Page 1 : Unit 2, New Ventures & Business Plan, , SOURCES OF BUSINESS IDEAS & OPPORTUNITY, ―Everything that can be counted does not necessarily count, everything that counts cannot, necessarily be counted‖ - Albert Einstein, ―Opportunity never knocks on the door. You have to knock on opportunity‘s door and they are, all around‖ - Thomas J.Watson, , An entrepreneur has innumerable opportunities available to him but he has to identify the best, opportunities out of the existing opportunities. One can have a large list of the available, opportunities from the magazines, Internet, Government, Friends, relatives and so on. To, select the best business opportunity, one needs creativity, skills and vision to analyse the, available information. It is also important for an entrepreneur to identify the opportunities and, also to select the best opportunity. At times, entrepreneur may be in dilemma and may find, one opportunity more lucrative and the other time can also find other opportunity more, profitable. Therefore, entrepreneur has to choose the best opportunity by applying his mind, and soul so that he/she can make profits, According to Prasanna Chandra in his book ―Projects- Planning, Analysis, Selection,, Financing, Implementation, and Review‖ are the keys to success. So a wide variety of sources, should be tapped to identify them. Identifying a new project is not an easy job because the, success of a project depends upon the idea of a project. There are different sources and, methods which help to develop a wide range of ideas such as performance of existing, industries, price trends, availability of raw material and skilled labour , government policies, and guidelines, new technological developments, trade fairs, unfilled psychological needs etc., •, , •, , •, , Study the performance of existing industries: A study of existing industries provides, information about the opportunities available in that field. An analysis of the profitability, and break-even point of different industries will offer sufficient information about the, financial position of different industrial sector. So entrepreneur can easily find out the, capacity utilization and profitability and future demand of those industries., Export/Import agencies: Export /Import agencies‟ statistical data also provide, information about the trends of export/Import of various goods. Five to seven years study, of data is helpful in drawing a conclusion. If study shows higher proportion of import of, a particular product and shows increasing trend of that product then it means import, substitution can be produced. If study shows increasing trend in an export of product then, it indicates high export potential for that product., Availability of Raw material and skilled labour: Availability of raw material and skilled, labour at competitive prices required for various industries may throw up project ideas.

Page 2 : •, , •, •, •, •, , •, , •, , •, , Government policies and rules regulations: In any country government plays a very, important role. Government plans of expenditure in different sectors provide useful, information about possible investment opportunities. The department of industrial, development and government of India, publishes guidelines on industries which is an, important source of information to identify the scope for new investments., Study of economic, social and price trends: A study of the price, economic and social, trends of the economy is also very helpful in projecting the demand for various goods and, services. Greater the demand of the product, greater is the scope of its expansion., Trade fairs: for the purpose of knowing about new products and developments, National, and International trade fairs are the important source for the entrepreneurs to identify latest, projects., New Technological developments: The main cause of commercial exploitation is setting, up research laboratories that are engaged in identifying new products or processes which, in turn provide avenues for doing so., Possibility of revival of sick units: There are number of industrial units in India which, has been recognized as sick industrial units. If internal factors involved behind the, sickness/ weakness of industrial units and that unit still have the capacity to become a, financially sound then a capable entrepreneur can take over that sick unit, survive it and, convert into financially sound unit with their entrepreneurial skills., Draw clues from consumption abroad: entrepreneur may identify the project which are, new to domestic market but extensively used abroad, if he is ready to take higher risk., Entertainment parks, fast food restaurants, big malls are few examples coming under this, category., Identified unfilled psychological needs: For some of well established branded products,, there may be unsatisfied psychological needs. New products of a branded group being, introduced and accepted by consumers show that unfilled psychological needs to the, customers., Various government and non-government sources: Various publications of, Government, research organization, consultancy organizations, banks, export import, promotion councils, and international agencies contain data which may indicate, prospective ventures. An analysis of balance sheet and working results of existed, companies will be useful in knowing the industrial sectors that are performing well., , Stages/Steps for identification of business idea:, •, •, •, •, •, •, •, •, 1., , Environmental scanning, Generation of ideas, SWOT Analysis, Preliminary evaluation, Corporate appraisal, Profit potential of different projects, Project selection, Project objectives, Environmental scanning: The environmental scanning covers both scanning of external, environment as well as internal environment. The scanning of external environment, includes identification of the opportunities and threats to the organizations whereas, internal environment include the study of strengths and weaknesses of the organizations., So environment is an aggregate of all conditions whether external or internal that, surrounds and affects business. While scanning of business environment, an entrepreneur

