In early 19th century the term entrepreneur originated from the French word entreprendre which means to undertake. Irish-French economist Richard Cantillon defined it first in his essay on The Nature of Trade in General. Credit for coining the term entrepreneur generally goes to the French economist Jean Baptiste. Who is an Entrepreneur? An individual who, rather than working as an employee, runs a business and assumes all the risk and reward of a given business venture, idea, or goods or service offered for sale. A person who sets up a business or businesses, taking on financial risks in the hope of profit. What is the definition of MSME? The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under: (i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh. (ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore. (iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore. and (i) A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh. (ii) A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore. (iii) A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore. MSME is having two Divisions called Small & Medium Enterprises (SME) Division and Agro & Rural Industry (ARI) Division. The SME Division is allocated the work, of administration, vigilance and administrative supervision of the National Small Industries Corporation (NSIC) Ltd. The ARI Division looks after the administration of two statutory bodies viz. the Khadi and Village Industries Commission (KVIC), Coir Board and a newly created organization called Mahatma Gandhi Institute for Rural Industrialization (MGIRI). The Implementation of policies and various programmes schemes for providing infrastructure and support services to MSME's is undertaken through its attached office, namely the Office of the Development Commissioner (OODC MSME), National Small Industries Corporation (NSIC), Khadi and Village Industries Commission (KVIC) Coir Board and three training institutes viz., National Institute for Entrepreneurship Small Business Development (NIESBUD) Noida. National Institute for Micro, Small and Medium Enterprises (NI-MSME), Hyderabad. Indian Institute of Entrepreneurship (lIE), Guwahati. Mahatma Gandhi Institute for Rural Industrialization (MGIRI), Wardha a society registered under Societies Registration Act, The National Board for Micro, Small and Medium Enterprises (NBMSME) was established by the Government under the Micro, Small and Medium Enterprises Development Act, 2006 and Rules made there under. Small Scale Business A small-scale industry is a project or firm created on a small budget or for a small group of people or an individual. A small-scale industry produces its goods using small machines, less power and hired labour. It is located within a single place and produces goods meant for few people. A small enterprise is the one where, investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore. A small enterprise is the one where, investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore. Total number of employees ranging between 10 49. Role of Small Enterprise 1. Employment generation 2. Mobilisation of resources and entrepreneurial skill 3. Equitable distribution of income 4. Regional dispersal of industries 5. Provides opportunities for development of technology 6. Indigenisation 7. Promotes exports 8. Supports the growth of large industries 9. Better industrial relations 10. Rural development 11. Poverty eradication Small Enterprise - Weaknesses 1. Financial Limitation 2. Staffing Problems 3. High Direct Cost 4. Lack of Credibility 5. Outdated Technology 6. Marketing Budget 7. Online Presence 8. Too dependent on owner or one key person 9. Lack of differentiation 10. Business is too dependent on one or two big customers Small Enterprise - Strengths 1. Personal Touch 2. Greater Motivation 3. Greater Flexibility 4. Less bureaucracy 5. Unobtrusive 6. Better time Management is possible 7. Generally distribution system is more effective Traits of a successful entrepreneur 1. Strong leadership qualities 2. Highly self-motivated 3. Strong sense of basic ethics and integrity 4. Willingness to fail 5. Serial innovators 6. Know what you don't know 7. Competitive spirit 8. Understand the value of a strong peer network 9. Limit the number of hats you wear 10. Follow-up constantly 11. Get and stay organized 12. Master the art of negotiation 13. Create a competitive advantage 14. Become known as an expert 15. Project a positive business image 16. Remember it's all about the customer How to develop an Entrepreneur Critical and creative thinking skills. 1. Creative Thinking 2. Problem Solving 3. Recognizing Opportunities Practical skills. 1. Goal Setting 2. Planning and Organizing 3. Decision Making 4. Business knowledge 5. Entrepreneurial knowledge 6. Opportunity-specific knowledge 7. Venture-specific knowledge Interpersonal skills. 1. Leadership and Motivation 2. Communication Skills 3. Listening 4. Personal Relations 5. Negotiation 6. Ethics Personal characteristics. 1. Optimism 2. Vision 3. Initiative 4. Desire for Control 5. Drive and Persistence 6. Risk Tolerance 7. Resilience Business Plan A business plan is a document that describes what you plan to do and how you plan to do it. The plan includes the overall budget, current and projected financing, a market analysis and its marketing strategy approach, a business owner projects revenues and expenses for a certain period of time and describes operational activity and costs related to the business. Why do we need a Business Plan? - Is the new venture technically feasible & financially viable? - Sources of fund for the venture? - Is the new venture's product or service feasible? - Does the market want the product or service? - Can the product or service be profitably sold? - Is the return on the venture adequate for prospective investors? - Can existing management run the business? How to prepare a business plan? 1. Cover Page - Your contact information so potential investors can easily reach you. 2. Executive Summary - Concisely describe what your business does - What market need it solves - Describe your unique success factors - List out the reasons why your business will be successful - Highlight your financial projections and amount of money you are seeking to raise through various sources. 3. Company Overview - Give a profile of your company - Answer questions such as: Where you are located? When you were formed? What is your legal entity form? - Describe the stage of your company: Beginner What your company has achieved so far 4. Industry Analysis - Describe the market in which you are competing? - How large it is, and what trends are affecting it? 5. Customer Analysis - Identify who your target customers are and their needs. - Specify the demographic and psychographic make-up of your customers. 