Q: What do you understand by plan of Action to set up a small business and list

significant points which should be taken care of while preparing a?

Ans: An action plan is a list of sequential activities and well-defined steps that outline the
most important priorities to focus on so you can get your small business off the ground.
Starting a business as an entrepreneur is an exciting process. The idea of working for yourself
can be very appealing and motivating, but moments of self-doubt may also arise. Having an
action plan in place will help you move past those moments of self-doubt that threaten to stall
you. As you meet one objective on your plan at a time, you will gain the necessary traction
youll need to launch your startup successfully.
Definition
Creating an action plan is the next crucial step to take after building your business plan. An
action plan is a list of sequential activities and well-defined steps that outline the most
important priorities to focus on so you can get your business off the ground.
In essence, your action plan will be the wheels on the wagon that move your business
forward and the road map that shows you where to head every step of the way.
Activities
To start creating your next action plan, begin by listing all the possible outcomes youd like
to achieve. For instance, if youre about to build a landscaping business, your list might
include buying tools and a truck, obtaining a business telephone, staying on top of payroll
and accounting functions, and having plenty of good-paying customers. You might also want
to rent storage or office space one day, buy a trailer and backhoe, and participate in local
home and garden shows.
Once youve created your dream list, prioritize it. Be sure to assign priority to the actions that
are legally necessary and those that will provide the quickest payback to the business.
Schedule the fun and frivolous ideas for a later time.
In the landscaping business scenario, it might be fun to shop for a shiny new truck, trailer and
backhoe, but buying a used truck and renting a trailer and backhoe as needed will probably
ensure better payback. You might gain new business contacts through home and garden
shows, but initially your participation will cost you time and money. Keeping overhead low
by working from a home office instead of renting space will leave you with better cash flow.
Schedule these other wish list items for later time.
Once your priorities are set, you can then add the achievable action steps youll need to take
to make your objectives a reality.
Again, in the landscaping business scenario, the first step toward buying a truck and tools
may be to visit a bank to gain financing for them. Your first step in assuring good
bookkeeping and payroll might be to hire an outside agency that does that type of work.

Benefits
A well-formed plan of action will set your business startup on course for many days into your
first fiscal year. It will provide you with clarity to better prioritize and allocate your time and
other resources. Essentially, your actions plan will become your guidebook, setting you back
on track on those days you might feel overwhelmed with competing priorities.
As a business owner, youll likely face many tasks that are out of your area of expertise. Your
action plan will help you identify potential obstacles and items you might want to delegate or
outsource. For instance, it may be more beneficial to hire a graphic artist to create your logo
than to spend valuable time trying to create one yourself.
A comprehensive plan will also ensure all the bases are covered. Its a good idea to purchase
a good business-planning software tool that has action-planning functionality built in. An
online template of this nature will typically include the most important categories youll need
to address. Built-in prompts will help you understand and choose key actions that will serve
your particular business best.
Design
Of course, youll need to tailor your road map to your particular business. A typical plan of
action follows this process:
1.

Identify desired outcomes within each business category.

2.

Identify preferred solutions.

3.

Set goals and steps toward making the outcome a reality.

4.

Assign each goal to a person whether yourself or someone you hire.

5.

Assign a desired start date.

6.

Assign a desired end date.

7.

Schedule milestones and status updates.

8.

Allocate money and time to each objective.

Once youve slotted each of your objectives into a spreadsheet or online project plan tool,
you can plug the assigned dates into your business calendar.
Your action plan will be something to refer to regularly. You can also use it to track your
results and compare them against your master business plan.

Significant points which should be taken care of while preparing an Action

Plan
1. Create a revenue plan
Identify your sources of revenues, the product or services that you offer, how many you plan
on selling, and the price you will charge. This will let you know if its possible to achieve
your financial goals.
2. Map your gap
This is the distance from where you are to where you want to be. This includes your financial,
non-financial and personal goalsrevenues, profits, volume of sales, number of customers
etc. Its a snapshot for you to decide if its the journey you want to take, or change it.