Page 3 : should take into consideration the different types of environment such as Economic, environment, Technological environment, Competitive environment, Socio-demographic, environment and Governmental environment., 2. Generation of ideas: It is primarily concerned with the germination of project idea., Entrepreneur may develop few ideas which he/she may think, suit to the existing environment., The project idea may be discovered from both internal and external resources., 3. SWOT Analysis: SWOT Analysis means Strengths, Weaknesses, Opportunities, and, Threats. It is a method which enables the organization to identify opportunities that can, be profitably exploited by it. SWOT analysis helps the entrepreneur in stimulating the, flow of ideas., 4. Preliminary evaluation: An entrepreneur may have many project ideas. So some sort of, preliminary evaluation is required to eliminate those project ideas which are not feasible:, •, •, •, , •, •, •, , •, , The project idea should confirm to the government regulatory framework. It should be, compatible with the national goals, priorities and policies of the government., There must be a sizeable market available to consume the product made from the new, project., The idea must be compatible with the interest, personality and resources of the, entrepreneur. In simple words it should be compatible with men, money, material and, market at the disposal of entrepreneur. In the words of Murphy ―A real opportunity, has three characteristics:, (a), It fits the personality of the entrepreneur-it squares with his abilities,, training, and proclivities,, (b), It is accessible to him and (c) It offers him the prospect of rapid, growth and high return on invested capital‖., The material needed for the project must be easily and economically available., Because success of the project depends upon availability of resources., Cost factor should be taken into consideration. The entrepreneur must be in a position, to realize an acceptable profit level., Indian economy from the view point of entrepreneur is still underdeveloped. It can, absorb a lot more entrepreneurs. So entering an already stagnant market will not be a, very good idea. So entrepreneur must analyze the risk factor before entering into a, market., Inherent risk in the project such as changes in demand, technological changes,, variation in business cycle, entry of substitutes, and competition from imports should, be properly examined before starting a project., , 5. Corporate appraisal: After preliminary evaluation, corporate appraisal of project should, be conducted in order to make sure the availability of raw material, equipment, selling and, distribution costs and customer behavior in relation to that project. The important aspects, to be considered in this respect are as follows:, (a), Raw material availability: The entrepreneur should ensure the availability of, raw material. For this he should investigate the sources of raw material, various, suppliers of raw material, inviting price quotation from suppliers, credit period, allowed by suppliers and terms and conditions of supply of raw materials.

Page 4 : (b), Production, operations and equipment availability: Before implementing, the project, the entrepreneur should investigate the availability of plant and equipment, which is required for the production of that product. To achieve this he must study the, comparative features of various manufacturers in terms of price, Guarantees and, Warranties after sale service, Technical and skilled staff requirement, operative, capacity, location and layout, cost structure, repair and maintenance of equipment and, condition of plant and machinery., (c), Marketing and Research and Development: In this segment the entrepreneur, has to study the market share, product line, distribution network, marketing and, distribution cost, advertising and publicity programme for the product, market, practices such as credit policy, product positioning, laboratories and testing facilities, available, co-ordination between research and operations., (d), Financial and Human resources: They include financial leverage, cost of, capital, cash flows and liquidity, tax situation, corporate stage, competence and loyalty, of employees, state of industrial relations and relation with shareholders and creditors., (e), Consumer and Consumer behavior: The entrepreneur should analyze the, categories of consumers such as industrial, foreign and retailer, comparative qualities, of own product with competitive products, purchasing power of consumer,, consumption pattern, consumer priorities and identification of customers‟ needs., 6. Profit potential and prioritize project list: Before entering a new venture a person must, look into the profit potential of that project and compare it with the other identified, projects. So in this step he needs to prioritize the list of projects, taking some things kept, into mind such as:, •, •, •, •, •, •, •, •, , Competition among existing firms, Bargaining power of buyers and suppliers, Existence of substitute products, Threat of new entrants, Divisional key performance indicators, Time and ease to complete each projects, Resources required for each project and, Five year corporate plans and goals, , 7. Project selection: After studying profit potential of each project and preparing, prioritization list, entrepreneur will come to know the overall rating of the different project, ideas. The project with maximum rating will be the most feasible in comparison to other, projects. The process involved in selecting a project out of some prospects is also, described as ―Zeroing in process‖. While selecting a project, the entrepreneur should, keep in mind about the Location, Technology, Size of investment, Equipment, and, Marketing of project., 8. Project objectives: project objective starts where project identification ends. Objectives, are the foundations on which the project design is built. Project objectives are concerned, with defining in a precise manner what the project is expected to achieve and to provide, a measure of performance for the project. The essential requirements of project objectives, are:

Page 5 : •, •, •, •, •, , It should be simple., It should be realistic and attainable., It should be specific., I t should be consistent with available resources., It should be consistent with organizational plan, policies and procedures., be measurable, tangible and verifiable., , It should, , So above are the various stages/steps in project identification which can surely help an, entrepreneur in identifying and selecting a right project suitable to his/her capabilities and, shills, resources and market needs., The concept of an opportunity, In general, the word opportunity means a favourable situation or a circumstance provided to, do something for the advancement or progress. Therefore, business opportunity is a, favourable chance available for an entrepreneur to run the business and earn profits at a given, point of time in particular environment. For an entrepreneur opportunity means a product or, a project. Therefore, identification of opportunity, product or a project is similar. An, entrepreneur may come across a large number of profitable opportunities but he has to select, the most possible and hopeful project. Therefore, Project identification and selection are the, important phases for an entrepreneur. Peter Drucker has explained the three types of, opportunities in this context, as following:, a., Additive Opportunities: these are the opportunities which are related to the use of, the available resources without making any changes. Therefore, there is very less risk in such, opportunities., b., Complementary Opportunities: These are related to the introduction of the new, ideas which directs the change in the available arrangement. There is a greater risk in such, opportunities., c., Breakthrough Opportunities: These are related to the huge change in the existing, arrangements which thus involve huge risk., A good opportunity should have a good and wide market scope i.e. easy demand and supply, of the product as well as heavy return on investment i.e good profits. In other words if an idea, has these four essential qualities [ref: figure below] , then it can be a perfect business, opportunity.

