Entrepreneurship

BBA- 603.
ENTREPRENEURSHIP
Notes - Unit II: Establishment of a new enterprise, Choice of product, Market Assessment,
Selection of Technology, Selection of Site, Organizational and Ownership Structure.
Establishment of a New Enterprise

What It Means
Starting a business involves many activities related to organizing the organization. The
process includes generating of an idea for the enterprise (called concept development),
researching the idea’s potential for success, and writing a business plan. Someone who is
starting a new business is called an entrepreneur. This person takes on the financial risks of
the initiation, operation, and management of the business. An entrepreneur may want to
establish a small, local business organized as a sole proprietorship (a business owned and
operated by a single person), or he or she may hope to one day grow his or her business into
a large, multinational business organized as a corporation.
Talk to any entrepreneur or small business owner and you'll quickly learn that starting a
business requires a lot of work. Generating a business idea is a great starting point, but an
idea doesn't become a business without effort. Some budding entrepreneurs understand the
effort necessary to create a business, but they might not be familiar with the many steps
required to launch a business venture. If you're willing to put in the effort to build a business,
you're going to want to know the steps needed to reach your goals.
Section 1: Steps for Setting up of a business enterprise
The procedure in setting up of a business unit is a time consuming, complex and complicated
activity. It involves various steps, procedures and formalities
The following steps are involved in process of setting up a new business enterprise:
1. Identification of business opportunity.

2. Generation of business idea.
3. Feasibility Study.
4. Preparation of a business plan.
2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 1

5. Launching the enterprise.
Step1. Identification of business opportunity:
This is the first step in setting up of a business unit Entrepreneur is an opportunity seeker. As
observed by Albert Einstein “In the middle of every difficulty lies opportunity”. He perceives
an opportunity and strives to translate the opportunity into an idea.
Opportunities do not come suddenly. The entrepreneur must show alertness to grab
opportunities when they come. The opportunities must be carefully scrutinized and
evaluated. The process of identifying opportunity involves identifying the needs and wants of
the customers, scanning the environment, understanding the competitor’s policy etc.
To identify the right business opportunity, an entrepreneur needs to consider the following:
 Identify Market Inefficiencies

 Remove Key Hassles
 Customers Desire to Experience Something New
 Pick a Growing Sector/Industry
 Product Differentiation
 Cash Flow Considerations
 Listen to your potential clients and past leads. When you're targeting potential
customers listen to their needs, wants, challenges and frustrations with your industry.
 Listen to your customers.
 Look at your competitors.
 Look at industry trends and insights.
Step 2. Generation of business idea:
This is the most important function of an entrepreneur.
The ideas that provide value for the customer, profit for the entrepreneur and benefit for
society and can be transformed into products of services are called business ideas. Idea is
generated through vision. Idea generation is a critical skill in entrepreneurship and involves
insight, observation, experience, education, training etc. It involves lot of creativity on the
part of entrepreneur and generally arises from an opportunity in the market.
The various sources of information for business ideas can be personal experience, observing
markets, prospective consumers, developments in other nations, government organizations

and trade fairs & exhibitions. This can be done through environmental scanning and market
survey.
An entrepreneur is not someone with clever ideas but someone who has the ability to turn
that idea into a real business. An entrepreneur conceives the idea of launching the project
and program the structure of business. Converting a business idea into a commercial venture
is at the heart entrepreneurship.
The entrepreneur than undergoes detailed investigation of an idea. He analyse the idea to
find out the feasibility whether the project is profitable of not. An entrepreneur must show
the initiative to develop the idea and implement it in practical sense.
Note: here we need to understand what is meant by innovation and creativity and how
important they are for generation of business idea in entrepreneurship.
 Role of Innovation and Creativity:
Innovation may be defined as exploiting new ideas leading to the creation of a new product,
process or service. Innovation deals with coming up with creative idea and turning that idea
into process. It may be defined as the process of doing new things or doing old things in new
ways. Entrepreneurship is a source of innovation.
Creativity means to come up with new ideas, concepts, process and products. In other
words, it means the ability to bring something new in existence.
Entrepreneurship process involves innovation and creativity. Entrepreneurs are innovators.