3. Know your customer

Make sure you know who your ideal customer is, because its often not who you think it is, or
who you are currently selling too. Knowing the profile of your customer will help you save
time and money when it comes to acquiring them. This is the foundation for every business.
4. Document how your prospects/customers think and behave
Specifically, you should think about why customers decide to purchasewhich is the key to
making the sale. Every decision starts with a desire created by internal emotion or external
influence. If you follow the way they think and act then you can place your product or service
right in front of them at the point of decision.
5. Create a unique positioning in your market
In a world of clutter, what gets heard is a simple message. Identify the biggest problem in
your marketplace and then tell people how you solve that problem and say it in less than 1
minute.
6. Know what sets you apart
Write down the biggest benefit that you offer your customers (a benefit that your
competition doesn't offer). It doesnt have to be a coherent statement, it just has to have
impact.
7. Take action
This is what is missing from the book The Secret which talks about using The Law of
Attraction to bring abundance into your life. You cannot attract abundance without taking
action. Affirmations, visualizations and meditation all work together when you add action to
the formula.
8. Success starts with the belief that its possible
Your current belief system may not be helping you achieve your goals. Old paradigms
(beliefs) are the number one reason for holding us back from achieving whats possible.

9. Determine which distribution channels you will use for your business
A distribution channel is simply the place where the transaction takes place between you and
your customerotherwise known as the Point of Sale. The seven distribution channels to
choose from are: retail, online, direct sales, events, mail order, phone sales or agents.
10. Select the right strategies
These should get people to the Point of Sale identified in step No. 4, and there are about 130
strategies and tactics to choose from (i.e., advertising, direct mail, copywriting, telemarketing, Internet marketing, etc.).

11. Create a 90 day sales and marketing schedule

This will help you plan the strategies, tactics, timing and who will be responsible for
implementation. Once you get your thoughts on paper you will feel less overwhelmed that
you now have some direction to follow or action items to delegate.

Q: How selection of location to set up a small business could play a role for
the success of a small business?
Ans: Being in the right location is a key ingredient in a business's success. If a company
selects the wrong location, it may have adequate access to customers, workers, transportation,
materials, and so on. Consequently, location often plays a significant role in a company's
profit and overall success. A location strategy is a plan for obtaining the optimal location for a
company by identifying company needs and objectives, and searching for locations with
offerings that are compatible with these needs and objectives. Generally, this means the firm
will attempt to maximize opportunity while minimizing costs and risks.
A company's location strategy should conform with, and be part of, its overall corporate
strategy. Hence, if a company strives to become a global leader in telecommunications
equipment, for example, it must consider establishing plants and warehouses in regions that
are consistent with its strategy and that are optimally located to serve its global customers. A
company's executives and managers often develop location strategies, but they may select
consultants (or economic development groups) to undertake the task of developing a location
strategy, or at least to assist in the process, especially if they have little experience in
selecting locations.
Formulating a location strategy typically involves the following factors:
1. Facilities. Facilities planning involves determining what kind of space a company will
need given its short-term and long-term goals.

2. Feasibility. Feasibility analysis is an assessment of the different operating costs and

other factors associated with different locations.
3. Logistics. Logistics evaluation is the appraisal of the transportation options and costs
for the prospective manufacturing and warehousing facilities.
4. Labor. Labor analysis determines whether prospective locations can meet a company's
labor needs given its short-term and long-term goals.
5. Community and site. Community and site evaluation involves examining whether a
company and a prospective community and site will be compatible in the long-term.
6. Trade zones. Companies may want to consider the benefits offered by free-trade
zones, which are closed facilities monitored by customs services where goods can be
brought without the usual customs requirements. The United States has about 170
free-trade zones and other countries have them as well.
7. Political risk. Companies considering expanding into other countries must take
political risk into consideration when developing a location strategy. Since some
countries have unstable political environments, companies must be prepared for
upheaval and turmoil if they plan long-term operations in such countries.
8. Governmental regulation. Companies also may face government barriers and heavy
restrictions and regulation if they intend to expand into other countries. Therefore,
companies must examine governmentalas well as culturalobstacles in other
countries when developing location strategies.
9. Environmental regulation. Companies should consider the various environmental
regulations that might affect their operations in different locations. Environmental
regulation also may have an impact on the relationship between a company and the
community around a prospective location.
10. Incentives. Incentive negotiation is the process by which a company and a community
negotiate property and any benefits the company will receive, such as tax breaks.
Incentives may place a significant role in a company's selection of a site.
Depending on the type of business, companies also may have to examine other aspects of
prospective locations and communities. Based on these considerations, companies are able to
choose a site that will best serve their needs and help them achieve their goals.
COMPANY REQUIREMENTS
The initial part of developing a location strategy is determining what a company will require
of its locations. These needs then serve as some of the primary criteria a company uses to
evaluate different options. Some of the basic requirements a company must consider are:

Size. A company must determine what size property or facility it needs.

