas. Entrepreneurs taking to
rural entrepreneurship should not only set up enterprises in rural areas but should be also using
rural produce as raw material and employing rural people in their production processes. Rural
entrepreneurship is, in essence, that entrepreneurship which ensures value addition to rural
resources in rural areas engaging largely rural human resources. In other words, this means that
finished products are produced in rural areas out of resources obtained in rural areas by largely
rural people.
The entrepreneur may or may not be of rural origin. The entrepreneurs may be from anywhere,
but their enterprises have to be located in a rural area, using mainly local resources both material
as well as human. Also, the enterprises have to be located in a rural area though it need not be
actually using 100% local material and human resources. Some amount of material and some
people may be from urban cities. But certainly large portion of material used has to be locally
produced and an appreciable number of people engaged in the production of finished goods
should be people based or living in rural areas. Even a unit set up by the government or a large
company in a rural area could promote rural entrepreneurship depending on how much
opportunities it throws up for entrepreneurs to use local resources, to fulfill the demands of such
large units and the multiplier effect such large units create. Any large unit coming up in rural
areas more or less does have an impact in activating the surrounding economy for entrepreneurs
to take advantage of. This is precisely the reason why it is recommended to shift industries from
urban centers to neighboring rural areas. Such shifting initially may be a difficult proposition but
in the long run beneficial in many ways. Moreover, it would throw up lots of opportunities in the
rural areas and result in decongestion of the urban centers. Urban slums would start disappearing
with large number of industries getting shifted to rural areas resulting in increasing opportunities
in the rural areas. Thus, both the rural as well as urban areas get benefited by setting up more
industrial units in the rural areas, making rural areas attractive locations for investments.

Constraints Of Potential Rural Entrepreneurs And Development Inputs

3

Sr. No

1.

Constraints

Inputs

Low self image and confidence.

Motivational inputs, unfreezing and

experience
sharing by successful local entrepreneurs.

2.

No faith on others includes

friends.

Group building experiences.

3.

No exposure to industry/
business.

Field visit to factories and big markets.

4.

What to contact for starting a

venture, what formalties and
procedure are to be followed?

Information inputs on procedures and

formalties.

5.

How to know whether the

identified business is a viable
and sound proposition?

Opportunity identification and guidance.

6.

How to know whether the

identified business is a viable
and sound proposition?

Market survey, project report preparation.

7.

How does one carry out bank

operations?

Training in simple banking procedures like

filing up deposit and withdrawal slip etc.

8.

How to manage the business?

Basic management orientation through

simulation exercises.

9.

How to read and write

accounts?

Functional and numerical literacy. Simple

accounting in terms of writing income and
expenditure.

10.

Almost no technical skills

Technical training ( on- the job training)

2. TYPES OF RURAL ENTREPRENEURSHIP

Rural entrepreneurial activity can be broadly classified in four types such as:
i)

Individual Entrepreneurship - It is basically called proprietary i.e. single ownership of

ii)

the enterprise.
Group Entrepreneurship - It mainly covers partnership, private limited company and

iii)

public limited company.

Cluster Formation - It covers NGOs*, VOs*, CBOs*, SHGs* and even networking of
these groups. These also cover formal and non-formal association of a group of

iv)

individuals on the basis of caste, occupation, income, etc.

Cooperatives - It is an autonomous association of persons united voluntarily for a
common objective. An entrepreneur has to decide on a particular type of
entrepreneurship based on the various options available.

1] INDIVIDUAL ENTREPRENEURSHIP/PROPRIETORSHIP
In this; it is the entrepreneur who is the only (100%) owner. The entrepreneur bears full responsibility
for each and every activity and is alone the strategic thinker and decision maker to make the unit
viable as well as profitable. There is hardly any difference between personal assets and business
assets. The entrepreneur has "unlimited liability under the law". This type of entrepreneurship is quite
prevalent in rural areas where an entrepreneur has limited resources .

2] GROUP ENTREPRENEURSHIP
It is classified into mainly three types such as i) Partnership; ii) Private Limited Company and iii)
Public Limited Company.

a. Partnership
5

In this case there is no individual ownership of the unit. There is another partner with you who works
with you and also bears the responsibility and shares profit. Like proprietorship, the liability is "Joint
and Several". For partnership type of entrepreneurship, mutual trust is a must. Besides both the
partners in partnership must understand their respective responsibilities and complement each other
for common objectives and goal. The characteristics of partnership are a) association of two or more
persons (maximum twenty), b) contractual relation: c) lawful business, d) sharing of profit, e) agency
relationship, f) unlimited liability; and g) non-transferability of interest. The requirements of ideal
partnership are good faith, common approach, written agreement, registration, adequate capital, skills
and stability. Partnership is governed by Indian Partnership Act, 1932.
The merits of partnership are ease of formation, large resources, and combined abilities and
judgment, flexibility, quick decisions, cautions operations, survival capacity, better human and public
relations, improved chances of growth and protection of minority interest. The demerits could be lack
of harmony, divided authority, instability of business, lack of public confidence, risk of implied
authority, unlimited liability, non-transferability of interest and social losses.

b. Private Limited Company

In this case the shareholders are the owners. There must be a minimum of 2 (two) shareholders. The
Indian law allows maximum of 50 (fifty) shareholders. The liability is limited in this case. As such if
the company goes bankrupt then no one has to part with one's other personal assets to meet the
obligation of the creditors. Being a private limited company, one can raise far less money than a
public limited company. But there is better control as the number of shareholders is few besides they
may be your kith and kin. Many provisions of Company Law are not applicable to private limited
companies. There is much less paperwork too. Companies are governed by Companies Act, 1956.

c. Public Limited Company

In this case the shareholders are also the owners. There must be minimum 7 (seven) shareholders.
There might be millions of shareholders as there is no such upper limit. Being a, public limited
company it can raise more money from the public by issuing equity shares, debentures, etc. to meet
various expenses of the company. All provisions of the Company Law are applicable here. It is more
of a professional organization and is fully governed by the Companies Act, 1956. It is to be noted
that merit of forming a company are many such as large financial resources, limited liability,
6

continuity, transferability of shares, benefits of large scale operations, professional management,

public confidence, scope of expansion and growth, social benefits, tax benefits, etc.

3] CLUSTER FORMATION
It is primarily a formal and non-formal group of people to achieve a common objective. It
basically covers Non-Governmental Organizations (NGOs), Voluntary Organization (VOs), SelfHelp Groups (SHGs), Community-Based Organizations (CBOs) and networking of all these.
a.NGOs
These are non-profit making organizations registered under the Society's Registration Act, 1860.
A group of seven people come on a common platform to carry out defined activities for the
socio-economic development of people.
The main characteristics of NGOs are:
i)

These are initiated, sponsored and constituted mainly by the Government as

autonomous bodies to fulfil specific development objectives.

ii)

These receive funds mainly from the Govt. and channelize them through VOs

iii)

These are usually non-political in nature.

iv)

These are formal organizations with rules, reulations and procedures with professional
management.

b. VOs
These are voluntary agencies initiated by individual for welfare and development. They may or
may not be registered under any appropriate Act. Generally these are registered under any
appropriate Act like Societies Registration Act, 1860, Indian Trusts Act, 1882 or Religious Act,
1920. These frame their own Memorandum of Associations, rules and regulations and systems
for their governance. The VOs receive funds from various donor agencies including NGOs. VOs
are generally managed by persons with motivated leadership and commitment. Their main
promoters are honorary with a strong desire to serve the people.
c. SHGs

Self-help groups are a platform of 10-20 people mainly, below the poverty line (BPL) to form a
social group not only to mutually help each other but also to achieve common objective. Only
one member from a family is eligible for membership group. The Swanjayati Gram Swarozgar
Yojana (SGSY) of the Ministry of Rural Development, Govt. of India covers all aspects of selfemployment of the rural poor viz. organisation of the poor in SHGs and their capacity building,
training, selection of , key activities, planning of activity clusters, infrastructure building up,
technology and marketing support. This is a non-formal group. The SHGs get funding from the
NGOs, VOs and even from the Government to carry out various activities in areas of common
interest and an objective for economic empowerment.
d. CBOs
These are community based organizations and are informal in nature. Specific community with a
specific avocation forms a group to carry out various activities in a group. A CBO is a group of
people from a common living area of habitat who get together for a common cause. The overall
objective is to enhance the bargaining strength of individuals in the group. For example:
fishermen group, cobbler group, milk producers, etc.

4] COOPERATIVES
According to ILO, a cooperative organization is an association of persons usually of limited
means, who have voluntarily joined together to achieve a common economic end, through
formation of a democratically controlled business organisation making equitable contributions to
the capital required and accepting a fair share of risks and benefits of the undertaking. According
to International Cooperative Alliance (ICA) "A cooperative is an autonomous association of
persons united voluntarily to meet their common economic, social and cultural needs and
aspirations through a jointly-owned and democratically controlled enterprise".