They constantly develop new ideas, concepts and process to survive in a competitive business
world. Entrepreneurship is an art of finding creative solutions to the problems. Innovation
and creativity are essential for sustainable growth and economic development.
 Stages In Creativity Process

Idea Germination:
The initial Stage of new idea.
Recognition
Preparation :
Careful and delibrate search for knowledge
Rationalisation
Incubation :
Automatic garnering (assimilation) of Information
Fantasizing
Illumination :
Recognition of technical feasibility of an idea
Realisation
Verification :
Testing whether the idea has value
Validation
The Creative Process
In the nutshell we can say that, Ideas evolve through a creative process whereby a person
with imagination germinates ideas, nurtures them and develops them successfully.
Step3. Feasibility Study:
After the selection of a worthy idea, an entrepreneur undertakes various researches relating
to market selection, competition, location, machinery and equipment’s, capital, customer
preferences etc. to test the feasibility of the project.
A feasibility study is an evaluation of a proposed project. It is the study of the project to find
out whether the project is profitable or not. In other words, feasibility study involves an
examination of the operations. Project has to be viable not only in technical terms but also in

economic and commercial terms too. The objective of financial analysis is to ascertain
whether the proposed project will be financially viable.
Feasibility study is a detailed investigation of the proposed project to determine whether

the project is financially, economically and technically viable or not. Feasibility Study
contains the comprehensive, detailed information about the business structure, availability of
resources and whether the business will run efficiently or not.
Feasibility study is conducted in the following areas:
 Market/ commercial Feasibility:

It involves study of market situation, current market, anticipated future market, competition,
potential buyers, etc.
 Technical Feasibility:
This study involves study of technological aspects related to the business, like location of the
business, layout, infrastructure, plant and equipment, effluent treatment and discharge,
foreign collaboration, transportation, resource availability etc.
 Financial Feasibility:
Financial feasibility denotes the financial aspects of the business. This study helps to
understand requirement of start-up capital, sources of capital, returns on investment, etc. It
helps to assess the financial health of the business.
 Socio- economic Feasibility:

This study is important to determine the extent to which the project is meeting its social
economic objectives of development. It involves social cost-benefit analysis for testing
national profitability. It helps to know the contribution of the project towards employment
generation, income distribution, foreign exchange savings, development of backward regions,
etc.
Preparation of Feasibility Report:

Feasibility report is the final conclusion drawn about the business after conducting the
feasibility study. The feasibility report includes the confirmation of the proposed project. It
gives the detail about technical, economic and financial, environmental, socio-cultural and
operational aspects of the project.
It is a formal document prepared by the experts. It gives the information on the authenticity
of the feasibility study. The feasibility report answer the question ‘the plan must be
implemented or not’.

The feasibility report contains information on:
a. It helps him to determine the viability of the venture.
b. It provides guidance to the entrepreneur in planning realistic goals.
c. It helps to identify possible roadblocks.
d. It is a pre-requisite to obtain finance.
Step 4: Preparation of a business plan:

It this step an entrepreneur prepares a good business plan, the designs and creates the
organisational structure for implementation of his plan. This plan is further used to achieve
the realistic goals.
A business plan, as defined by Entrepreneur, is a “written document describing the nature of

the business, the sales and marketing strategy, and the financial background, and
containing a projected profit and loss statement.” It serves as the blueprint for how you will
operate your business. It is an effective means of defining your goals and the steps needed to
reach them.
 Need and purpose of a business plan:

A business plan spells out your purpose, vision and means of operation. It also serves as your
company's resume, explaining your objectives to investors, partners, employees and vendors.
It serves the following purposes:
 Maintaining Business Focus.