Traffic. If it is in the service business, a company must obtain statistics on the amount
of traffic or the number of pedestrians that pass by a prospective location each day.

Population. Whether a service or manufacturing operation, a company must examine

the population of prospective locations to ensure that there is a sufficient number of
potential customers (if a service business) or a sufficient number of skilled or
trainable workers. In addition, manufacturers also benefit from being close to their
customers, because proximity to customers reduces shipment time and increases
company responsiveness to customers.

Total costs. Companies must determine the maximum total costs they are willing to
pay for a new location. Total costs include distribution, land, labor, taxes, utilities, and
construction costs. More obscure costs also should be considered, such as
transportation costs to ship materials and supplies, and the loss of customer
responsiveness if moving further away from the customer base.

Infrastructure. Companies must consider what their infrastructure requirements will

be, including what modes of transportation they will need and what kinds of
telecommunications services and equipment they will need.

Labor. Companies must establish their labor criteria and determine what kind of labor
pool they will need, including the desired education and skilled levels.

Suppliers. Companies must consider the kinds of suppliers they will need near their
locations. In addition, having suppliers nearby can help companies reduce their
production costs.
Besides these basic requirements, companies must take into consideration their unique
requirements of prospective locations. These requirements may correspond to their overall
corporate strategy and corporate goals and to their particular industries.
SERVICES.
Since service businesses generally must maintain a number of sites to remain close to
customers, the location selected should be close to the targeted segment of the market. The
market also can influence the number of new locations, as well as their size and features.
A simple technique for determining service locations is to establish a set of minimum criteria
for opening new outlets. These criteria should be developed so that the locations selected
have strong chances of success. A company could assess the potential of prospective locations
based on primary criteria such as:

The population of the community should more than 100,000.

The annual per capita income should be more than $35,000.

After selecting locations that satisfy these criteria, a company might further evaluate the
potential locations based on a set of criteria that considers the location's industrialization,
person/car ratio, labor availability, population density, and infrastructure
TRENDS IN LOCATION STRATEGY
Globalization and technology have been the biggest drivers of change in the location decision
process over the last thirty years. Location activity has been very high in recent decades as a
result of technology improvements, economic growth, international expansion and
globalization, and corporate restructuring, mergers and acquisitions.
The top five location factors for global companies are costs, infrastructure, labor
characteristics, government and political issues, and economy. Key sub-factors are the
availability and quality of the labor force, the quality and reliability of modes of
transportation, the quality and reliability of utilities, wage rates, worker motivation,
telecommunication systems, record of government stability, and industrial relations laws.
Other sub-factorsprotection of patents, availability of management resources and specific
skills, and system and integration costsare of increasing importance.
Whereas wages and the industrial relations environment are significant factors in
multinational location decisions, by far the main determinant is the host country market size.
Furthermore, global economic considerations have become paramount in location strategy as
companies contemplate the advantages afforded by various locations in terms of positioning
in international markets and against competitors.
When companies seek new sites they generally strive to keep operating and start-up costs
low, and so they often choose locations in collaboration with economic development groups
to achieve these goals. Companies also now expect to move into new facilities more quickly
than in the past, so they tend to focus more on leasing facilities than purchasing land and
building new facilities. Also, by leasing facilities, companies can relocate every few years if
the market requires it.
Technology, especially communications technology, has not only been a driver of change, but
has facilitated the site selection process. Managers can obtain initial information on
alternative locations via the Internet and promotional software. Site selections agencies
increasingly use geographical information system (GIS) technology, and e-mail has become a
dominant mode of communication in location research and negotiation.
Location databases have enabled companies to do initial screening themselves, hence
reducing their need to rely on economic developers to providing only very specific
information and details on locationssuch as commuting patterns and workforce
characteristics.
Telecommunications technology has created the "virtual office" of employees working from
remote locations. The growth of the virtual office has impacted location strategy in that some

companies no longer need as much workspace because many employees work from remote
sites. When these employees need to work at the office, they can call and reserve office space
for themselves. The decrease in facility size can lead to millions of dollars worth of savings
each year, while increasing productivity.