3. DOMAINS OF RURAL ENTREPRENEURSHIP

There are large number of products and service in rural areas, which can be leveraged by
entrepreneurs to set up new small and micro enterprises. In fact entrepreneurship can be pursued
in virtually any economic field. The idea here is to make the readers aware of the linkages
between various economic activities within a particular category in the Indian context. The
following indicative sectors may be taken into consideration for gainful employment: a) Original
enterprises created out of opportunities in supplying rural products to urban consumers and new
products to rural consumers. b) Replication of urban experiences in Rural Setting.

Rural Entrepreneurship in India

One of the main aims of development policy in India is to provide employment to millions of
unemployed rural youth. India's rural economy is primarily agricultural based, but the rapid rise
in its population with consequent pressure on land has led the planners to lay greater emphasis on
industrial development. The core of the problem in countries like India is surplus agricultural
labour and closure of traditional village industries, resulting in unemployment in rural areas and
movement or, migration of rural youth to urban area in search of jobs thus putting more pressure
on the urban infrastructure and amenities. Rural industries generated employment for 47.97 lacs
persons in the year 1996-97 as against 37.21 lacs persons in the year 1992-93. Of late, Agro
based industries have generated several employment opportunities to rural people.

Income and Employment Potential

Industries in rural area, which are mostly micro or tiny in structure, are quick yielding. In other
words their gestation period is much less as compared to large-scale industries. Rural industries
are labour intensive and provide large employment opportunities to rural folks of all age groups.
Khadi and Village Industries Commission at national level and Khadi Villiage Industries Board
at State level have played a pivotal role in this context .The village and small-scale industries
was set-up with the following aims: 1) to orient the rural population specially the rural youth
towards entrepreneurship; 2) to increase the levels of earnings of artisans in rural areas; 3) to
sustain and create avenues of self-employment among the unemployed youth; 4) to ensure
regular supply of goods and services through use of local skills; 5) to develop entrepreneurship
9

in combination with improved methods of production through appropriate training and package
of incentives; 6) to preserve craftsmanship and art heritage of the country.
1. food processing
Food processing covers variety of products from various sectors comprising agriculture,
horticulture, plantation, animal husbandry and fisheries & marine products. India is one of the
major food producers in the world and has enough availability of a wide variety of food-grains,
fruits, vegetables, flowers, livestock, poultry, fish and seafood. Diverse climatic conditions and a
long coastline has contributed to India's position as a large food producer with variety. However,
the food processing industry is still a low-key affair and only two percent of fruits and vegetables
and 15 per cent of the milk produced are processed in the industries as a whole. The processed
food industry, which ranks fifth in size in the country, represents 6.3 per cent of GDP. It accounts
for 13 per cent of the country's exports and 6 per cent of total industrial investment which is
estimated at US$70 billion, including US$22 billion of value added products. After India started
pursuing the path of economic liberalization this sector has been attracting Foreign Direct
Investment across different parts of the world in almost all the sectors.
2. Dehydrated Fruits and Vegetables
Foods are dehydrated either to preserve a perishable raw commodity to ensure its availability
round the year or to reduce the cost and /or difficulty in packaging, handling, transporting and
storing, by converting it to a dry solid by reducing its weight and volume. Of course, there are
other benefits to the user such as price stability, and also availability for immediate use without
preparation. Grapes, bananas, mango, jackfruit, pineapple, papaya among others are highly
nutritious and delicious and can be used as preserved food which has got high potential.
Similarly most of the vegetables are seasonal and dehydration under hygienic conditions makes
them available throughout the year at a reasonable cost. These are convenient enough to be used
by large scale catering establishments and for defense services and in various expeditions, etc.
3. Fruit Based Beverages
Fruit based beverages are relished very much particularly when served chilled especially during
summers. These are nutritious and healthy. Juice, Squash, Crush, Cordial and Syrups are popular
10

fruit products. Products like syrups and squashes of orange, mango, lime, pineapple, grape,
apple, etc. besides their jam and jelly are very popular among the masses.
4. Mushrooms
Mushrooms including the commonly known Dhingri grow on decaying tissues of plant
material under normal conditions.. It is light grey in colour and has pleasant flavour. The study at
CFTRI, Mysore has shown that it can be cultivated easily under normal conditions of
temperature (21 to 2SC) and relative humidity ( 5% to 75%) for a period of 6 to 8 months in a
year in many parts of the country. It can also be cultivated in summer months, by providing extra
humidity and low temperature with the use of modem techniques. The spawn (seed material) of
mushroom is the ramified mycelium, which is used as which is used as seed. The spawn is
prepared by inoculating the pure culture of mushroom on paddy jowar straw under certain
conditions. This is known as master spawn. This can be stored at room temperature for a period
of 3 months from the date of inoculation. Mushrooms have got tremendous market, both
domestic as well as international. Local market also has two segments, one is the domestic
consumer and the other is the business consumer at hotels and restaurants. Use of Mushroom has
increased substantially at local level in the recent past.
5. Chikki Industry
Chikki is a popular and traditional Indian sweet. It is known by different names in different
languages and in different States. The ingredients which go into production chikkies are
puffe&rmsted Bengd gram, groundnut, puffed rice, beaten rice, coconut scrapings individually or
in combination. The sweetening agents are added to the preparation. is a popular item and has
potential both in internal as well as export markets.
The main production areas of Chikki are Lonawala & Khandala in Maharashtra which are
located on the Mumbai-Pune highway. In this area several smallscale units produce Chikki with
over 100 varieties which are of very high quality products.
6. poultry industry

11

Poultry farming is one of the fastest growing industries in India. It is quite profitable and can be
managed by persons of all ages from all walks of life in all sections of the country. It may be
conducted as an exclusive business or as a side business for additional income. The National
Commission of Agriculture states that poultry farming has certain special Strategies and
Experiences features, which favour its large-scale adoption by small and marginal farmers and
agricultural labourers. Land required for poultry farming is small; the capital investment for
starting small poultry units is less. Poultry farming can be started on a small scale and can be
expanded gradually. It does not require heavy investment and the raw materials are easily
available. Also short-term training facilities are available and even uneducated people could set
up poultry farms. Profits are earned much sooner than most other farm products.
Some of the advantages of poultry keeping are:
1) Supplies nutritious food for the people.
2) Serves as hobby and sport for some people.
3) Requires less capital to start a poultry unit and gives good and quick
4) Needs little space and can be done in phases.
5) Water requirement is less as compared to crop cultivation or farming.
6) Waste products like bran and substandard grains can be utilized.
7) Eradicates garden pests such as caterpillars, insects and snails.
8) Gives rich fertilizer for crop cultivation especially for vegetable gardens.
9) Poultry feathers are useful in many ways.
10) It is a favourable side business to agriculture.
11) Gives income throughout the year.
12) Not much labour is involved and generates self-employment.
13) Supports many ancillary units.
14) Easy to manage, even women and children can look after them.
15) Some medicines and tonics are obtained from poultry as by-products.
Presently it is a well-organised agro-industry where people with limited or adequate finances can
start commercial poultry farming.
7. Cottage and Handicrafts Industry

12

Cottage industries are those industries run within the residences of the artisans by family
members without any hired labour, with the use of locally available raw materials and by making
little capid investment. The major industrial activities in this scheme include pot making, match
making, ghani oil extraction, bee-keeping, bamboo cane works, basket-making, korai mat
weaving, stone weaving items, clay folks.
8. Oil Industry
The vegetable oils are essential ingredients of food needed for the growth and maintenance of
human body. Crushing of oil seeds to obtain edible oil for human consumption has been an ageold village industry in India. The Telis have been an important component of the village society.
Either they have been crushing oil-seeds procured by them or providing oil extraction service to
oil-seed producers. This provides nutritious oil with natural flavour and taste.
The village oil industry employs lakhs of artisans in rural areas. This industry renders service to
the society in two-ways; it supplies fresh, flavoured and nutritious oil to the consumers on the
one hand and provides employment to the traditional artisans and others unemployed, on the
other. In order to increase the production of oil, all sources of equipment must be utilized Since
Ghani is a simple machine, which needs low capital and small quantity of raw materials, it must
be encouraged.
9. Pottery
The pottery is traditional industry of rural India. In fact it is age-old industry where the pottery
products are used within rural India by rural folks for cooking (Handi), storing water (Matka &
Surai) and crockery and cutlery in the form of Kullar, etc. The urban Indians are using the
pottery products for plants, very special kitchen items made up of china clay for serving tea,
coffee, clay bowels for preparing curds and serving food.