 Securing Outside Financing.
 Understanding consumers and competitors.
 Fuelling Ambitions and Mapping Growth.
 Enlightening Executive Talent or to understand employee needs.
 To assess feasibility of your venture.
 Contents of a business plan:
a. Executive Summary
Your executive summary should appear first in your business plan. It should summarize what
you expect your business to accomplish. A good executive summary is compelling. It reveals
the company’s mission statement, along with a short description of its products and services.
It might also be a good idea to briefly explain why you’re starting your company and include
details about your experience in the industry you’re entering.

b. Company Description
The next section that should appear in your business plan is a company description. It’s best
to include key information about your business, your goals and the customers you plan to
serve. Your company description should also discuss how your business will stand out from
others in the industry and how the products and services you’re providing will be helpful to
your target audience.
c. Market Analysis
Ideally, your market analysis will show that you know the ins and outs of the industry and the
specific market you’re planning to enter. In that section, you’ll need to use data and statistics
to talk about where the market has been, where it’s expected to go and how your company
will fit into it. In addition, you’ll have to provide details about the consumers you’ll be
marketing to, such as their income levels. Further information about markets, pricing
systems, methods of distribution, and sales forecast, etc. are to be enclosed.
d. Competitive Analysis
A good business plan will present a clear comparison of your business to your direct and
indirect competitors. You’ll need to show that you know their strengths and weaknesses and
you know how your business will stack up. If there are any issues that could prevent you from
jumping into the market, like high upfront costs, it’s best to say so. This information will go in
your market analysis section.
e. Description of Management and Organization
Following your market analysis, your business plan will outline the way that your organization
will be set up. You’ll introduce your company managers and summarize their skills and
primary job responsibilities. If you want to, you can create a diagram that maps out your
chain of command. Don’t forget to indicate whether your business will operate as a
partnership, a sole proprietorship or a business with a different ownership structure. If you
have a board of directors, you’ll need to identify the members.
f. Breakdown of Your Products and Services
If you didn’t incorporate enough facts about your products and services into your company
description (since that section is meant to be an overview), it might be a good idea to include
extra information about them in a separate section. Whoever’s reading this portion of your
business plan should know exactly what you’re planning to create and sell, how long your
products are supposed to last and how they’ll meet an existing need?
It’s a good idea to mention your suppliers, too. If you know how much it’ll cost to make your
products and how much money you’re hoping to bring in, those are great details to add.
You’ll need to list anything related to patents and copyright concerns as well.
g. Marketing Plan
In your business plan, it’s important to describe how you intend to get your products and
services in front of potential clients. That’s what marketing is all about. As you pinpoint the
steps you’re going to take to promote your products, you’ll need to mention the budget you’ll
need to implement your strategies.
h. Sales Strategy
In this section of business plan, one needs to decide, How will you sell the products you’re
building? That’s the most important question you’ll answer when you discuss your sales
strategy. It’s best to be as specific as possible. It’s a good idea to throw in the number of sales
reps you’re planning to hire and how you’ll go about finding them and bringing them on
board. You can also include sales targets.
i. Manufacturing and Operational Plan

In your business plan, the operations plan section describes the physical necessities of your
business' operation, such as your physical location, facilities, and equipment. Depending on
what kind of business you'll be operating, it may also include information about inventory
requirements, suppliers, and a description of the manufacturing process. An operations plan
is helpful for investors, but it's also helpful for you and employees because it pushes you to
think about tactics and deadlines.
j. Financial Projections
In the final section of your business plan, you’ll reveal the financial goals and expectations
that you’ve set based on market research. You’ll report your anticipated revenue for the first
12 months and your annual projected earnings for the second, third, fourth and fifth years of
business. The following schedules and statements to be included: Start up projections,
income statement, cash flow statement, balance sheet and break even analysis.
k. Appendices and Exhibits
In addition to the sections outlined above, at the end of your business plan, include any
additional information that will help establish the credibility of your business idea, such as
marketing studies, photographs of your product, permits, intellectual property rights such as