The bottom line is that it takes a carefully balancing act to select the best location for a
business. It requires balancing costs, business needs, customer needs and the existing
regulations and incentives.
That is because the best locations cost money. So do advertisements. If a good location is
costly and there is not enough money to spare for promotions, the normal thing is to find a
cheaper place and cut down on advertisements.
Take your time to find the perfect location the first time. Unless moving locations is in your
business plan, you want to find the right location now. Moving or being forced to move can
be challenging, stressful and expensive.
Although it may take a lot of time to find the perfect space, doing it right the first time is
essential to the success of your new business.

Q: What measures has the government taken to solve the problem of

finance and marketing in the small scale sector?
ANS: The contribution of small scale industries is remarkable. Thus, Government has
provided the following institutional support to solve the problem of finance and
marketing in the small scale sector
(i) National Bank for Agriculture and Rural Development (NABARD) NABARD was
setup in 1982, to promote integrated rural development. Apart from agriculture, it
supports small industries, cottage and village industries, and rural artisans. It provides
credit and offers counseling and consultancy services and organizes training and
development programs for rural entrepreneurs.
(ii) The Rural Small Business Development Centre (RSBDC) It was set up by the
world association for small and medium enterprises and sponsored by NABARD. It
works for the benefit of socially and economically disadvantaged individuals and
groups. It aims at providing management and technical support to current and
prospective micro and small entrepreneurs in rural areas.
(iii) National Small Industries Corporation (NSIC) this was set up in 1955 with a
view to promote, aid and foster the growth of small business units in the country.
Functions of NSIC include
(a) Supply of machines on easy hire-purchase terms.
(b) Procure, supply and distribute raw materials.
(c) Export the products of small business units and develop export-worthiness.
(d) Mentoring and advisory services.
(e) Serve as technology business incubators.
(f) Creating awareness on technological up gradation.
(g) Developing software technology parks and technology transfer centers. Scheme of
'performance and credit rating' of small businesses is implemented through NSIC to
ensure that they score higher rating for their credit requirements as and when they
approach the financial institutions for their working capital and investment
requirements.
(iv) Small Industries Development Bank of India (SIDBI) SIDBI was set up as an apex
bank to provide direct/indirect financial assistance under different schemes, to meet
credit needs of small business organizations and to coordinate the functions of other
institutions in similar activities.
(v) The National Commission for Enterprises in the Unorganized Sector (NCEUS) The
NCEUS was constituted in September, 2004, with the objectives of recommending
measures considered necessary for improving the productivity of small enterprises in
the informal sector and to enhance the competitiveness of the sector in the emerging
global environment by developing linkages of the sector with other institutions in the
areas of credit, raw materials, infrastructure, technology up gradation, marketing, etc.

(vi) Rural and Women Entrepreneurship Development (RWED) The Rural and Women
Entrepreneurship Development programe aims at promoting a conducive business
environment and at building institutional and human capacities that will encourage
and support the entrepreneurial initiatives of rural people and women by providing
training and advisory services.
(vii) Scheme of Fund for Regeneration of Traditional Industries (SFURTI) The Central
Government set up this fund to make the traditional industries more productive and
competitive and to facilitate their sustainable development. The main objectives of
SFURTI are to develop clusters of traditional industries in various parts of the
country; build innovative and traditional skills, improve technologies and encourage
public-private partnerships, develop market intelligence etc.
(viii) The District Industries Centers (DICs) District Industries Centre is the
institution at the district level which provides all the services and support facilities to
the entrepreneurs for setting up small and village industries including identification of
suitable schemes, preparation of feasibility reports, arranging for credit, machinery
and equipment, provision of raw materials and other extension services. This was
launched on 1st May, 1978.
(ix) Some of the common incentives provided by the Government for industries in
backward and hilly areas are as follows
(a) Land Every state offers developed plots for setting up of industries. The terms
and conditions may vary. Some states don't charge rent in the initial years,
while some allow payment in installments.
(b) Power Power is supplied at a concessional rate of 50%, while some states
exempt such units from payment in the initial years.
(c) Water is supplied on no-profit, no-loss basis or with 50% concession or
exemption from water charges for a period of 5 years.
(d) Sales Tax In all union territories, industries are exempted from sales tax, while
some states extend exemption for 5 years period.
(e) Octroi Most states have abolished octroi.
(f) Raw Materials Units located in backward areas get preferential treatment in the
matter of allotment of scarce raw materials like cement, iron and steel etc.
(g) Finance Subsidy of 10-15% is given for building capital assets. Loans are also
offered at concessional rates.
(h) Industrial Estates Some states encourage setting up of industrial estates in
backward areas.
(i) Tax Holiday Exemption from paying taxes for 5 or 10 years is given to
industries established in backward, hilly and tribal areas