SERVICE SECTOR RURAL ENTERPRISE

13

The service sector enterprises are generally more successful, no matter whether co-operating in
rural or urban areas. What is more important is identification of the nature of need based services
related business activity.
10. Repair of Phone/Mobile Phone, Electronic and Electrical goods
With Industrial growth and revolution in communication industry especially in the field of
electronic media all over, the rural India is also using TV, radio particularly for various FM
stations available in local and regional language, cable network, land line and mobile phones.
The various service providers have opened a range of self-employment opportunities to rural
educated youth who have the competence and/or are willing to work or start their own enterprise
in the area of service needs of rural India. Self-employment oriented training programmes to start
an enterprise with small investment are easily available to rural youth through various training
institutes which do not require high level of educational qualifications. It rather requires the
necessary skill and basic aptitude to learn and understand the skill. Service in this sector varies
from opening of a shop as sales outlet, a service outlet, outlet for accessories or an outlet of the
main service provided vendors specially mobile phone companies. This area covers large number
of activities in rural India where youth can undertake the activity of higher taste. This being a
purely service oriented sector, a person with good interpersonal relations and qualities will win
over the business competition, which in any case is basic requirement to become a successful
entrepreneur.
11. Rural Tourism
India is one of the oldest, culturally richest and diverse country full of colour and boasts of a
civilization with rich flora and fauna. Our cuisine is mouth watering, scenic beauty is
breathtaking, folk dances are simply enchanting and wide array of places of tourist attraction from the valleys of Himachal Pradesh, hills of Uttranchal, plains of the river Gang% forests of
North East, or plateau of South India, In other words, India is simply full of diversity and that is
why the latest blitz of the Government terms her as Incredible India. Nearly two-third Indians
live in villages; in fact our roots are located in rural India. Moreover most of tourist sites are
located away from the urban centres towards rural India and the trend is also shifting towards the
rural areas. There is wealth of craft performing art, vivid lifestyle and cultural diversity obtaining
in rural India.
14

12. Entertainment
In the absence of leisure time Bs well as purchasing power, the rural folks are generally devoid
of the entertainment which everyone needs for rest and relaxation. With the reach of electronic
media the rural youth has developed a taste towards music, dance, acting, etc. in addition to
traditional songs, folk dances, cultural activities, traditional games and sports which can be used
as source of revenue generation. This type of service can be provided either by an individual
having good financial background or by a small group rendering and promoting such activities
and services in rural India on various occasions such as social functions, VIP visits, etc. Such
events are attracting not only the domestic tourist but international tourist also is now keen to
observe Indian customs, culture and costumes thus becoming a very good source of income for
the rural unemployed youth.
13. Modern Industries
With the Government efforts to extend the development initiatives to rural India especially in
developing States, the Modem industries are being given special packages and relief with tax
benefits for setting up the industries at a subsidized cost with the aim to provide job
opportunities, infrastructure development in terms of road, power, water supply, e t ~T.h is, in
consequence, leads to overall increase in the living standards of local people where the modem
industries are being set up by various national and international companies. As a matter of policy,
the industries are being asked to shift from the large townships like metros especially to
decongest and lessen the burden on the urban centres. These industries offer great opportunities
of varied nature of jobs for local youth who are educated and are willing take challenging
assignments,

whether

wage-employment

or

self-employment

type.

The

employment

opportunities are basically based on qualifications, skills and expertise while self-employment
opportunities or indirect employment opportunities are based on the various types of industry
related trade or service activities which the rural youth can undertake and be gainfully employed.
Modern industry is now playing very important role ever since globalization and liberalization
policy of Government came into existence and it has definitely helped the rural youth in finding
suitable vocation.

15

4. PLANNING A RURAL ENTERPRISE

Planning is the foremost function in decision making to set up a rural enterprise. Project planning
aims at formulation of all the future project activities well in advance, determine the quantum of
resources required for the purpose and coordinate various activities to complete the activities as
per schedule at the right time. The first and foremost step to initiate the planning process is the
identification of a suitable project followed by information accessibility, market assessment,
preparation of feasibility report, etc. Besides, one has to know the registration procedure of the
enterprise and various legal aspects of business.

PROJECT IDENTIFICATION
For identifying a new project, there are many institutions/agencies such as Entrepreneurship
Development Institutes (EDIs)/Centers, Small Industries Service Institute (SISI), Technical
Consultancy Organizations (TCOs), etc. at State level and District Industries Centers (DICs),
private consultancy organizations, etc. usually located at the district headquarter or in a nearby
town which can provide effective counseling services in planning the enterprise and also in the
subsequent activities. Once one decides to set up own business, one has a wide choice before
her/him. In other words, one has a choice of starting
a) Manufacturing unit - Setting up an industry means one has to organize many things like
planning, arranging for technical know-how, buying and installing machinery, building a factory,
managing several departments like production, sales, quality control, personnel and
administration, finance and so on and so forth.
b) Trading - Trading involves planning, purchase, sale, stock control and financial management.
A retail grocery shop, compared to an industry, is a simpler business. A large departmental store,
however, is not so simple.
c) Service enterprise - A service enterprise can either be simple or complex. For instance, setting
up a photocopying centre and managing it may be simple but inspection of offshore oil-gas lines
is a rather complex business. To set up an industry or a service enterprise, one can start an
16

enterprise in sectors like chemical, pharmaceuticals, basic metal industries, metal products,
machinery other than electrical machinery, electrical machinery, electronics, transport
equipments, textile, rubber, plastic, food, mineral-based industries, ceramics, agro-based but nonfood industries (e.g. making briquette from agricultural waste), paper, or glass.

INFORMATION ACCESSIBILITY
One needs various types of information about several aspects such as opportunities, market,
technology, finance, policies, location, etc. The different sources of information could be:
i)

Similar enterprise owners/producers

ii)

Raw materials suppliers

iii)

Machineries suppliers

iv)

Packing materials suppliers

v)

Customers

vi)

Dealers

vii)

Consultants

viii)

Employees of similar enterprises

ix)

Bank officials

x)

Promotional agency and regulatory agency officials

xi)

Association of similar product(s) manufacturers and so on

Information on Business Ideas - There are numerous directories, handbooks and databases
published by the Govt. of India, Associations and other agencies for obtaining information on
opportunities. These are information in the following forms:
Feasibility studies
Project profiles
Industry studies
Area development studies
The organizations in possession of information on business opportunities are are:
1) District Industry Centres (DIC) - (one in each district)
2) Technical Consultancy Organizations (TCO) - (one each in most States)
3) Centres for Entrepreneurship Development (one each in many States)
17

4) Small Industry Service Institutes (SISI) (one in each of many large cities)
5) Lead Bank (one in each district)
6) Industrial Extension Bureaus (these exist in several States) and are known as INDEXTB,
Udyog Mitra, Udyog Sahay and so on).
7) National Industrial Development Corporation (NIDC), New Delhi
8) Khadi and Village Industries Commission (KVIC)
9) Commissioner of Cottage Industries (one in each State)
10) Entrepreneurship Development Institute of India (EDI), Ahmedabad
11) National Institute of Entrepreneurship and Small Business Development (NIESBUD), New
Delhi
12) National Institute of Small Industry Extension and Training, Hyderabad
13) Small Industries Development Bank of India (SLDBI), Lucknow
14) Industrial Consultancy Firms
Ideas
An ability of a business idea among various alternatives being considered is a must. The key
questions in settling down to a viable business idea are as under:
Uses/applications of the product or service
Possible scales of production or operation for which economies of scale is to be looked into
Investment for a given scale and the sources of funds and related expenses there on
Market prospects
Unit sale price
Technical arrangements
Expected annual turnover
Expected profit and break-even analysis
Success determinants, etc.
Capital Organization Capital is the prime requirement for any project. Term lending institutions
such as State Financial Corporations (SFCs), State Industrial Development Corporations
(SIDCs), State Industrial Investment Corporations (SIICs), Commercial Banks, etc. are the prime
sources for meeting the project cost such as :
Land cost and land development charges,
18

 Construction of buildings,
Purchase of plant and machinery,
Acquiring technical know-how,
Procuring miscellaneous fixed assets,
Margin of working capital,
Contingencies, etc.
While sanctioning loans, the financial institutions consider the credit worthiness of the project
beside the payback capacity of the project. Hence assessment of financial viability is a must
before releasing the funds.
Support System
Information about support system is a must for an enterprise. In short-term it is the information
which helps in-sound decision making. The information could be on infrastructure facilities,
incentives available, financial tie-ups, availability of raw materials, tax concessions, etc.
Information on various infrastructure facilities such as availability of land, power, and water,
facilities for effluents or wastes disposal should be available from the District Industries Centre
of the District or from the concerned State Directorate of Industries. For financial tie-ups the
State Financial Corporation and its branches which are located at various districts of the State
can effectively guide.
Even commercial banks of the locality could be approached. Also proper analysis has to be done
by comparing relevant facts and figures so thatthe best term or package is available to the
entrepreneur. There are tax concessions and other allowances available from time to time by the
Central Government or the concerned State Governments in the form of tax holidays, sales tax
incentives, etc. for which the concerned District Industry Centre (DIC) shall guide. They can also
advise as to how to meet various provisions of income tax, sales tax, excise duty, etc. depending
upon the nature of the product.