a patent, credit histories, resumes, marketing materials, and/or contracts or other legal
agreements pertinent to your business.
Note: Add a Title Page and Table of Contents
After completing all the sections, don't forget to insert a title page at the beginning of the
plan followed by a table of contents listing each section with page numbers.
Table of Contents
1. Executive Summary................................ Page #
2. Business/Industry Overview................... Page #
3. Market Analysis...................................... Page #
4. The Competition..................................... Page #
5. Sales & Marketing Plan........................... Page #
6. Ownership and Management Plan....... …Page #
7. Operating Plan........................................Page #
8. Financial Plan..........................................Page #
9. Appendices and Exhibits......................... Page #
Step 5: Launching the enterprise and managing the business
At this step the entrepreneur fulfill some legal formalities. He hunts for suitable location,
design the premises and install machinery. All the statutory formalities are to be met.
i. Acquiring license.
ii. Permission from local authorities.
iii. Approvals from banks and financial institution.
iv. Registration etc.
Once the project is set up, the entrepreneur must try to achieve the target of a business plan.
This involves setting up of an appropriate business process. Only proper management can
ensure achievement of goals. The entrepreneur must be capable of turning his ideas into
reality. He should also have the foresight to anticipate changes to avail of opportunities and
meeting threats likely to arise in the near future.

Section 2: Problems in setting up of a business
The factors that affect the growth of business are explained below in detail:
1. Lack of legal knowledge:

The entrepreneur should have adequate legal knowledge to handle legal affairs efficiently.
Lack of legal knowledge on the part of entrepreneurs may affect smooth conduct of
business. He should have knowledge regarding Factories Act, Wages & Salaries Act, and
Workers Compensation Act etc.
2. Lack of experience:
An entrepreneur should have enough experience to manage the business efficiently. Lack of
adequate experience may create major problems and adversely affect the experience. The
major hurdles that the new entrepreneurs face are the availability of resources to carry out
such a business. The most important is the allocation of funds that comes in the form of
money to research and development.
3. Lack of finance:
Finance is the life blood of every business. To start up a new venture requires adequate
capital. It is required to meet business expenses like purchase of raw material, payment of
wages and salaries; payment of interest on loans etc. Lack of finance can create hurdles in
setting up of a business unit.
4. Lack of technology:
Technology is never constant, it keeps on changing. Sophisticated technology helps in
increasing the production capacity and quality of the products. Lack of suitable technology
can hamper the reputation of the firm. Adoption of suitable technology can prove beneficial
to the business success and vice versa.
5. Problem of human resource:

Organisation is made up of people and people make an organisation. A firm requires skilled,
qualified and talented employees. Lack of competent staff is another major issue for a
business unit.
6. Problem of data:
Entrepreneurship is based on research work. The Entrepreneur need to conduct a survey for
gathering information regarding market condition, competition, technology, consumer etc.
the data collected may not be accurate and precise. At times it is incorrect and outdated. This
hampers the survival of a business.

7. Problem of marketing:
The Entrepreneur should have marketing knowledge. This helps to face cut-throat
competition in all sectors. Lack of marketing efforts and knowledge with respect to product,
pricing, distribution and promotion hampers the Entrepreneurial growth.
Challenges Faced By Entrepreneurs
The following are the challenges before Indian entrepreneurs:
a. Lack of knowledge and information:

One of the most important inputs of an entrepreneur is “information”, without which it is
difficult to take any decision. The entrepreneur has to gather information relating to market,
consumer behaviour, and competitors, technical, financial and legal aspects. Collecting
relevant information can prove a challenge to an entrepreneur.
b. Competition:
In today’s dynamic world of global competition, an entrepreneur must continuously innovate
new and innovative products to compete successfully. They generally face potential threats
from larger corporation. An entrepreneur has to be innovative because the presence of
innovation drives them towards profit.
c. Legal provisions:
An entrepreneur usually face possible risk associated with laws and regulation. There are
many important legal issues in starting a new venture. The entrepreneur should be prepared
for future legislations. He must be well versed with legal and procedural formalities related to
acquiring license, financial assistance etc. to succeed in the business.
d. Managing resources:
Management of resources is a major challenge before an entrepreneur. Management of
human resource includes judgment, insight, creativity, vision and intelligence of individual
members in an organisation. Managing human resource includes social skill on the part of an
entrepreneur.
An entrepreneur should also have competency in managing financial resources. Financial
represents money assets. They form a valuable resource without which no firm can get very
far. It is the challenge before an entrepreneur to determine the sources of resources.
e. Business planning:
Planning is one of the major challenges faced by an entrepreneur. Planning precedes
organizing, directing, motivation and controlling. Business plan should be properly planned
and implemented. Effective decision depends upon proper planning. Decision-making
pervades all managerial functions. The effectiveness of management depends upon the
quality of decision-making.
Startup Registration India – 7 Steps to Register your Startup
What is a startup?
A startup is a newly established business, usually small, started by 1 or a group of individuals.

