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Entrepreneurship Development Programme

Concept of entrepreneurship
An entrepreneur is the agent who buys factors of production at certain price in order to combine them into a product with a view to selling it at uncertain price in future. - Cantillon An entrepreneur is the economic agent who units all means of production- land of one, the labour of another and capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit. J.B. Say An entrepreneur is an innovator who brings economic development through new combinations of factors of production. - Joseph Schumpeter

Traits of entrepreneur
Initiation Watching for opportunities Persistence Information seeker & resourceful Quality conscious Commitment to work Efficiency lover Proper planning Self confidence Assertiveness Persuation Efficient monitoring Concern for employees

Difference between Entrepreneur & Manager


Venture Risk bearing Reward Continuity Innovation Status role Prerequisites

Function of Entrepreneur
Innovation Risktaking Organization building

Type of Entrepreneur
Innovating Entrepreneur Imitative Entrepreneur Fabian / Drone Entrepreneur

Assignment - 1
Understanding of concept of establishing a business, understanding the logistics of setting up a small business enterprise and identifying strengths & weakness of project.

Product/ Project identification and type of ownership

Types of ownership
Sole Proprietorship Partnership Joint stock company

Sole Proprietorship
Salient features 1. Single ownership 2. One man control 3. Undivided risk 4. Unlimited liability 5. No government regulation

Sole Proprietorship
Advantages
1. 2. 3. 4. 5. 6. Simplicity Quick Decisions High secrecy Direct Motivation Personal Touch Flexibility

Disadvantages
1. 2. 3. 4. Limited Funds Limited Skills Unlimited Liability Uncertain Life

Sole Proprietorship
Expansion of business 1. By Employment of Paid Assistant 2. By Admission of a Partner

By Employment of Paid Assistant


Advantage Reduction in administrative burden Division of work Appointment of specialist Complete control / no interference in policies Independent decisions and freedom of action No sharing of profits Easy to dismiss Disadvantage
May be careless & inefficient Increases risk and liability of the sole proprietor No financial stake/ business at the mercy of the assistant Danger of disclosure of business secrets No addition to goodwill Problem of capital unsolved Increased expanse May leave the business and set up competition

By Admission of a Partner
Advantages
Investment of capital. Sharing of managerial responsibility. Pooling of knowledge, experience and judgment. Increase in goodwill & connections. Direct relation between effort and reward, personal incentive and interest. Secrecy ensured. Sharing of losses & liability. Economy of costs.

Disadvantages
Sharing of control/ loss in freedom of action. Division of authority/ lack of independent decisions. Increase in liability and risk. Danger of dishonesty and negligence. Possibility of dispute and differences. Sharing of profits. Difficulty in removing the partner.

Partnership Firm
Salient features Association of 2 or more persons. Maximim 10 in banking business and 20 in non banking business. Contractual relationship written or oral agreement among the partners. Existence of a lawful business Sharing of profit and loss Mutual agency among partners Unlimited liability Restriction on transfer of interest Utmost good faith.

Partnership Firm
Formation / Deed of partnership Name of the firm, Nature of the firms business, Date of agreement, Principal place of the firms business, Duration of partnership. Amount of capital contributed by each partner. The proportion in which the profits and losses are to be shared. Loans & advances by partners and interest payable on them. Amount of withdrawal allowed to each partner and the rate of interest. Amount of salary or commission payable to any partner. Duties, power & obligation of all the partners. Maintenance of accounts and audit. Mode of valuation of goodwill on admission, retirement or death of a partner. Procedure for dissolution of the firm and settlement of accounts. Settlement of disputes among the partners. Etc.

Partnership Firm
Registration of firms Name of the firm, Nature of the firms business, Date of agreement, Principal place of the firms business, Duration of partnership. Dissolution of firm By agreement By notice Contingent Compulsory Through court Settlement of accounts on dissolution

Partnership Firm
Merits
Ease of formation Larger financial resources Specialisation and balanced approach Flexibility of operations Personal incentive and direct supervision Capacity for survival Better human and public relation Business secrecy

Demerits Unlimited liability Limited resources Risk of incompetent/ dishonest partner Lack of harmony Lack of continuity Non transferability of interest. Public distrust

Joint stock company


Salient features Separate legal entity Prepetual succession Limited liability Common seal Transferability of shares Separation of ownership and management Incorporated association of persons- Private company ( minimum 2 person) & Public company ( minimum 7 persons)

Joint stock company


merits
Limited liability Large financial resource Continuity Transferability of shares Professional management Scope for growth and expansion Public confidence Diffused risk Social benefits

demerits
Difficulty of formation Excessive government control Lack of motivation and personal touch Delay in decisions Conflict of interest Frauds in promotion and management Lack of secrecy Social evils

Steps for establishing small business venture


Selection of the product. Location of the enterprise. Choice of form of ownership. Registration with the authorities. Statutory licenses and clearances. Arranging term finance. Acquiring land and building. Arranging work capital. Recruitment of staff. Installation of machinery. Procuring raw material. Power connection and water supply. Starting production. Marketing the product.

Evaluate the plan


a. Does the idea make sense?

b. Will it work?
c. Who is my customer?

Plan ways to avoid obstacles.

If obstacles cant be
avoided TERMINATE THE B.P.

d. Does it satisfy customer needs?


e. Whats the PLAN B against CONTIGENCIES? f. Can I manage such a business? g. Who will I compete with?

Writing the business plan


1. Introductory page a. Name and address of business b. Name(s) and address(es) of principal(s) c. Nature of business d. Statement of financing needed e. Statement of confidentiality of report 2. Executive summary 3-4 pages summarising the complete business plan

Writing the business plan


3. Industry analysis a. Future outlook and trends

b. Analysis of competitors
c. Market segmentation d. Industry and market forecasts 4. Description of venture a. Product(s) b. Service(s) c. Size of business d. Office equipment and personnel e. Background of entrepreneur

Writing the business plan


5. Production plan

a. Manufacturing process (amount subcontracted)


b. Physical plant c. Machinery and equipment

d. Names of suppliers of raw materials


6. Operational plan a. Description of companys operation b. Flow of orders for goods and/or services c. Technology utilisation

Writing the business plan


7. Marketing plan a. b. Pricing Distribution

c.
d. e.

Promotion
Product forecasts Controls

8.

Organisational plan
a. b. c. d. e. Form of ownership Identification of partners or principal shareholders Authority of principals Management-team background Roles and responsibilities of members of organisation

Writing the business plan


9. Assessment of risk a. b. c. Evaluate weakness of business New technologies Contingency plans

10. Financial plan a. b. c. d. e. Income statement Cash flow projections Balance sheet Break-even analysis Sources and applications of funds

Writing the business plan


11. Appendix (contains backup material) a. b. c. d. Letters Market Research data Leases or contracts Price lists from suppliers