MARKET ASSESSMENT
For sound market assessment three things are important such as
Analysis of Market Demand Market demand
19

for a product is the total volume that would be bought by a defined customer group, in a defined
geographical area, in a defined time period, in a defined marketing environment, under a defined
marketing programme. Hence, there are eight elements of variables which must be analyzed in
order to determine market demand.
The Competition
For a particular product of different brands, the competitive situation could be assessed by
analyzing the market share, price, product features, product age, discount to dealers, credit terms,
major customers, etc. of a brand vis-a-vis the other.
Trading Practices
An Entrepreneur must try to understand the trade practices that are relevant to her/his product.
The intermediaries in the channel, prevailing sales tax, legal implications, etc. have to be
understood properly for assessing market. In selection of a product of service, there is the need to
analyze the market through primary and secondary data. These data can help to assess the current
demand, the forecast and the potential of a particular product or service besides the opportunities
and risks available to it.
Primary Data & Secondary Data
It is the information which is collected first-hand through field work or survey by various
methods such as Questionnaires, Personal Interviews, etc. There are various methods of
collecting primary data i.e. observation method, experiment method and survey method.
Secondary Data: Information which already exists in documented form. Such sources can be a)
Annual reports of the companies b) Trade publication and records c) Libraries and trade
information centers d) Directories of manufacturers e) Newspaper, business magazines, etc. f) Govt.
publications (e.g. DCSSI profiles) g) Data agencies, consultancy firms, etc. h) Information from dealers,
various agencies
Market Research (MR)
It helps to collect primary data. The more accurate and fresh the data, the greater are the benefits. The
American Marketing Association defines marketing research as "The systematic gathering, recording and
analyzing of data about problems related to the marketing of goods and services".

1. Problem definition
20

2.

Research design

3. Field work
4.

Data analysis

5.

Report presentation and implementation

FEASIBILITY REPORT
It is very essential to prepare a feasibility report covering all the activities and the resources
needed for the project. The feasibility report broadly contains the following: a) The background
of the entrepreneur i.e. the educational background, family background and professional
exposure b) Market potential and marketing strategy c) Selection of location of the project which
should be on the basis of proximity to the source of raw materials and/or markets, availabilities
of labour, infrastructural facilities, incentives, etc. d) Requirements of land and building. It is to
be ensured that the land is free from any legal encumbrances e) Requirement of plant and
machinery including their installation f) Manufacturing process g) Requirements of utilities such
as water and electricity h) Requirements of raw materials and sources of supply i) Estimated cost
of the project j) Means of finance k) Cost of production, taxes and profitability
h) Break-even point m) Cash flow statement n) Internal rate of return and o) Economic viability
A feasibility report must provide a base-technical, economic and commercial-for an investment
decision on any industry/entrepreneurial project. It should define and analyze the critical
elements that relate to the production of a given product together with alternative approaches to
such production. Such a report should provide a project of a defined production capacity at a
selected location, using a particular technology or technologies in relation to defined materials
and inputs, at identified investment and production costs, and sales revenues yielding a defined
return on investment. It must consider all aspects of business right from project background and
history, location and site to conclusion covering its advantages, drawbacks and implementation
of the project.

REGISTRATION PROCEDURE
As a small-scale unit it should be registered with the District Industries Centre (DIC) of the
district in which project is to be proposed to be located. It has to obtain No Objection Certificate

21

from the State Pollution Control Board. Depending upon the nature of the product or service, it
has to be registered for Sales Tax, Service Tax, and other statutory purposes.
LEGAL ASPECTS OF BUSINESS
An entrepreneur must be aware of various legal and statutory obligations affecting labour related
regulations of the business. These are covered under various Acts/legislations as under the
Factories Act, 1948; Industrial Disputes Act, 1947; social legislations and wage legislations.
1. The Factories Act, 1948
This Act is applicable where the number of employees is ten or more and where power is
used and twenty or more where power is not used. Under this Act the entrepreneur has to take
necessary measures for health, safety and welfare of the workers as per the Act besides taking
necessary precautionary measures against fire. Further, necessary records have to be
maintained for working hours, annual leaves, overtime, advances, wages, deductions, etc.
The adherence to various provisions of the Act shall be regulated by the Chief Inspector of
Factories.
2. The Industrial Disputes Act, 1947 Thus Act is applicable to every trade, business, service,
etc. which is also considered as an industry under this act. Industrial disputes are common in
a workplace. Such disputes may arise between employers and employees or among the
employees. This dispute may be related to employment or non-employment or terms of
employment or the conditions of labour of any person. The Authorities under the Act are
Works Committee, Conciliation Officer, Board of Conciliation, and Courts of Inquiry, Labour
Court, Industry Tribunals and National Tribunal. An entrepreneur has to follow necessary
procedures in case such a dispute arises.
3. Social Legislation

Social security is a need for any employee. The Employees Provident Fund and
Miscellaneous Provisions Act, 1952 are applicable to any establishment employing 20 or
more employees. Under this Act, the minimum contribution payable by the employer towards
provident fund is 8.33% of the salary. The employee has to make an equal contribution. The

22

details and modalities could be obtained from the Regional Provident Fund Commissioner.
Various other schemes which are covered under this Act are a) Employee Family Pension
Fund and b) Deposit Linked Insurance Scheme.

4. Wage Legislation

It covers the following Acts: i) Payment of Wages Act, 1936, ii) Payment of Gratuity Act,
1972, iii) Payment of Bonus Act, 1965, and iv) Minimum Wages Act, 1948. i) Payment of
Wages Act, 1936 - This Act is applicable to establishment where ten or more workers are
employed on any day of the preceding 12 months with the aid of power and twenty or more
workers without the aid of power. Wages mean basic pay, dearness allowance, city
compensatory allowance, overtime wages and production incentives. As per the norms,
necessary registers for wages and other related matters have to be maintained. ii) Payment of
Gratuity Act, 1972 - It is applicable in all establishments in which 10 or more persons are
employed. Gratuity shall be payable to an employee who has put in uninterrupted service for
a minimum period of five years. iii) Payment of Bonus Act, 1965 - The Act applies to
establishments employing ten or more persons. Under the Act the employer is liable to pay
bonus to employees as an annual statutory payment irrespective of profits. This Act includes
all employees drawing wage or salary up to Rs. 3500 per month. To become eligible for
bonus, every employee must have worked for 30 working days in the establishment in the
relevant accounting year. A minimum 8.33% of wages actually earned during the financial
year subject to minimum of Rs. 1,0001- is payable to each eligible employee irrespective of
profit or loss. iv) Minimum Wages Act, 1948 - This is applicable in 44 scheduled industries.
Basic wages are fixed for different industries and special allowances are announced by the
labour commissioner every six months. Necessary registers have to be maintained.

23

5. HUMAN RESOURCES FOR DEVELOPING RURAL

ENTREPRENEURS
Human Resources are amongst the most essential resources that are required for fostering rural
entrepreneurship. The importance of human resources cannot be over emphasized, for it is this
resource alone that makes the greatest impact on socioeconomic development of rural areas.
Achievement motivation is a key to entrepreneurship development. This is achieved in many
ways: childhood reading, upbringing, exposure to challenging situations, self study,
apprenticeship, coaching and training, all contribute to achievement motivation.
Training for Entrepreneurship Development
Development

of

entrepreneurs

through

systematic

training

namely Entrepreneurship

Development Programmes (EDPs) has emerged as an important strategy for development of

human resources for promoting small business enterprises in rural areas. India has come a long
way since the idea of creating an entrepreneur through training was first mooted over 40 years
ago. The focal point of all entrepreneurship development programmes is the entrepreneur, the
person who matters in the process of development. The entrepreneur should be seen in the social
context and also in the context of the needs of rural societies. The conceptual framework of the
development of rural entrepreneurship should be made the starting point so that the various
strategies used in developing entrepreneurs can be properly understood and planned.
Entrepreneurial motivation is the most important factor in contributing to the development of
entrepreneurship in a society. So, various aspects that help in developing achievement motivation
need to be included in the EDP training courses. These skills have to be properly emphasized. In
order that the potential entrepreneurs succeed in their entrepreneurial ventures, they need to be
thoroughly prepared, rather pained, to imbibe and nurture the key traits like taking initiative,
perseverance, self-confidence, ability to identify and grab opportunities, information seeking
ability, planning, problem solving, persuasive and influencing competencies, risk taking
willingness, hard working, quality consciousness, sense of efficacy, openness to feedback,
learning from experience, time orientation, concern for society, competition and collaboration,
dignity of labour, respect for work, need for independence and need for outstanding

24

performance, etc. Normally the above traits or qualities are not found in the majority of rural
people since they are not oriented to an entrepreneurial culture. The environment, in which they
live, and the lack of opportunities for entrepreneurial encounters, etc. restrict them. It is,
therefore, necessary to create an atmosphere for promoting potential entrepreneurs.
Entrepreneurship Development Centres being run in each State, and national level institute like
EDII, NISIET, NIESBUD, IIED, ICECD, have designed several training courses for training
potential entrepreneurs on various aspects of enterprise development. In addition, several
agricultural universities, research institutes, KVIC, Krishi Vigyan Kendras have provided
adequate training opportunities on the subject matter and technologies for enterprise
development. RUDSET institutes also provide training for potential entrepreneurs under PMRY
scheme.
In addition, the network of SISIs located all over the country provides technical guidance and
support for small enterprise development.
Training and Development of Rural Entrepreneurs
A brief sketch of the training and support programmes launched by the government is given to
enable the reader get a comprehensive view of the efforts of human resources development for
rural entrepreneurship.
Training of rural Youth for Self Employment (TRYSEM):
Training of Rural Youth for Self Employment was launched by the Government of India in 1979
as a facilitating component of Integrated Rural Development Programme (IPDP). In this
programme, the selected rural youth are put through a period of training, either with a training
institution or a master craftsman to provide necessary technical and entrepreneurial skills. On
completion of training, the identified youth receive a combination of subsidy and institutional
credit under IRDP for acquisition of an income generating asset. The syllabus for each trade
under TRYSEM should include training in job skills, as well as management skills. The latter
may include elements of bookkeeping, simple knowledge of marketing, product costing,
familiarization with entrepreneurial assistance agencies and with project financing by banks.
Prime Minister's Rozgar Yojana (PMRY):Prime Minister's Rozgar Yojana was launched on 2nd
October 1993 to assist educated unemployed youth to set up self-employment ventures. It relates