Page 6 : Four essential qualities for a business opportunity, , A business opportunity must be evaluated from the view point of production, technology,, demand, profits, society etc., Need for Opportunity Identification and Selection, Enterprise and entrepreneur are complimentary to each other. Therefore, the success of an, entrepreneur depends on his suitability of the enterprise and at the same time the successful, enterprise can be started if the entrepreneur has the characteristics and skills to handle that, enterprise. Therefore, there is a need for the opportunity identification and selection because, if opportunity is not selected on the basis of the skills and there is non- suitability between the, entrepreneurs and the enterprise then there will be business failure, Business Opportunities in various sectors, There are innumerable opportunities exists in the business environment but one requires a, vision to identify the available opportunities. Various business opportunities available are like, following:, Textiles: India is famous for its textiles from the very beginning and every region has its, own unique style of dressing which thus offers a wide and diversified market. Moreover, India, has a huge potential to grow as a market leader in the textile sector. Surat, Ludhiana etc. has, emerged as an export hub of the textiles. Therefore, a better understanding of the textile, industry and the customer needs helps in discovering the potential it holds., Software: India is having large number of the software engineers with leading business in, software. With growing business in the software industry and the increasing business, outsourcing from the foreign companies is providing tremendous opportunities for the, entrepreneurs to invest in this sector., Tourism: It is one of the most promising and fastest growing industries as India has the, potential for tourism development. India covers 15% of the world population and shares only, 0.40% in the world tourism. It is not because of the lack of tourism in the country but because

Page 7 : of the undiscovered tourism opportunities. Therefore, entrepreneurs has the opportunity to, helps in discovering the tourism potential as it is being estimated that India can become the, number one tourist destination of the world., Engineering Goods: India is one of the largest exporters of the engineering goods., Therefore, entrepreneurs can earn by meeting the increasing demand of the engineering goods., Automobile: India has become a hub of producing low cost automobile parts and is very, rapidly becoming hot spot for the automobile industry. India is manufacturing large number, of cars with strong engineering know-how but still there is some undiscovered segments, which offers the wide opportunities to the entrepreneurs., Ayurveda and Traditional medicines: India is known for its ayurveda and herbal, products. With the increasing demand of the ayurvedic products, it is offering a unique, business to the entrepreneurs., Packaging: Indian business is growing in every field like agriculture, consumer goods,, infrastructure etc. So, there is a huge demand of the packaging material like plastics. So there, is a big opportunity for the entrepreneurs in this sector also., Healthcare sector: Indian healthcare sector is at the growing stage and with the growth in, the medical tourism this sector will offer wide prospects for the entrepreneurs as there will be, costeffective treatments., Media: The media industry is offering a wide scope to the entrepreneurs. There is a boom, in television, print media, advertising, radio etc from the past few years. Therefore, this, particular sector is the most promising sector as it is about to grow at a double rate. According, to the report of FICCI (Federation of Indian chamber of Commerce and Industry), innovation,, marketing, Distribution, competition, digitisation etc will give boost to the media and, entertainment sector in the coming years., Floriculture: With the growing demand for the fresh flowers, this sector is opening up a, new opportunity for the entrepreneurs. Although Indian Floriculture segment is small and, unorganised, but as it has a huge potential and with the increasing demand one can think of, business in this sector., Toys: this industry is the evergreen industry. India has the potential to make safe and cost, effective toys. Although china is giving a tough competition in this sector, but the Chinese, toys contains toxics where India has an advantage to produce safe and durable toys., Biotechnology: After the software industry, biotechnology sector has the highest potential, and offers opportunity for the entrepreneurs. It has been proved that agricultural, biotechnology ahs a huge impact on the productivity. Therefore, huge importance is being, given to the research and development to produce crops which are resistant to heat, cold,, insects etc. It also helped in producing improved quality food products. With the increasing, importance of the agro- biotechnology, it is providing various options to the entrepreneur to, start a business in the field of horticulture, poultry, dairy, agriculture and production of fruits, and vegetables.

Page 8 : Recycling Business: E-waste is rising at an unmanageable speed with the development in, the technology. According to the UN report, computer waste will grow about 500 % from, 2007 to 2020, alone in India. Therefore, this alarming problem opening up new business, opportunity for the young entrepreneurs to manage e-waste and develop techniques to dispose, the e-waste., Energy Solutions: India has a huge population and so are the consumption needs of the, populated country. It is difficult for the nation to generate power with the limited resources., Therefore, in the power starved nation like ours, there is a need of the cost-effective and power, saving methods. Government has already initiated steps to use cost effective methods by, implementing the national Solar Mission. Therefore, solar engineering is a big opportunity for, the entrepreneurs., Organic Farming: This sector is prevalent in India since long but with the increasing, demands of the organic products especially in foreign is opening up wide opportunity for the, Indian entrepreneurs. Although farmers in India are focusing on the organic farming, but still, are not able to meet the increasing demand. Therefore, there is a huge scope for the, entrepreneurs rto invest in this sector and thus earning large benefits., Corporate demands: As large companies are opening up their offices in India, therefore,, there is a huge demand of the formal clothes. Moreover, there is an increasing trend of the, corporate gifting, so one can try his luck in this sector also., Social Ventures: India is a hub of social problems. Social entrepreneurs are the persons, who provide solutions to the social problems. Therefore, to provide solutions to the social, problems, entrepreneurs have started their social ventures. For e.g: SEWA, Lizzat pappad etc., though it is one of the challenging tasks but is offering opportunity to the young entrepreneurs, to step in., Franchising: After the Liberalisation, Privatisation and Globalisation in 1991, India is, opened economy. Franchising helps in spreading brands all over the world. So, it is a good, opportunity for the entrepreneurs to invest in franchisee business as it has well maintained, image and low risk., Education and Training: Competition in the education is increasing. There is a good, scope in the education sector and training sector with the increasing demand and competition., Students prepare endlessly for the competitive exams be it for the government exams or, training courses. Therefore, entrepreneurs has the scope to provide the training and education, facilities at the competitive rates. Moreover, India has the potential to attract students from, the abroad which can open up large opportunities for the Indian entrepreneurs in this sector., , Identifying a Business Opportunity, An entrepreneur should be the opportunity seeker and his most important task is to Identify,, discover and to select the best business opportunity. A good opportunity must be capable of, converting into a feasible project. An entrepreneur may come across multiple opportunities, but he has to select the most promising and possible opportunity because the success of the