What differentiates it from other new businesses is that a startup offers a new product or
service that is not being given elsewhere in the same way. The keyword is innovation. The
business either develops a new product/ service or redevelops a current product/service into
something better.
What is Startup India?
Startups are becoming very popular in India. In order to develop Indian economy and attract
talented entrepreneurs, the Government of India, under the leadership of PM Narendra
Modi, has started and promoted Startup India initiative to recognize and promote startups.
How to register your startup with Startup India
Step 1: Incorporate your Business
You must first incorporate your business as a Private Limited Company or a Partnership firm
or a Limited Liability Partnership. You have to follow all the normal procedures for
registration of any business like obtaining the Certificate of Incorporation/Partnership
registration, PAN, and other required compliances.
Step 2: Register with Startup India
Then the business must be registered as a startup. The entire process is simple and online. All
you need to do is log on to the Startup India website and fill up the form with details of your
business. Next, enter the OTP which is sent to your e-mail and other details like, startup as

type of user, name and stage of the startup, etc. After entering these details, the Startup India
profile is created.
Once, your profile is created on the website, startups can apply for various acceleration,
incubator/mentorship programmes and other challenges on the website along with getting
access to resources like Learning and Development Program, Government Schemes, State
Polices for Startups and pro-bono services.
Step 3: Get DPIIT Recognition
The next step after creating the profile on the Startup India Website is to avail Department for
Promotion of Industry and Internal Trade (DPIIT) Recognition. This recognition helps the
startups to avail benefits like access to high quality intellectual Property services and
resources, relaxation in public procurement norms, self-certification under labour and
environment laws, easy winding of company, access to Fund of Funds, tax exemption for 3
consecutive years and tax exemption on investment above fair market value.
For getting DPIIT Recognition, click on ‘Get Recognised’ button if you are a new user. If you
are an existing user click on ‘Dashboard button’ and then ‘DPIIT Recognition’.
Step 4: Recognition Application
The ‘Recognition Application Detail’ page opens. On this page click on ‘View Details’ under
the Registration Details section. Fill up the ‘Startup Recognition Form’ and click on ‘Submit’.
Step 5: Documents for Registration
 Incorporation/Registration Certificate of your startup

 Details of the Directors
 Proof of concept like pitch deck/website link/video (in case of a validation/ early
traction/scaling stage startup)
 Patent and trademark details (Optional)
 PAN Number
Step 6: Recognition Number

That’s it! On applying you will immediately get a recognition number for your startup. The
certificate of recognition will be issued after the examination of all your documents which is
usually done in 2 days after submitting the details online.
However, be careful while uploading the documents. If on subsequent verification, it is found