25

to the setting up of the self employment ventures in all economically viable projects (except
direct agricultural operations). The Scheme also seeks to associate reputed non-governmental
organisations in implementation of PMRY Scheme especially in the selection, training of
entrepreneurs and preparation of project profiles. The scheme targeted for setting up of nearly 7
lakh enterprises and consequent employment generation to more than one million educated
unemployed youth in the last four years of the Eighth Five Year Plan. The target for the year
2004-05 & 2005-06 under the Yojana has been enhanced from 2.20 lakh beneficiaries to 2.50
lakh beneficiaries per annum for creation of additional employment opportunities in the rural
non-farm sector.
Swaranjayanti Gram Swarozgar Yojana (SGSY):
Swaranjayanti Gram Swarozgar Yojana (SGSY) was launched by Government of India in 1999
with a focus on providing effective self employment through self help group approach and
activity cluster approach for rural poor families below poverty line. The self help groups are
motivated through training and capacity building for taking up thrift and credit activity and start
their own small rural enterprises through the financial assistance of Revolving Fund Assistance.
The Scheme also seeks to associate reputed non-governmental organisations in implementation
of SGSY Scheme Rural Employment Generation Programme (REGP): On the basis of
recommendation of the High Power Committee submitted in May 1994, headed by the then
Prime Minster of India, the KVIC launched Rural Employment Generation Programme (REGP)
with effect from 1st Nov 1995, for generation of two million jobs under the KVI sector in the
rural areas of the country
The main objectives of REGP are a) to generate employment in rural areas, b) to develop
entrepreneurial skill and attitude among rural unemployed youth, c) to achieve the goal of rural
industrialization, And d) to facilitate participation of financial institutions for higher credit flow
to rural industries. The REGP scheme is applicable to all village industries project set up in rural
areas. The eligible agencies under the scheme are (i) individuals (rural artisans/entrepreneurs) ii)
institutions cooperative societies, Trusts & SHGs for projects up to Rs. 25.00 lakhs. Under the
scheme, the borrower is required to invest her/his own contribution of 10 percent of the project
cost. In case of SC/ST and other weaker section borrowers, the beneficiary's contribution will be
26

5% of the project cost. Banks will sanction 90 percent of the project cost in case of general
category borrowers

and 95 percent of the project cost to the weaker section

beneficiaries/institutions and disburse full amount of the loan. After the sanction of the credit
facility by the Bank branch, eligible amount of Margin Money will be kept in Term Deposit of
two years in the account of the borrower at the leading bank branch, which will be credited to the
borrower's loan account after a period of two years from the date of first disbursement of loans.

6. BASIC INFRASTRUCTURE FOR RURAL

ENTREPRENEURSHIP
Infrastructure plays a significant role in providing and enabling encouraging atmosphere for the
growth and spread of rural enterprises and small industries. The achievement of an 8 percent
growth rate envisaged in the Five Year Plans will require industry sector growth of over 10
percent, with at least a corresponding growth in demand for infrastructure. In India, serious
problems have been building up in the infrastructure sector for many years: in transport rail
efficiency is low, there has been under-investment and freight rates are high in order to subsidize
passengers. The basic infrastructure includes transport, utilities and communication including
railways, roads, ports, power, and telecommunication services. Additional infrastructure facilities
that are also required are drinking water, housing, healthcare, among others.
Transport, Power and Communication: A well knit and coordinated system of transport plays
an important role in the sustained economic growth of a country. Transport system forms the
major basic infrastructure required for harnessing the potential of rural entrepreneurship. Among
the transport systems' several modes, rail and road are important while ports also play a major
role in some cases.
Railways: Railways provide the principal mode of transportation of freight and passengers.
Railways with its vast network spread all over the country play a vital role in the economic,
industrial and social development of the country. The revenue freight traffic, being at 5 18.7
million tonnes in 2002-03 and increasing substantially from then on, is the backbone of industrial
growth and caters to improving the performance and profitability of small industries.

27

Roads: India has one of the largest road networks in the world aggregating to about 3.32 million
kilometers by 2004-05. The country's road network consists of national highways, state
highways, major/other district roads and village/rural roads. National Highways, comprising only
1.7% of the highway network, carry 40% of the traffic, and another 40% is carried on State
Highways and major district roads comprising 12% of the system. But it is connectivity at local
levels which has the greatest impact on rural development and poverty alleviation. Over onethird of the villages in the country are not connected by all-weather roads. The expected share of
roads in total traffic would be 65 percent of freight traffic by the end of 2007, which can be
achieved through the national highways development programme. Rural roads are also given
their due importance through special programmes like PMGSY, whose objective is to link with a
population of more than 500 with all-weather roads by the end of 2007. A Central Road Fund
was created through a Central Road Fund Act enacted in December 2000.
Pradhan Mantri Gram Sadak Yojana (PMGSY) was launched to provide all weather basic access
to about 1.72 lakh habitation of populations of 500 or more. PMGSY roads are constructed to
high technical standards and backed by 5 year maintenance contracts. The objective of rural
connectivity is to provide basic access and the continuity of linkage up to the market/service
centre in a cost effective manner. In a recent study it has been found that the Indian government's
expenditure on road construction contributed more to poverty reduction than did the other
investments. Roads helped farmers transport their goods to markets, gave them better access to
higher-wage employment opportunities in the rural non-farm sector, and increased consumers'
access to food markets. Investment in infrastructure in general (roads, electricity, and
communications) also reduced poverty by enhancing agricultural, productivity growth, thus
increasing farm incomes and expanding the non-agricultural sector.
Power: Generation and distribution of electricity from various sources has a catalytic role in
development of rural enterprises. Accelerated Rural Electrification Programme (AREP)
envisages at providing supply of electricity for production oriented activities like rural industries,
minor irrigation and electrification of villages. To give impetus to rural electrification, the
Government is paying special attention to creation and augmentation of Rural Electricity
Distribution Backbone and Village Electricity Infrastructure so as to cover all the un-electrified
villages and rural households in five years. Rural Electricity Supply Technology Mission (REST)
28

has been set up to oversee the implementation of schemes under AREP. The Electricity Act, 2003
enacted with a progressive outlook has envisaged a provision of license-free generation and
distribution in the rural areas and regulation of power supply throughout the country. The Rural
Electrification Corporation Limited (REC)'s current mission is to facilitate availability of
electricity for accelerated growth and for enrichment of quality of life of rural and semi urban
population and to act as a competitive, client-friendly and development oriented organization for
financing and promoting projects covering power generation, power conservation, power
transmission and power distribution network in the country. Adequate and uninterrupted regular
power supply will augment the growth of small industries and enterprises in rural areas.
Telecommunication: The telecommunications services form the core area of infrastructure
development today with the thrust on e-governance up to district, tehsil and Gram Panchayat
levels. Telephones have become omnipresent with installation of more than 37000 electronic
telephone exchanges by the government. The results have been dramatic. After decades of
constraints, tele-density rose from 1.57 per 100 persons in 1991-2 to 4.4 in 2002 (including
mobiles). The target for direct exchange lines in the Ninth Plan was achieved. Capacity grew by
22% p.a. sufficient to sustain new telecoms-based industries such as call centres - and costs fell.
Contractual and regulatory constraints on the private sector were eased in the light of experience.
There is still a marked difference between rural and urban areas, with tele-density being 1.14 in
rural areas against 10.16 in urban. One third of villages have no phone lines. Computerization of
Land Reforms (CLR) was started as a centrally sponsored scheme in 1988-89 on a pilot basis in
eight districts in eight states to remove the problems inherent in the manual system of
maintenance and updating of land records and to meet the requirements of various groups of
users people, planners and administrators. The CLR scheme is extended to about 365 districts
and 35 19 tehsils or taluks.
Scheme of Fund for Regeneration of Traditional Industries (SFURTI): Government has
recently launched the Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
under which 100 traditional industry clusters (of khadi, village industry and coir) would be taken
up for comprehensive development over 5 years. The KVIC and the Coir Board are the nodal
agencies for the Scheme, which will be the first comprehensive initiative for regeneration of the
khadi and village industries sector, based on the cluster development methodology.
29