Page 9 : enterprise depends on the proper identification and selection of the project. Project, Identification is the foremost step for starting a new business but is one of the most difficult, tasks. Therefore, project identification is the process of selecting the few possible projects out, of the several opportunities available. To identify the possible projects, one has to go through, the following steps:, 1. Idea Generation:, This is the first and most important stage in project identification. It is an intellectual process, that requires vision, initiative, scheme and inquisitiveness. The Project idea can come out, from one or more following sources:, a) Trade fairs and trade journals., b) through experience of others in the particular business,, c) Success stories of friends, relatives., d) Surveys, reports, newspapers, periodicals., e) detailed analysis of demand and supply, f) Government policies and support for the development of the various sectors., g) Increasing demand of certain goods and services in the domestic market as well as, foreign market., h) Easy Availability of raw material, skilled labour, i) Invention of new technology., Idea can be generated with the help of the following methods:, a. Brainstorming, b. Focus Groups, c. Problem inventory analysis., a., Brainstorming: This technique was originally used by Alex Osborn in 1938 in an, American company to persuade innovative thinking in a group of six to eight people. Through, this method a large number of ideas are generated without any criticism. In this method,, people are encouraged to produce as many ideas they can generate without any criticism and, evaluation. It works on the principle of no criticism and quantity raises quality., b., Focus Groups: This group consists of 6-12 members belonging to different socioeconomic backgrounds to focus on the particular matter. The group has a moderator to have, the detailed discussion. Ideas are generated and detailed discussions are carried on to identify, the excellent ideas., c., Problem Inventory analysis: This method is more like a focused group method but, in this method along with generating ideas, it also considers the problem a product faces. In, this method, focus group is provided with the list of the problems in a general product category, and then identifying and discussing the problems of the products in that category., Idea generation phase helps in opportunity scanning and opportunity identification and thus, helps in identifying and idea and thus converting it into an opportunity. At the idea stage,, there is a just an Idea of what to do but at the opportunity stage, entrepreneur actually converts, his idea into opportunity by gaining insight into what actually to do. For e.g: Arjun and Raman, are friends. Raman is working a company and Arjun is still searching for the job. Raman

Page 10 : suggested Arjun to start a business, this is called an Idea. Later on after analyzing the various, businesses, when Arjun has decided to go to start a transport business, then it is an opportunity., Therefore, this phase helps in identifying the opportunity., 2. Choosing the right line of business:, Once the idea is conceived then prospective entrepreneur has to go through the detailed, analysis to choose the right type of business and has to input his cost and time to examine the, potential of his ideas. To analyse, he has to:, a., b., c., d., e., f., g., h., , Study the environment of the product, Future prospects of the demand of the product., Availability of technology., Access to technical know-how, Access to the market., Availability of raw material and skilled labour, Availability of customers, Complexity of legal provisions, , Identifying a business opportunity is complex and very risky task. Therefore, prospective, entrepreneur has to go through various analysis. Before selecting the best opportunity, an, entrepreneur explore and analyse all business opportunities. For analyzing the available, business opportunities, following explorations can be done:, a. Environment exploration:, This means the study of the environment factors that has an impact on the business. This, includes the study of the economic factors like gross domestic product, national income, per, capita income, social factors like demographic features, lifestyle, values, beliefs etc., technological factors like, labour intensive technology, capital intensive technology etc., political environment like, political parties, stability of the government, personal interest of, the politicians etc and the legal environment i.e. laws and regulations.,, b. Present business exploration: this exploration is related to the present scenario of the, business like the consumption pattern, demand pattern, income pattern etc., , Opportunity Selection, As soon as the project identification ends, project selection starts. In the project identification, phase, an entrepreneur may have identified different opportunities which he considers good, for him. In this phase, he/she has to select the best opportunity out of the identified ones which, is most promising and most profitable under the given conditions. Project selection refers to, the balanced choice of a project where the cost ratio is low and profits are more. This is the, most important phase as the whole project depends on this phase only., The prospective entrepreneur should conduct SWOT analysis to select the best opportunity., He/she should anaylse the strengths, weaknesses, competitive advantages (opportunities) and