to be obtained that the required document is not uploaded/wrong document uploaded or a
forged document has been uploaded then you shall be liable to a fine of 50% of your paid-up
capital of the startup with a minimum fine of Rs. 25,000.
Step 7: Other Areas
a) Patents, trademarks and/or design registration
If you need a patent for your innovation or a trademark for your business, you can easily
approach any from the list of facilitators issued by the government. You will need to bear only
the statutory fees thus getting an 80% reduction in fees.
b) Funding
One of the key challenges faced by many startups has been accessing to finance. Due to lack
of experience, security or existing cash flows, entrepreneurs fail to attract investors. Besides,
the high-risk nature of startups, as a significant percentage fail to take-off, puts off many
investors.
In order to provide funding support, Government has set up a fund with an initial corpus of
INR 2,500 crore and a total corpus of INR 10,000 crore over a period 4 years (i.e. INR 2,500
crore per year). The Fund is in the nature of Fund of Funds, which means that it will not invest
directly into Startups, but shall participate in the capital of SEBI registered Venture Funds.
c) Self Certification under Employment and Labour Laws
Startups can self certify under labour laws and environment laws so that their compliance
costs are reduced. Self-certification is provided to reduce regulatory burden thereby allowing
them to focus on their core business. Startups are allowed to self-certify their compliances
under six labour laws and three environment laws for a period of 3 to 5 years from the date of
incorporation.

Units operating under 36 white category industries as published on the website of Central
Pollution Control Board do not require clearance under 3 environment related Acts for 3
years.
d) Tax Exemption
Startups are exempted from income tax for 3 years. But to avail these benefits, they must be
certified by the Inter-Ministerial Board (IMB). The Startups incorporated on or after 1st April
2016 can apply for the income tax exemption.
Requirements which are Waived Off
Startup India has changed the procedure of registration since its inception. It has exempted
most of the previous requirements now. Many documents which were required to be filed
previously are waived off. The list of documents which are not required to be filed at the time
of the registration are-
 Letter of Recommendations
 Letter of funding
 Sanction Letters
 Udyog Aadhar
 MSME Certificate
 GST Certificate
Key features of the Fund of Funds
 The Fund of Funds shall be managed by Small Industries Development Bank of India
(SIDBI)
 Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds
 The Fund of Funds shall contribute to a maximum of 50% of the SEBI registered
Venture Funds (“daughter funds”). In order to be able to receive the contribution, the
daughter fund should have already raised the balance 50%. The Fund of Funds shall
have representatives on the board of the venture fund based on the contribution
made.
 The Fund shall ensure support to a broad mix of sectors such as manufacturing,
agriculture, health, education, etc.
It’s very easy to register as a startup thanks to the various government initiatives. However,
you can focus on your key area while we at ClearTax help you from the start to finish right
from incorporating your company to getting your startup recognition. Do visit our website to
know more about startup services
FAQ on Startup Registration India
Who can register with startup India?
An entity incorporated as a Private Limited Company, Partnership Firm or a Limited Liability

Partnership can register themselves under the startup India scheme. The annual turnover of
these business entities should not exceed 100 crores, and they should have been in existence
for up to ten years from the date of its incorporation/ registration. Such an entity should be
working towards innovation, development or improvement of products or services or
processes.
What are the benefits of signing up with startup India?
There are a number of benefits startups receive by the Startup India Scheme. Nevertheless, in
order to avail these benefits, an entity is needed to be set up by the DPIIT as a startup.
Startups are allowed to self certify their compliance for six labour laws and three environment
laws. This is allowed for a total period of five years from the date of
incorporation/registration of the entity. Startups are allowed a three-year tax exemption and
the best intellectual property services and resources solely built to help startups protect and
commercialize their IPRs.
What kind of business structure should I choose for my startup?
The most preferred business structures for a startup are Private Limited companies and LLPs.
A Private Limited company is legally recognized and generally favoured by investors.
However, it has stricter compliance and may have a higher cost of incorporation.
Whereas incorporation cost is lower for LLPs and they tend to have relaxed compliance in
comparison to Pvt. Ltd. Co. In addition to that, LLPs have limited liabilities and are equally
recognised by investors and all over the world.
What can I do to attract investors for a start-up?
To attract investors, not only do you need a stellar product with a scalable model, but you
also need visibility. Make sure that your product receives healthy engagement and traction.