7. MANAGING A RURAL ENTREPRISE

A rural entrepreneur attempts at managing his enterprise through three sets of enterprise
management functions: primary, production management and financial management functions.
After launching a rural enterprise, various entrepreneurial activities are taken up by the
entrepreneur for optimizing resource use, maximizing profits and enhancing the efficiency of
running the enterprise. So he engages himself in producing and marketing products. He has the
simple goal of making the unit economically viable and sustainable. Hence managing the
enterprise assumes greater importance to achieve efficiency and to make profits on a continuous
basis. So managing a rural enterprise becomes the top priority of the entrepreneur. Organizing
resources -men, money and materials for production, processing, packaging, and marketing of
goods is the essence of managing an enterprise. Choosing and upgrading appropriate technology
is also a key factor for the success of the enterprise. In managing a rural enterprise, following
aspects are considered as constituents of the unit: scale of operation, de-risking through trials,
sourcing supply of inputs, working capital, operating cycle, adopting a gradual growth of
production, supervising cash flows and quality control, using available idle capacity, managing
waste, and checking pilferage. Enterprise management is the process of planning, organizing,
controlling and budgeting of the works of a rural enterprise. Enterprise management comprises
various management practices - planning for long-term and short-term goals, organizing
production or services, arranging working capital for operating cycles, coordination of all
enterprise activities, marketing, decision-making, delegating, controlling, monitoring and
supervising, managing cash flows and finance management, book-keeping including writing
balance sheet and income statement for budgeting.
a. PRIMARY MANAGEMENT FUNCTIONS
Whenever a new entrepreneur attempts at launching a new venture - a small industry or an
enterprise or business in rural areas, she needs to understand the key functions of running and
managing enterprise to attain entrepreneurial success. The new entrepreneur has to have a
clear vision for his enterprise and plan for achieving long-term goals. So planning is the most
essential of all the primary management functions. The decision-making about the choice of
product line and technology to be used is also very important. Then organizing production
30

/services is another essential aspect that the entrepreneur has to think of. Organizing involves
resourcing the enterprise, which includes arranging for men, money and material resources
for starting production work. Staffing, i.e., recruiting and selecting suitable manpower to run
the enterprise, is yet another primary aspect for the entrepreneur-manager. The primary
management functions include most essential functions, such as planning, decision-making,
organizing and staffing.
Planning Planning is a process of setting goals and a suitable course of action for achieving the
enterprise goals. Planning is done at two levels: strategic and operational levels. Strategic Planning:
When an entrepreneur adopts a clear long-term goal with a clear vision and well expressed and
articulated mission statement for his enterprise, the entrepreneur is said to be practicing strategic
planning. In the small-scale industries and rural enterprises, there is very limited scope to adopt
systematic planning and adherence to strategies. The management process is essentially adaptive in
nature. Like in medium and large-scale industries, they cannot afford to adopt a predictive
management process, which involves setting objectives, formulating policies, drawing up strategies to
realize the set objectives. However, a rural entrepreneur is advised to adopt a strategic planning
process at least to set long-term goals. The small scale units with their need to adopt an adaptive
process of management perhaps have to depend on primary relationships like close friendships or
kinship ties for their management functions. Because of the adaptive nature of management, smallscale units do not permit professionalism to a great extent.
Operational Planning: Rural entrepreneurs usually adopt operational planning process in achieving
their enterprises' short-term goals. Since the daily activities related to enterprise are within their
immediate control, the rural entrepreneurs plan them well and also execute their plans quite
satisfactorily. Since a rural entrepreneur usually starts an enterprise for which he/she has quite
adequate knowledge, skills, and competencies, she successfully follows her/his daily operational
plans in running the rural enterprise.
Decision-Making: Usually every rural entrepreneur takes several decisions, on a regular basis, for
handling daily operations of production, assessing the sale volumes for production, assessing working
capital requirements, maintaining quality of\products or services, reducing costs, increasing profits,
etc. Appropriate decision-making is the hallmark of successful entrepreneurs. An element of risk
taking willingness of an entrepreneur plays a key role in taking right decisions. Usually the decisions

31

taken would prove to be right or wrong only after the results start coming and after assessing the
consequences.
Product Choice: Entrepreneurs make several decisions about product choice. When an entrepreneur
attempts to make a difficult or complex product, say an electric mains switch, marketing it is
relatively easier than the items which can be easily produced. Running around marketing of simple
and easy products consumes more time and pays fewer dividends. Moreover, with difficult products
in hand, the entrepreneur can even monopolize the market, while with simple products he/she faces
heavy competition due to many players in the market.

Technology Choice: Appropriate choice of technology plays a significant role in getting

better product quality and market share. A spice manufacturer had installed an imported
machine that enabled him to powder the spices at low temperatures so that the quality is not
affected, which otherwise normally happens with the indigenous machines because of heat
generated in the grinding process. Costs may increase in such cases but it is the quality of
final product that gets an entrepreneur the money back. Successful entrepreneurs usually end
up taking decisions that yield desired results and may prove to be right in retrospect. So,
practicing appropriate decision-making in their enterprises may be one of the reasons for
their entrepreneurial success.
Organizing Production/Services A rural entrepreneur needs to organize the production
process or service operations for achieving entrepreneurial success. So he/she starts installing
the equipment and machinery, organizes space and sets up the enterprise according to the
project proposal. Managing a rural enterprise involves looking after production processes to
ensure quality control and wastage reduction. So, technically trained entrepreneurs spend
more time in close and direct supervision of the production process. Those people who bad
prior experience of working in a product line also give special emphasis to production
process. So, they assume that production is crucial part of small-scale enterprises and feel
that time devoted to .production never goes waste. The entrepreneur-manager also takes care
of raw material supplies and studies the raw material market, explores for new dealers and
spends a lot of time for getting better raw materials and components for the enterprise. The
organizing function of managing a rural enterprise evolves into an expertise and specialized

32

field for entrepreneurs because this is one area of enterprise control where costs can be
controlled. Adequate experience and enough knowledge about all the raw material
components required and their sources to get them at competitive prices is another essential
feature of successful management of an enterprise. Getting to know the reliable supplier of
raw materials does not happen in a day or two. It involves many trials and tests and is quite
painstaking. A good manager believes in simple truths: "No pains, no gains!"
Staffing An entrepreneur, in an attempt to launch a new enterprise, creates employment not
only for himself but also for many others - skilled as well as unskilled labour. The staff
including workers, technicians, mechanics, foremen, supervisors, managers, etc., is the most
essential of all resources for running the production process and realizing the dream project
of the enterprise.
Recruiting and selecting the staff: This is most critical aspect for the entrepreneur who has to
select only those people who not only provide necessary skills and competencies for the
enterprise and but also share her/his dream, values, standards of excellence and quality
products or services. But getting the required people is always a difficult task for the
entrepreneurs.
Managerial Staff: They usually take in a few of their own family members in management
cadre for many reasons, such as convenience, familiarity, understanding and being less risky.
But the experience has shown that this has yielded mixed results. In some cases, the relatives
managed to cooperate with each other, while in others, tensions caused even closure of the
enterprises. Most of the entrepreneurs depend on the primary relationships because they
adopt an adaptive mode of management, which may not allow for professionalism to a great
extent. Retired government officials or middle-aged persons offer their services for
managerial jobs in small industries, but usually prove to be misfits due to unrealistic
expectations and mismatched performance standards. Most of the managerial staffs possess
very little experience as the entrepreneurs of small-scale industries find it difficult to attract
experienced managerial personnel. They often learn their job according to the exigencies
without much prior practical training. Due to shortage of management staff, it is imperative

33

for the entrepreneur-owner to also handle other's jobs to ensure that the work does not get
held up in case someone is absent. Managers have also to be recruited suiting their abilities
and temperament. A good manager diagnoses the problem objectively and does not get
carried away by emotions and tempers. Similarly the capable and competent supervisors and
foremen on the shop floor make a great difference in production performance and quality
control.
Training the unskilled labour: Getting the skilled labour may become difficult as the better
skilled people may not opt for working in a rural industry. But the unskilled labour may take
long time as they learn everything on the job and through experience may acquire necessary
skills. In such cases, where skilled labour are hired from outside, they may soon quit for
better opportunities elsewhere. So when these people leave the enterprise, the lower level
unskilled labour may take over operations with mixed results. In the process, the enterprise
slows down and suffers. The lower skilled or unskilled labour force are usually not provided
any technical training for the fear of losing them as they may leave for better options after
acquiring the training. Adequate specialized training needs to be given to the employed man
power for running the machinery in order to develop masters of some specific tasks.
Employed staffs need to be observed critically for their competencies and weaknesses and
they need to be assigned tasks accordingly, and developed appropriately to become experts in
a particular field. Otherwise, the employee may become jack-of-all-trades but master of
none.
b. PRODUCTION MANAGEMENT FUNCTIONS
The production management functions include those functions in running the enterprise, such as
production management, arranging working capital for operating cycles, assessing the breakeven point, and marketing of products/services.
Production Management
Production management is the process of arranging and allocating work, men, money, and
material resources in such a structured manner to achieve the twin goals of an enterprise reducing costs and increasing profits. Once an enterprise is set up, i.e., once the entrepreneur has
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organized space, machinery, equipment, and other fixed assets, and also recruited and selected
required work force, she would start production. She/he is ready and set to start operations of
her/his enterprise. The entrepreneur needs working capital for starting production. She tries to
understand the operating cycles of production assesses working capital requirements and sets
about producing goods. So s/he needs to understand operating cycle, Working capital, etc. Then
the new entrepreneur would make attempts at production, engages in trial production- and adopts
a pricing policy based on the costing of making the products
Working Capital: An entrepreneur needs finance for various operating expenses. She needs to
buy raw materials, consumables, packaging materials, etc., and needs money for salary and
wages, rent, premium and other services. So, in order to cover all these, expenses she would need
money, which is known as the working capital. This money can be recovered once the
entrepreneur sells the finished goods. Till that time, the funds gets locked up in the production
process. So, working capital can be defined as the amount of capital perpetually locked up in the
form of current assets viz. raw materials, work-in-progress, finished goods, credit may lead to
wrong decisions and result in a chaos in the enterprise, which tin be easily avoided given and
cash required to sustain a specified level of activity in terms of production and sales. To find out
the requirement of working capital, one needs to understand the concept of operating cycle.
Operating Cycle: One needs to buy and maintain the stock of raw materials for a certain
minimum period. This will depend upon various factors like nearness of the market, cost of
procurement, availability of the raw materials and their shelf life. The stocking period will vary
from a day to even 5-6 months. To convert the raw material into finished products will also take
certain time. This will depend upon the process involved and timely availability of all the needed
resources. Once the product is ready it has to reach the buyers and in return the sale proceeds are
to be collected. This also takes some time depending upon the demand and terms of sales. The
time taken for all the three stages above, i.e., the stocking period, production time and sales
realization time put together constitute an operating cycle of the business. The working capital is
the total funds required to meet all the expenses of one operating cycle. Usually, the small
entrepreneurs consider the production expenses only as working capital. They neither consider
the stocking period nor presume the sales realization time. So it is very important to understand