6. Competitive Analysis - Identify your competitors and their key strengths and weaknesses - Identify your competitive advantages 7. Marketing Plan - Describe your products and/or services - Desired brand positioning - Detail your promotions plan - Discuss your distribution plan 8. Operations Plan - Describe the key daily operational processes your organization needs - Identify the milestones you need to accomplish over the next 1-3 years 9. Management Team - The Management Team section must prove why the key company personnel are eminently qualified to execute on the business model. 10. Financial Plan - Identify the ways in which your company generates revenues. - Key assumptions which govern your financial projections. - If you are seeking funding, identify the sources. - Specify how much money you need to start and/or run your business, and the primary uses of these funds. 11. Appendix - Include your full financial projections, including your projected income statements, balance sheets and cash flow statements. - Include any additional details, such as patent information, customer lists, etc., that help prove to investors that your company is a great investment opportunity. Why do companies need to do Marketing Research? 1. Marketing research (MR) provides valuable data. 2. It studies and provides data about consumer behaviour. 3. It helps to select suitable sales promotional techniques. 4. It supplies market-related information. 5. It helps a company to evaluate its marketing performance. Operating Plans Operating plan is the section of your business plan where you dig into more of the nuts and bolts of your business areas like: production, manufacturing, inventory, and distribution. An operational plan will always vary based upon the type of business you run. If you are planning to start a retail shop then you need to take care of things like inventory, distribution etc. But if you are planning to start an IT firm, you will focus more on how to keep the data confidential, securing the office space and the equipments etc. Financial Plans A financial plan explains what your business can afford, how it can afford to do it, and what the expected profits will be. A well written business plan can be the difference between you carrying the business or the business carrying you. What is Cluster financing? A cluster based approach may be more beneficial (a) in dealing with well-defined and recognized groups (b) availability of appropriate information for risk assessment (c) monitoring by the lending institutions and (d) reduction in costs. Cluster based approach to lending is intended to provide a full-service approach to cater to the diverse needs of the MSE sector which may be achieved through extending banking services to recognized MSE clusters. United Nations Industrial Development Organisation (UNIDO) has identified 388 clusters spread over 21 states in various parts of the country. The Ministry of Micro, Small and Medium Enterprises has also approved a list of clusters under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and Micro and Small Enterprises Cluster Development Programme (MSECDP) located in 121 Minority Concentration Districts. Types of Entrepreneurs 1. Innovating entrepreneurs. 2. Adoptive entrepreneurs. 3. Fabian Entrepreneurs. 4. Drone Entrepreneurs. 5. Entrepreneurs by inheritance. 6. Forced entrepreneurs. Advantages of acquiring an established business The difficult start-up work has already been done. Buying an established business means immediate cash flow. The financial history of the company will help it easier to secure loans, and attract investors. You will existing customers, goodwill, suppliers, contacts, staff, plant, equipment and stock. Your product is established in the market, so publicity effort is reduced. The staff there will be having their experiences to share. Disadvantages of acquiring an established business Business might need major improvements to old plant & machinery. Initially you need to invest large amount especially for the professionals and accountants. The business might be poorly located, badly managed, and with low staff morale. Increasing competition or declining industry can affect the future growth. Underperforming business needs a lot of investment to make it profitable. The relation with the dealers & suppliers might get affected. Business Opportunity A business opportunity can be defined as a sound business idea which forms the basis upon which an entrepreneur makes an investment decision. Considerations for evaluation business opportunities 1. Potential for growth. 2. Infrastructure. 3. Market for goods & services. 4. Rewarding the Investor. 5. Price Structure. 6. Competition. 7. Competitive advantage. 8. Incentives. 9. Legal Considerations. 10. Financial Viability. 11. Personnel training & management. Valuation of a business Business valuation is process and a set of procedures used to estimate the economic value of an owners interest. Elements of business valuation 1. Economic conditions. 2. Financial analysis. Business Valuation Methods 1. Income approach. This approach relies upon the economic principle of Expectation ie, the value of business is based on the expected economic benefit and the level of risk associated with the Investment. The mainly used income approaches are: Capital Asset Pricing Model. Modified Capital asset Pricing Model. Weighted Average Cost of Capital. 2. Asset Based Approach This approach is based on the principle of Substitution, as no rational investor will pay more for the business assets than the cost of procuring the asset of similar economic utility. The two main methods followed by this approach are: Net book value Fair market value 3. Market Approach The market approach is based upon the economic principle of Competition ie, in a free market, the supply and demand forces will drive the price of business assets to a certain equilibrium. Franchising Franchising is the practice of the right to use a firms business model and brand for a prescribed period of time. What are the Franchisees perspective? 1. A documented tested and profitable business idea. 2. Support, counselling & education. 3. Economy of scale. 4. Network of other practitioners. 5. Effective division of labour. What are the Franchisors perspective? 1. Lesser capital needs. 2. Shared risk. 3. Quicker expansion. 4. Local motivation, opportunity & risk. 5. Effective division of work generates less overhead and less risk.