Page 11 : challenges (threats) offered by each of the idea. On the basis of this analysis, the most suitable, project opportunity is selected. The prospective entrepreneur should select the best, opportunity with the help of the following criteria:, a., Investment Size: It means the cost of the project. In terms of Investment, an, entrepreneurs should choose between the small scale, medium-scale and large-scale business, on the basis of the funds he can raise from the various sources and the amount he is investing., Entrepreneur should choose the project which suits best of his investment., b., Location: The location of the project should be such that which provides advantages., It should be such that is near to the market, transport facility is easily available. It should be, at the places where there are the facilities of Industrial Development Corporation and other, agencies. The proposed location should have variety of skilled and cheap human resources., c., Technology: Entrepreneur should give due consideration to the technology required, for the project. He/She should select the project which requires the verified and easily, available technology., d., Equipment: An entrepreneur should choose the best equipments for the project and, should take the advice of the experienced consultant. The cost and quality of the equipments, should be within the budget., e., Marketing: An entrepreneur should choose the project which has wide scope to enter, into the market and can help in making good market share and profits. He should not go for, the projects which are having cutthroat competition and are difficult to enter as a beginner., f., Selection of the product An entrepreneur should select the product which he/she, thinks will earn profits. He/she should take into account the government policies, present, market size, demand etc., As a summary we can say that an entrepreneur should give proper time and effort to identify, and select the opportunity. Project Identification and Selection is half done in establishing, enterprises. Most enterprises fail because of choosing the non-suitable opportunity or do not, give due importance to the project identification and selection. Project Identification involves, sources and methods of idea generation and Project Selection includes analysis of the, identified projects with the help of SWOT analysis. Therefore,, most suitable opportunity is, selected to set up a new venture., BUSINESS PLAN (B-Plan /Project plan), A business plan refers to a formal statement of plans of an enterprise. It explains business, goals of the enterprise and means to achieve those goals. It seeks to address the strengths,, weaknesses, opportunities, and threats of starting a venture. The business plan differs from, enterprise to enterprise depending on various factors, such as complexity in organizational, structure, types of products and services, and demand for the product. However, the basic, elements of a business plan remain the same. The business plan is often an integration of all, the functional plans such as finance, marketing, manufacturing, and human resources. It helps, the entrepreneur in both short term and long term decision making.

Page 12 : In the words of Tariq Siddique, ―If you are failing to plan, you are planning to fail.‖ The, definition explains the importance of a plan to succeed., David Gumpert has defined a business plan as, ―It‘s a document that convincingly, demonstrates that your business can sell enough of its product or services to make a, satisfactory profit and to be attractive to potential backers.‖ In the view of Gumpert, a business, plan is essentially a selling document that convinces the key investors that the venture has a, real potential to be successful., The advantages of creating a business plan are as follows:, •, •, , •, •, , •, , Encourages individuals to take into consideration all the aspects of business., Helps in obtaining the opinion of trusted and experienced external advisors on initial, plans. It helps to identify the weaknesses, missed opportunities, and unsupportable, assumptions, which further help in improving the prospects, reducing the probability, of rejections, and chances of operational failure., Helps in formulating a proposed budget, as it involves proper financial forecasting., This further helps in matching the results with projections and inducing corrective, measures on time., Forms an important document for creditors and investors, as they would always refer, the business plan before investing. An investor looks into the following 5Cs of an, entrepreneurial venture while evaluating the business plan:, o Capital: Refers to the amount of money invested in the business by the, entrepreneur, o Capacity: States whether the financial budget is realistic and sufficient o, Collateral: Refers to the security provided by the entrepreneurs o Character:, Refers to the trustworthiness of the entrepreneur, o Conditions: Signifies whether the environment is conducive for the purposed, business., Helps in obtaining statutory permissions/approvals for starting a business., , Thus, it is essential for an entrepreneur to create a realistic business plan. The business plan, should ideally be prepared by the entrepreneur. However, he/she may consult advisors, such, as lawyers, accountants, marketing consultants, and engineers, to prepare an accurate plan., Nature and Scope of Business Plan, A well-prepared business plan helps in gaining the trust of suppliers and various other parties, and securing favorable credit terms. It states the vision, future plans of the enterprise, and, products and services offered by it. This helps investors and lenders to take interest in the, enterprise as both of them use the business plan to understand the new venture and relate it, with the current market opportunities. Mark Steven, an advisor to small businesses aptly, expressed the importance of the business plan in dealing with investors. In his words, ―If, you are inclined to view the business plan as just another piece of useless paperwork, it‘s time, for an attitude change. When you are starting out, investors will justifiably want to know a lot, about you and your qualification for running a business and will want to see a step-by-step, plan for how you intend to make it success.‖, However, the business plan is not a legal document for raising the required capital. When it, comes to a solicit investment, a memorandum is also needed. An entrepreneur uses the

Page 13 : business plan to create interest of investors in the enterprise and then follow up with a formal, offering of memorandum to investors, who are willing to invest in the enterprise. Furthermore,, it helps in communicating the entrepreneur‘s vision to current and prospective employees of, the enterprise. Thus, a business plan is used by both the insiders and outsiders as shown in the, following Figure:, , Features of a Successful Business Plan, , Containing an executive summary, a table of contents, and chapters in the right order, Exhibiting the right appearance and the right length-not too long and too short, not too, fancy and too plain, Providing a clear idea of what the founders and the enterprise expect to accomplish in the, future, Explaining the benefits of products and services to be given to customers, Presenting hard evidence of the marketability of products or services, Justifying the means that is selected to sell products or services, Explaining and justifying the level of product development, Providing the details of the manufacturing process and associated costs, Portraying the partners as a team of experienced managers with complementary business, skills , Stating clearly how the entrepreneurs‘ products are better than that of its competitors, Mentioning the superiority of the team members, Containing, realistic, financial, projections, Providing a well-organized oral presentation, Writing a Business Plan, Creating a business plan is the first step of the planning process of an enterprise. An enterprise, needs to conduct lot of research to develop an effective business plan. Figure shows the, essentials of an effective business plan:

Page 14 : o Title Page, The title page of a business plan includes the name of the business, date, and the name,, address, and contact number of the entrepreneur or the concerned person. The cover page can, be simple or complex depending upon the choice of the entrepreneur., , o Table of Contents, The structure of the table of contents may vary from one enterprise to another depending upon, the scale and nature of business operation. An entrepreneur generally prepares the table of, content after adding all the features of the business plan. The table of content consists of main, headings and sub-headings with related page numbers., o Executive Summary, The executive summary is a brief summary of the entire plan, highlighting all important, aspects of the plan in a concise and appealing manner. It contains basic information, such as, the name of an enterprise and its location, nature of business, types of product or services, and, financial requirements. The executive summary may also contain important points or news, about the enterprise, which attract investors, suppliers, and other target audience. It is the most, critical section from readers‘ point of view because people generally go through this to decide, whether to read other sections. The executive summary should not exceed 3-4 pages and, should be short and comprehendible. It should provide the technical, marketing, managerial,, and financial details of the venture., o Description of the Business, The business description presents the details of the business opportunity and the strategy to, capture that opportunity. It contains a detail description of enterprise‘s background, country, of origin, strengths of employees, stakeholders, products, and portfolio. The description of the

Page 15 : enterprise comprises the historical background and current status of the enterprise as well as, details about its products and services., Different components of strategic management, such as enterprise‘s vision, mission, profile,, and external environmental objectives, need to be considered before creating a business plan., A comprehensive study of these components helps in designing effective plans for the future, of the enterprise. A process of building these components in a systematic manner is called, strategic intent., o Concept of Strategic Intent, Strategic intent is a process that helps the management team to set priorities, make decisions,, and achieve the goals of the enterprise. These priorities, decisions, and goals are integrated to, form the vision and mission statements of the enterprise. Following figure shows the process, of strategic intent in an enterprise:, , The importance of vision and mission statement is drawn in the following points:, • Infuses a common purpose throughout the enterprise. This statement helps in providing, the direction of enterprise‘s goal to managers and employees., • Enables superiors to delegate authority to subordinates and ensure whether the targets, are fulfilled., Product description involves information about the products or services offered by the, enterprise. It helps customers to understand whether the product or service is as per their, expectations., Important points to be included in product description are as follows:,  Product Specification: Includes characteristics of the product related to a particular, industry. For example, if a product relates to the manufacturing industry, it should be, contain the ISO trademark. The product specification includes information about, patents, copyrights, and trademarks owned by the enterprise.,  Production Process: Includes information about the type of products manufactured, by the enterprise. It also involves information related to inputs used to get the required, output.,  Unique Selling Proposition (USP): Refers to the competitive advantage or, uniqueness of a product that would help in attracting customers.,  Quality Assurance: Refers to the process of inspecting the quality of the product, through various quality management system standards, such as ISI marks, ISO, 9000:2000, Agmark, and Hallmark., o Market Plan

Page 16 : A market plan describes how the product or service would be distributed, priced, and, promoted. It involves the analysis the current market conditions and trends. The market plan, involves critical marketing decision strategies and sales forecasting. Potential investors view, the marketing plan as critical to the success of the new venture. Thus, the market plan should, be comprehensive and detailed as much as possible, so that investors can clearly understand, the goals of the enterprise and the strategies to be implemented to achieve these goals, effectively. Marketing planning is an ongoing requirement for the entrepreneur, which serves, as a road map for short-term decision making., o Equipment and Material Description, An entrepreneur needs to provide a clear description of the equipment and materials required, to carry on the operations of the enterprise. Equipment and materials include plant, machinery,, and raw materials that act as inputs to produce the output (product). They form the most, expensive purchases of an enterprise. An entrepreneur makes an advance payment to get, customized some parts of the machinery as per his/her requirements. He/she should aim to, achieve cost minimization and timely delivery of the materials while purchasing the materials, and equipment. An entrepreneur should have good bargaining skills to get customized, machinery at optimal cost., o Operations Plan, An operations plan involves actions that need to be taken to make the efficient use of resources, and processes. It includes information about the following:,  Capacity Planning: Determines the maximum amount of work that an enterprise can, do in a given period of time. Generally, enterprises forecast the capacity utilization, over the years and make targets to attain the final capacity utilization level. For, instance, if an enterprise‘s current capacity is 40% within one year and it aims to attain, 60% of the capacity, then it needs to perform proper capacity planning and make, judicious use of resources.,  Personnel: Refers to the human capital of an organization. The success or failure of, an enterprise depends on the efficiency of its human resource. Therefore, the enterprise, strives to adopt efficient human resource management system, so that the growth and, development of employee is possible., Therefore, operations planning provide a map for resource and personnel planning., o Management and Organizational Plan, Management and organizational plan provides information background, skills, abilities, and, competencies of an entrepreneur or the management team. It also contains information, regarding the form of ownership of the enterprise and its organizational structure. For, example, if an enterprise is running in partnership, the details of its partners, their names, and, designations must, be provided in the management and organizational plan. In addition, the management and, organizational plan should also contain description about roles, responsibilities, and, authorities of individuals in the enterprise. This can be explained easily with the help of a tool, called organizational chart., Management plan also includes human resource policy and its strategies, such as recruitment, and selection policy, promotion and increment, retention policy incentives, or motivation., Thus, management and ownership forms the most essential part without which the process of, planning in an organization cannot be implemented.