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the concept of operating cycle and calculate the working capital required for the entire period.
And working capital is the sum total of all operating expenses for the period of one operating
cycle. Working capital management is the most dynamic concept of financial management in an
enterprise. Effective working capital management would lead to: a) Lower investment of finance
in working capital for a given activity level. b) Effective management of cash, which is an idle
investment. C) Reduction in cost of production as a result of lower investment of finance in
working capital. Operating cycle should be as fast as possible so that the working capital is
required for only a short period of time as it incurs interest costs. Faster operating cycles also
enable more number of operating cycles and greater volume of production.
Marketing Management
Marketing is perhaps the most crucial of all management functions in rural enterprise
management. If the entrepreneur can understand the preferences of customers and adopts an
effective strategy for marketing and selling, distributes products and services directly or through
agencies to customers, then probability of success is very high. A good entrepreneur makes prior
agreements for assured marketing and adopts an effective marketing strategy and thus earns
profits through marketing. Marketing involves assessment of the needs of customers, a good
pricing policy, promotional and advertising approach and distribution system, and finally good
profit. Hence, a customer is the focus point of all marketing management and strategies. The
customers decide: a) What they want and need, b) What they will pay for the product or service
to satisfy that need, and c) Where and from whom they will buy it. Hence the customer is
focused in marketing and promotion strategies. The entrepreneur needs to understand that
marketing is the backbone of one's enterprise as this alone can bring in cash for further
production and sustenance. Since marketing is assumed to be crucial to entrepreneurial success,
marketing management needs to be taken up ardently by the new entrepreneurs.
C. FINANCIAL MANAGEMENT FUNCTIONS
The financial management functions include those functions that deal with handling cash and
finances, costing, pricing, break-even analysis, managing cash flows, accounting and bookkeeping, writing a balance sheet and income statement for budgeting. Financial management is a

36

very important area of control. It involves management and long-term finance for establishing
enterprise, expansion and growth; as well as short-term finance for getting working capital.
Proper estimation and management of finances for the enterprise are necessary for the success of
any enterprise.
Costing
An entrepreneur needs to understand the role of both these costs in fixing prices for finished
goods. While the direct costs for each product unit increase proportionately, the indirect costs
will generally decrease with increase in number of product units manufactured. Care should be
taken to include the costs incurred in production wastages, loss in handling and transit, customer
rejections, after sales service, loss in man-hours, transportation costs, distribution and sales costs,
local taxes, etc., as these directly affect the price of finished products. An entrepreneur-manager
needs to calculate these costs carefully in order to arrive at reasonable profits.
Pricing The process of setting a price for the finished products poses a great challenge to a new
entrepreneur. Price of the products or services depends a great deal on the cost of doing business.
The cost of sales tells what to charge to stay in business. This is known as setting the floor price;
or the minimum price. The competition will set the ceiling price, or the maximum price. The
entrepreneur needs to charge enough for the product or services so that both fixed costs and
variable costs will be covered by sales and a small profit is also derived. If prices are set too
high, it may not be possible to attract sufficient business to cover fixed-costs; if prices are too
low, the larger number of customers attracted may not still generate enough revenue to cover all
costs.
Break-even Analysis A break-even analysis can and should be done to check the reasonableness
of the prices fixed. Break-even helps to take fixed costs and variable costs into account when
fixing the prices. Initially, in the first and second operating cycles of production, it may not be
possible for the entrepreneur to break-even but over time the entrepreneur moves beyond breakeven point and starts making profits. It is always better to reach break-even point sooner than
later. The break-even point is a valuable tool to analyze how much one needs to sell to make
profits. If the entrepreneur knows approximately how much they needs to sell, they can order the
proper amounts of stock of raw materials, produce, and find way to sell that much. Once these
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basic elements are identified and estimated, one can calculate the break-even point. Breakeven
analysis determines the point at which sales revenues equal production costs. The break-even
point can also be defined in terms of physical units sold, or the level of capacity utilization at
which sales revenues and production costs match each other. So entrepreneurs always attempt to
utilize maximum capacity of their equipment, machinery and labour and reduce idle capacity
utilization.
Cash Flows Management The new entrepreneurs need to know as to what amount of money
has come in and how money has gone out in a certain period. It will give them an idea whether
the business is likely to yield profits and enable them to realistically forecast money movements.
The money movement into and out of business is a matter to be controlled by the entrepreneur.
Cash flow refers to the actual movement of cash into and out of an enterprise. A cash flow
statement is prepared for a few years, and it is usually sub-divided into the cash movements on a
monthly basis for first two years and even on a daily basis in the initial stages.
Cash inflow from sales depends on the method of payment to be expected. This is because credit
trading has the effect of shifting cash flow into a later period than the date of actual sales. In cash
outflow the actual payment is considered, depending on the credit terms arranged with the
material suppliers, as this will allow payment some time after the delivery of raw material. If a
business is to keep out of trouble, it must have enough cash inflow to pay day-to-day expenses
like wages, suppliers, rent and electricity, etc. Monitoring cash flows and ensuring smooth flow
of cash forms one of the healthy practices of an entrepreneur. A healthy cash flow and finance
management would ensure healthy enterprise and thereby entrepreneurial success.
Accounting and Book-keeping Every new entrepreneur is advised to form a system of
maintaining books of accounts and records from inception. Recording all accounts regularly is a
routine work that may be monotonous and boring but its worth can only be seen in its absence.
Absence of a system of accounting is one of the important reasons of failure. Accounts are eyes
of business and show the economic condition and financial health of the business very clearly.
Book-keeping or maintaining a record of all accounts of the enterprise - the expenditure incurred,
the wages, the payments due and the overall income-expenditure-profit details help the
entrepreneur to assess the financial health and financial discipline of the enterprise. If an
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entrepreneur is keeping all records of vouchers, bills, account slips, etc. in various cash books
and registers, then she is practicing book-keeping for her/his enterprise and also running the
enterprise in a systematic manner. Successful entrepreneurs resort to regular counting and bookkeeping of their enterprises which provides ready data on finances and may guide them in
making appropriate decisions and running their enterprises efficiently.
Balance Sheet: Balance Sheet describes the enterprise's financial condition at a given point in
time, in terms of its assets, liabilities and net worth. The successful entrepreneurs usually write
their balance sheets on a regular basis and may turn out to be good enterprise managers and
hence achieve success in their entrepreneurial ventures. The unsuccessful entrepreneurs, more
often than not, do not prepare any balance sheet whatsoever.
Income Statement: Income statement summarizes the enterprise's financial capability. An
entrepreneur, after all, works to earn an income from her/his enterprise. If she is not aware of
how much she had earned over a period of time, she is not in a position to decide whether to
continue or stop or change the course of action. Through an income statement, the entrepreneur
will have a fair idea of the operational costs, cost of products sold, administrative expenses; taxes
and interests paid, and the net income earned. The income statements of over; a period of years
or cycles of production will also help the entrepreneur to actually know whether there are
incremental gains or losses in her/his enterprise. Effective financial management practices form
the core of managing a rural enterprise. The rural entrepreneurs need to grasp the intricacies of
costing, pricing and breakeven analysis in order to attain entrepreneurial success.
SOURCES OF FUNDS
Normally an entrepreneur tries to meet at least part of the funds requirement from ones own
sources, which we call as capital of the promoter. He/she arrange this fund either from friends,
family members or from own saving. In most cases it is founds that this funds is quit insufficient
to run the business. Therefore he approaches various agencies for meeting the requirements. The
credit and landing agencies operating rural areas can be divided into two types:1) Institutional
2) Non- Institutional
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The former comprise commercial banks, co-operative societies, development banks, regional
rural banks and non banking financial companies. These institution operate in regulated
environment and observe fixed norms & guidelines enumerated by the government. Since they
are more amenable to policy prescriptions of government authorities they have fixed criteria on
rate of interest, primary & collateral securities & selection procedures. The non institutional
agencies are lending agencies operating in non formal manner. They are mostly money lenders
operating in rural areas. They are only lending agencies before the entry of institutional agencies.
Rural people have easy access to these sources of finance, as there are no Rules & regulations
guiding their activities. They charge very high rate of interest and many of them take away the
entire property of the poor people which is pledge by them for granting loans of even very small
amount.
Institutional financial is of three types:1) Banking Institutional:- Commercial banks, co-operative societies, Regional Rural Bank.
2) Development banks:- Small industries development bank of India(SIDBI) , National Bank of
Agricultural and Rural Development Bank (NABARD), National Housing Bank (NHB)
3) Non banking financial companies
TYPES OF CREDIT FACILITIES AVAILABALE TO RURAL ENTREPRENEUR
Credit facilities can be fund based or non fund based. In case of non fund based facilities bank do
not lend funds directly. They issue Letter of Guarantee and letter of Credit (LC), which are
simply commitments on the part of the bank to pay for the borrower in case of contingencies.
Fund based facilities are those where banks have to land funds directly. It include
1) Cash Credit (for Working capital Requirement)
2) Term Loan (for appearing Fixed Assets)
3) Bridge Loan (short term finance)
d. SUSTENANCE MANAGEMENT FUNCTIONS
Once the production process is on, the rural entrepreneurs need to concentrate their energy and
efforts on sustaining the activities of the enterprise. The major management functions that would
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help sustain the enterprise are coordination, controlling, delegating and supervising.
Coordination An entrepreneur is the technician, worker, manager, financer and the boss - all in
one. S/he has to take care of all the activities involved in the raw material supply, production,
quality control, packaging, marketing, budgeting, recycling funds and managing the enterprise,
among others. So the likelihood of an entrepreneur being successful depends, on the way he or
she coordinates all the activities of the enterprise. Thus, coordination is the process of integrating
enterprise works in order to pursue entrepreneurial goals effectively.
Controlling An entrepreneur takes steps to ensure that the actual activities of running enterprise
conform to the plans and goals already set for the enterprise. If a production target is set, it has to
be met within the specified time frame. Otherwise, delays may prove very costly. Thus the
production process is monitored. This management practice is called 'controlling', which helps
managers to monitor the effectiveness of their planning, organizing, decision-making, and
actions. An essential part of controlling process is taking corrective actions, as and when needed,
to achieve the entrepreneurial goals. In fact, it is the constant close supervision of the enterprise
owner that helps in steering the enterprise in the right direction. In case, the enterprise is not
being run in desired direction, the entrepreneur controls it, i.e. she sees if the enterprise goals are
in sight and if not, changes the direction towards the set goals. To enable better controlling of the
enterprise, the enterprise follows the simple practices of monitoring the cash flows to and from
the enterprise. Strict financial management practices help attain better control of the enterprise.
Even close supervision and monitoring of production process helps in quality control.
Delegation In the tiny units, the owner has to manage almost everything. Or she may have one
of her/his family members or relative to help as an assistant. As the size of the unit grows the
need for delegation of responsibility increases. When the scale of operation of an enterprise gets
enlarged, the entrepreneur usually has to attend to various activities of the enterprise and is hard
pressed for time. In such cases, she usually hands over some specific work to one of her/his
employees or family members for monitoring and completion. This act of assigning work related
to management coupled with formal authority and responsibility is called delegation.
Entrepreneurs delegate work to others in order to manage the enterprise efficiently and
successfully. In this process, the entrepreneur personally handles some of the most essential jobs
and gets other less critical jobs done under her/his instruction and supervision.
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Usually many entrepreneurs learn something about all the tasks of their enterprise. An
entrepreneur who can handle all operations of one's unit is more likely to succeed only because
she pays equal attention to all aspects of managing the enterprise. Moreover, she can easily
diagnose what went wrong and where. Time management also assumes significance as proper
distribution of time proportionately among all aspects of enterprise ensures success. Many of the
successful entrepreneurs, even though they delegate some specific works to supervisors in their
enterprises, are not entirely happy with the process of delegation. They would insist that the
responsibility still rests with them in ensuring the completion of some works and quality of
products/services. To give an example, the poultry farmers rarely delegated the technical tasks
like vaccination of birds at regular intervals as it involves high level of skill and its poor
performance may result in high losses. On the other hand, a low skill task with low risks like
'daily feeding of birds' was often delegated to the workers. Supervising Supervision may be
defined as the art of directing the effort or harnessing the energy of human resources of the
enterprise for the attainment of enterprise goals. Supervision involves directing, delegating and
controlling functions of a manager, Close and direct supervision is essential for maintaining
quality control. Quality Control: Quality conscientiousness is another aspect that fetches more
monetary returns. Improving quality of products by redesigning and using better components is
possible only when the entrepreneur herself/himself spends adequate time with workers on shop
floor, diagnosing problems and immediately correcting them, and by getting directly involved in
the manufacturing process. To ensure quality, mid-way in the process of manufacturing various
components, the entrepreneur conducts various tests, because improper components may not be
useful to assemble better final products.