Q: Why small businesses are important part of the industrial fabric of the
country and can play major role to boost the economy of the country?
Ans: In developing countries, micro and small enterprises (MSEs) comprise the largest part
of the industrial fabric and are among the most important development agents in society.
MSEs offer many millions of poor people around the world the possibility of earning money,
training, work experience and employment. However, empirical evidence shows that most
small enterprises never develop the business beyond a certain scale and only a small minority
of them manages to upgrade to the next level of productivity, income and employment. Small
scale industries are small in size but play a big role in the economic development of a
developing country like India. India has adopted the ideal of a socialistic pattern of society
with full employment balanced regional development and self-reliance as the major
objectives.
Small scale firms are helpful in the achievement of these goals in the following ways:
1. Employment: Small scale firms use labour-intensive techniques and, therefore, they have
high potential to provide employment to a larger number of people per unit of capital. For
every worker employed in large scale industries about three workers are engaged in small
scale and cottage industries. Next to agriculture small business constitutes the most popular
occupation of people in India. Small firms promote self-employment particularly among the
educated and professional class. They also provide employment to agriculturists who remain
idle during a part of the year. In fact, the healthy growth of small scale industries can be an
effective approach to the pressing problem of unemployment in the country. Several
empirical studies have revealed that the employment generating capacity of small scale
industries in about in times more than that of the large scale industries.
2. Balanced Regional Development: small scale industries promote decentralized
development and help to remove regional disparities in industrialisation. Decentralized
development contributes to the process of self-sustained growth and avoids concentration of
industries in particular areas. By providing employment in rural areas they help to check
migration and overcrowding in urban areas. Small scale firms can be a useful means of rural
reconstruction and development. Development of decentralized sector also improves the
standard
of
living
of
people
in
backward
regions.
3. Optimization of Capital: Small scale firms require less capital per unit of output and,
therefore, greater output can be obtained with small investment. The Annual Surveys of
industries reveal that fixed capital per employee in case of small scale industry was Rs. 3,706
as compared to Rs. 27,757 in case of large scale industry. Small firms also provide quick
returns after their establishment on account of short gestation period. In India where the rate
of capital formation is low, small scale industries are very suitable.
4. Mobilization of Local Resources: Small scale industries facilitate Mobilization and
utilization of local resources and family skills which might otherwise remain talent or
utilized. Small business promotes a new cadre of small entrepreneurs and self-employed and
encourages local talent. The growth of small enterprises helps in tapping talent resources like
entrepreneurial skills and small savings specially in rural areas. Small business helps to
protect
technical
skills
and
handicrafts.

5. Exchange Earnings: Small scale industries help in reducing pressure on the country's
balance of payments in two ways. First, they do not require imports of sophisticated
machinery and equipment. Secondly, they earn valuable foreign exchange through exports of
their products. The exports of small scale industries increased from Rs. 637 crores in 1975-76
to Rs. 2785 crores in 1985-86. Small scale sector accounts for 40 percent of the exports of
non-traditional items and about 25 per cent of the country's total exports. About 90 per cent of
its exports are of non-traditional items.
6. Egalitarian Society : Small scale industries help in reducing concentration of economic
power in a few hands. They promote a more equitable distribution of national income and
wealth. Development of small scale industries helps to reduce monopolies and exploitation of
consumers. Benefits of small scale firms are derived by a wider population. A large part of
the earnings is distributed among workers.
7. Feeder to Large industries: small scale sector is complementary to the large scale
industries. Small scale industries manufacture various types of components, spare parts, tools
and accessories which are required by the large scale sector.
8. Social Advantage: Small scale units offer opportunity for an independent way of life to
people with small means. They offer savings in social overheads like education, housing and
medical facilities by taking industry nearer to the people. They help to raise per capita income
an standard of living in the country. A system of widely diffused ownership permits wider
participation of people in the process of economic development. Small scale sector provides a
base for democracy, socialism and self-government.
At present there are about 16 lakh small scale units in India producing more than 500 times.
The Seventh Fiver Year Plan envisages a growth rate of 10 per cent in the small scale sector.
By the end of 1990 the production of small scale sector is expected to be Rs. 8,000 crores and
employment 1.19 crore persons.
At current prices the total output of small scale sector in 198-87 amounted to Rs. 72,250
crores.