Page 17 : o Financial Plan, A financial plan constitutes an important component of the business plan. It provides financial, information and startup timeline for the business. An entrepreneur needs to raise sufficient, amount of capital for starting a business. Businesses require capital to purchase fixed assets,, such as land and machines, and to meet day-to-day expenses. In case of small enterprises,, funds can be raised through own savings; however, in case of large enterprises, funds have to, be raised by public, commercial banks, and financial institutions. Therefore, the entrepreneur, is required to generate financial forecasts to raise finances. These forecasts help in calculating, the amount of funds and debt financing required to carry on the business. These further help, in planning the potential return on investment., The financial portion of a business plan must be examined closely by all the partners and, investors. Thus, accurate financial projections attract investors, lenders, and serve as a guide, to future business decisions., The importance of financial planning is shown in the following points:, Acts as an integral part of corporate planning for the business, Ensures adequate funds from various sources for smooth conduct of business, Attempts to achieve a balance between the inflow and outflow of funds, Ensures adequate liquidity throughout the year, Leads to minimization of waste of resources, Financing any new venture can be done in the following two ways:,  Debt Financing: Refers to an interest bearing investment that needs collateral, security, for example, loans,  Equity Financing: Offers investor‘s ownership to the extent of size of investment, and does not need collateral security, for example, shares, Financial decisions are required with respect to the following:, • The amount of long-term capital required, • The cost of raising funds, • Determination of optimum capital structure, • The estimation of return on investment, Thus, these decisions involve making financial forecasts that require projections for three to, five years. These projections include:, Income Statement: Refers to a profit and loss statement, which shows the cash, management of the enterprise by subtracting expenses from receipts., Cash Flow Statement: Shows all cash receipts and expenses. Cash flow is crucial for, the survival of any business., Balance Sheet: Shows assets, liabilities, and retained earnings. It indicates the value, of the cash position and owner's equity at a given point., Break-even Analysis: Shows the volume of revenue from sales that are needed to, balance the fixed and variable expenses. It is a no loss-no profit point.

Page 18 : Key Financial Assumptions: Includes assumptions about expected cash flow in an, organization, market share, and rate of return. For example, an enterprise can assume, that its product would be able to capture 40% of the market and then can make plans, and decisions about the investment and marketing strategies., Financial forecasts are mostly set up on yearly basis. The yearly plans are divided into, quarterly or monthly plans. These projections and forecasts form an essential part of a, financial portfolio; therefore, it is required to make sure that they are valid, realistic, and, accurate., o Contingency Plan, A contingency plan mentions all the anticipated risks associated with a business and ways to, mitigate those risks. One of the most important characteristic of an entrepreneur is that they, are risk takers. Risks are the most important part of the business. Ignorance of the risks may, lead to a negative impact on the operations or profitability of business. Risks can arise from, the following two types of factors:,  Internal Factors: Refers to the controllable factors of an organization. For example,, if the manufacturing plants of an enterprise are not operating at optimum efficiency,, then the enterprise can correct it by revamping the operational structure of plants., These factors can be identified and corrected easily.,  External Factors: Refers to the factors that are beyond the control of an enterprise and, may affect its financial condition. For example, threat of new entrants in business and, uncertainties, such as natural disasters., Every entrepreneur should have the ability to identify the risks and have readymade solutions, to avoid the risks. The various types of risks faced by an entrepreneur are as follows:, Economy Risks: Refer to the risk associated with the economy in which business, operates. For example, inflation and recession., Industry Risks: Refer to the risk associated with the industry in which business, operates. For example, competition and change in government policies, Internal Risks: Refer to the risk unique to the business and are controllable in nature., For example, lack of funds and managerial skills., The different measures taken by enterprise to mitigate risks are as follows:, Risk Avoidance: Implies avoiding the activities involving risk. For example, an, entrepreneur avoids the liability that he/she feels may affect negatively in future, if, he/she is unable to pay it back., Risk Reduction: Implies using various methods to reduce risks. It lessens the, possibility of loss from occurring. For example, enterprises use fire extinguishers to, reduce the risk of loss arising from fire., Risk Transfer: Implies transferring the risk to the other person or party. It can be, done by the purchase of an insurance contract, which helps in transferring the risk. For, example, marine insurance covers the loss of damage of ships, cargo, and any transport, or property by which cargo is transferred., Risk Retention: Implies accepting the loss when it occurs. All types of risks that, cannot be avoided or transferred are retained, by default. This includes risks that are