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8. PITFALLS IN MANAGING A RURAL ENTERPRISE

A promoter of a rural enterprise faces a plethora of problems, usually called 'teething troubles'
when he/he sets up her/his enterprise. First, arranging working capital becomes the major task as
she runs out of money to buy raw materials though she may not yet have earned any reputation in
the market to get raw materials on credit. Similarly, she makes several production trials, refines
the finished products, improves quality, attempts to set a price for her/his products, etc. In the
process, she learns from the customers and distributors about the preferences and prices.
Common Pitfalls A person who does not believe in long-term strategic plans but gets entangled
in daily chores of running the enterprise usually meets with failure for lack of preparedness for
future eventualities. Among rural entrepreneurs, the practice of strategic planning is found to be
quite inadequate. Since the rural people, in general, have often fallen victims to vagaries of
monsoons, prices and other uncertainties, they seldom venture to think of future plans and are
usually ill-prepared for any contingencies. They were also found to be confusing the term
strategic planning with daydreaming. The usual dictum is "Do not count your chickens before
they are hatched!" But successful entrepreneurs believe in "Hope for the best, but prepare for the
worst", and hence success. Most of the managerial staffs recruited have very little experience.
They often learn their job according to the exigencies without much prior practical training.
However, the scope for specialization is limited. Due to shortage of managerial staff, it is
imperative for one to handle other's jobs to ensure that work does not get held up in case
someone is absent. The managerial jobs are plural in nature to a greater degree in the small-scale
sector than in the medium and large-scale industries.
In cases where the scale of operation of an enterprise has increased, small-scale industries are
also started as joint ventures with two-or more partners. But partnerships may yield mixed
results. While some units survive because of committed partnerships, others have failed due to
lack of understanding between partners. A good deal of mutual faith, maturity and
complementary support are essential for successful partnership in enterprises. An entrepreneur
needs to look beyond into future with long-term goals in mind. A narrow outlook, inferiority
complex and lack of patience and lack of exposure will be great impediments for enterprise

43

development. Merely thinking of limited gains will not make a successful entrepreneur.
Suspicion and jealousy may not find place in a partnership venture.
Most of the rural entrepreneurs are not serious with the practice of organizing resources for
production/services for their enterprises. Usually, they take it for granted this crucial issue of
organizing inputs, money and other key resources because they take up only familiar
entrepreneurial activities on which they have adequate command and knowledge.
They find organizing of resources as an easy and routine affair and conduct themselves in a
'business as usual' manner. Most of the entrepreneurs supervise their production work by
themselves. However, they have to learn to delegate various responsibilities to their partners and
subordinates. Otherwise, they tend to get bogged down in one aspect of production at the cost of
ignoring some other crucial aspect of managing the enterprise and so productivity may decline.
The small entrepreneurs usually do not prepare long-term plans. They often believe that their
ideas cannot be implemented for want of resources. However, it is the inadequate understanding
of the intricacies of business and lack of proper planning which hampers their dreams. Usually
they learn the basic principles of financial management from their own mistakes. In the process,
many of them bum their fingers and get disheartened in the beginning. Even if they know their
job and business skills, they are not able to reflect upon the mistakes of the past. Quite often in
the absence of records, the access to formal credit facilities is also denied. So it is important for
them to learn and adopt the principles of financial management as well as maintain the necessary
records. Managing cash flows poses a great challenge for the entrepreneurs. Delayed cash flow is
a big pitfall which may not be avoided by even the best of entrepreneurs. Similarly large gaps are
seen in the understanding the operating cycle and working capital requirements by the new
entrepreneurs. An effective manager-entrepreneur will take special care of cash flows in running
one's enterprise

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CONCLUSION

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BIBLOGRAPHY
BOOKS

WEBSITE

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