Page 19 : so large that they cannot be insured. For example, emergence of a war can lead to loss, of property, which has to be retained by individuals. In most of the cases, property is, not insured against war., Every business involves a certain amount of risk. Therefore, an entrepreneur should have the, ability to identify the risks, evaluate the critical risks, and make realistic contingency plans., Steps in Preparing your Business Plan, 1. Research: Get as much information on your proposed business as possible. Talk to, those already in business, visit the library, learn all you can from trade associations, and trade publications, conduct research on-line and find out what help is available, from local and federal government agencies., 2. Make your projections: The more you know about your business, the more accurately, you can make intelligent projections of sales and potential profits for the first few, years. This knowledge is invaluable., 3. Capital: Money. Accept the fact that it always requires more money than you‘ve, anticipated starting, or improving your business. Have enough working capital on hand, and back-up resources just in case the new business does not prosper as you had, anticipated., 4. Competition: Know thy enemy. Study your competition carefully; they‘ve been in the, trenches and have already experienced what you are abut to discover. Read their, literature. There is a reason your competitor is in business, and you‘d better find out, what it is – and how you can turn their customers into your customers., 5. Location: Location. If you can‘t go to your customer, your customer must come to, you – so make it easy. Pick a prime location or invest in targeted advertising., 6. Image: What kind of public image do you want to create with your service,, merchandise, quality, décor, packaging, personnel vehicles, advertising and pricing?, How does that image correspond with the customer you are trying to attract?, 7. Keep Records: Complete, accurate records are needed to file taxes, to properly, manage your bank accounts and most importantly, to give you guidance. Always know, where your business stands financially., 8. Professional Help: In addition to professional and confidential SCORE counseling,, rely on a competent lawyer, accountant, banker and insurance broker to fulfill your, business needs. A marketing professional in you corner may also be needed., 9. Purchasing: Knowing what, when and where to buy and how to gauge inventory can, make or break you. It allows you to conserve working capital, reduce obsolescence, and meet and beat the competition. Know what sells., 10. Profits: This is the bottom line for which you are going into business. Make sure that, all expenses are accounted for, including your own living costs, possible losses,, shrinkage, unseen costs such as fringe benefits and taxes. Then add a legitimate profit, to your risk. If the profit does not come out right, perhaps you should rethink your, idea. Make sure you consult a SCORE counselor for guidance., Implementing a Business Plan, After developing the business plan, the next important step is to execute it. An enterprise, communicates the progress of activities carried according to the plan, to its employees. This, helps the enterprise to achieve its key objectives and mission. A business plan guides the

Page 20 : entrepreneur throughout the entrepreneurial process. In the implementation phase, the, entrepreneur arranges the essential resources, such as men, machine, and material, to achieve, the set objectives. Next, he/she assigns tasks to employees to meet the goals and ensures that, the assigned tasks are performed efficiently. Lastly, the entrepreneur ensures that objectives, projected in the business plan are achieved effectively., , FEASIBILITY STUDY, A feasibility study is an analysis used in measuring the ability and likelihood to complete a, project successfully including all relevant factors. It must account for factors that affect it such, as economic, technological, legal and scheduling factors. Project managers use feasibility, studies to determine potential positive and negative outcomes of a project before investing a, considerable amount of time and money into it., In other words,, A feasibility study is defined as an evaluation or analysis of the potential impact of a, proposed project or program. It is conducted to assist decision makers in determining, whether or not to implement a particular project or program, For example, a small school looking to expand its campus might perform a feasibility study, to determine if it should follow through, considering material and labor costs, how disruptive, the project would be to the students, the public opinion of the expansion, and laws that might, affect the expansion., A feasibility study tests the viability of an idea, a project or even a new business. The goal of, a feasibility study is to emphasize potential problems that could occur if one pursues a project, and determine if, after considering all significant factors, the project is a good idea. Feasibility, studies also allow a business to address where and how it will operate, potential obstacles,, competition and the funding needed to get the business up and running. Importance of, Feasibility Studies,  Feasibility studies allow entities to determine and organize all the details to make a, business work.,  A feasibility study helps identify logistical problems, and nearly all business-related, problems and their solutions.,  Feasibility studies can also lead to the development of marketing strategies that, convince investors or a bank that investing in the business is a wise choice., Components of a Feasibility Study, There are several components of a feasibility study:, Description: A layout of the business, the products and services it will offer, and how it will, deliver them., Market feasibility: Description of the industry, the current and future market potential,, competition, sales estimations and prospective buyers., Technical feasibility: The details on how a company will deliver goods or services, including, transportation, business location, technology needed, materials and labor.

Page 21 : Financial feasibility: A projection of the amount of funding or startup capital needed, what, sources of capital a business can and will use, and what is the return on investment., Organizational feasibility: A definition of the corporate and legal structure of the business., This may include information about the founders, their professional background and the skills, they possess necessary to get the company off the ground and keep it operational., Feasibility Plan Vs Business Plan, A feasibility study is not the same thing as a business plan. The feasibility study would be, completed prior to the business plan. The feasibility study helps determine whether an idea, or business is a viable option. The business plan is developed after the business opportunity, is created. ―A feasibility study is carried out with the aim of finding out the workability and, profitability of a business venture. Before anything is invested in a new business venture, a, feasibility study is carried out to know if the business venture is worth the time, effort and, resources. A feasibility study is filled with calculations, analysis and estimated projections, while a business plan is made up of mostly tactics and strategies to be implemented in other, to grow the business.‖, , While it may seem the feasibility study is similar in many ways to the business plan, it is, important to keep in mind that the feasibility study is developed prior to the venture., ―A feasibility study can readily be converted to a business plan.‖ It‘s important to think of, the business plan in terms of growth and sustainability and the feasibility study in terms of, idea, viability, Feasibility Plan, Business Plan, Emphasis, , Answers the question, ―Will this, work?, , Answers the question, ―How wills this, work?, , Target, Audience, , for the entrepreneur's benefit, to, determine whether it's worth, proceeding with the business, , are targeted at investors, lenders and, future executives to explain how the, business works., , Sections, , Studies focus on the size of the, potential market, availability and, prices of suppliers and distributors,, and, the, abilities, of, the, entrepreneur., , It also includes operations plans,, marketing, strategies,, location,, management team and in-depth financial, projections., , Versions, , Usually compare several possible, scenarios for how a business might, work, , Describes a specific business, but include, different sections depending on which, parts of the business are interesting to the, audience., , Importance, , A business will probably fail if its, feasibility study if done poorly the, first time, , Business plans, however, will go through, much alteration and are designed to, evolve to describe an ongoing business.