You’ll need to register your startup on startup India and proactively seek out investors. Make
sure you are able to effectively communicate your business idea to the investor and the
sustainability of your business model.
Can a foreign company register under the Startup India hub?
Any entity that has at least one registered office in India can register itself on the hub, since
the location preferences, for the time being, are only created for Indian states. However, soon
the government hopes to start registrations for stakeholders from the global ecosystem too.
What is the difference between an accelerator and an incubator?
Startup incubators are typically institutions that help entrepreneurs by developing their
business, especially in the initial stages. Incubation function is usually carried out by
institutions who have experience in the business and the tech world.
Startup accelerators support early-stage, growth-driven companies. These programmes

usually have a timeframe in which individual companies spend anywhere between a few
weeks and a few months working with a group of mentors who are educated and may also
provide financial help.
For how long is a company recognised as a startup?
Any business entity that has completed 10 years from the date of its
incorporation/registration, and has exceeded the previous year’s turnover of 100 crores shall
stop to be a startup on completion of 10 years from the date of its registration/incorporation.
Can an existing entity register itself as a “Startup” on the Startup India Portal?
Yes, as per the law an existing entity can register itself as a startup, provided that it meets the
prescribed criteria for a startup. They will also be able to avail various tax and IPR benefits
that are available to startups. The criteria are the same as those mentioned in the article
above.
How do I know my registration is complete?
Once the application is complete, and the startup gets recognised, you will receive a system-
generated certificate of recognition. You will be able to download this certificate from the
Startup India portal.

(https://cleartax.in/s/7-steps-to-register-your-startup-in-startup-india)
Choice of Product
To succeed as an entrepreneur, you must develop the ability to select and offer the right
products or services to your customers in a competitive market. More than any other factor,
your ability to make this choice will determine your success or failure.
Fully 80 percent of the products and services being consumed today are different from those
that were being consumed five years ago. And five years from today, fully 80 percent of the
products being used will be new and different from those being used today.
There are thousands of products and services available to consumers today. And there are
unlimited opportunities for you to enter the marketplace and compete effectively with a new
product or service that's better in some way than what's already being offered by your
competitors. Remember, your skill at choosing that product or service is critical to your
success.
The most important thing you can do before deciding what to sell is to think. And the more
you think about a product or service before you bring it to market, the better your decisions
will be.
So how do you start? To make a product successful, you must be personally and emotionally
committed to its success. Once you've got a product or service in mind, you need to begin
with a self-analysis:
 What kinds of products do you like, enjoy, consume and benefit from?
 Do you like the product or service you're planning to sell?
 Can you see yourself getting excited about this product or service?
 Would you buy it and use it yourself?
 Would you sell it to your mother, your best friend, your next-door neighbor?
 Can you see yourself selling this product or service for the next five to 10 years?
 Is this a product or service that you intensely desire to bring to the marketplace?
Then analyze the product or service from the customer's point of view:
 What does the product achieve, avoid or preserve for the customer?
 How does the product improve your customer's life or work?
 What kind of customers will you be selling the product to?
 Do you personally like the customers who'll be buying this product or service?
Imagine that you've hired a management consultant to get advice on introducing this new
product or service. They're going to cut right to the chase and ask you these very objective,
bottom-line questions about the product:
 Is there a real demand for the product at the price you'll have to charge?
 Is the demand large enough for you to make a profit?
 Is the demand concentrated enough so you can advertise, sell and deliver the product
at a reasonable expense?
Dig even deeper into the potential success of your product or service by determining the
answer to the following critical questions:
 What is to be sold, exactly? Describe the product in terms of what it does for the
customer.
 To whom is the product going to be sold? Describe your ideal customer.
 What price will you have to charge for the product for it to be profitable?
 Who's going to sell the product?
 How is the product to be sold? What method of sales, or process of promotion, will
you use?
 How is the product or service to be manufactured or produced?
 How is the product going to be paid for and by whom?
 How is the product or service going to be delivered to the customer?
 How is it going to be serviced, repaired, guaranteed or replaced?
And you're not done yet. There are a series of additional questions you need to ask before
you make a final decision on a new product or service offering.
 Is there a real need for the product or service in today's market?

 Is your new product or service better than anything else currently available?
 What are the three ways that your product is superior to your competition?
 Is your product lower priced or of better quality than anything else that is available?
 Do you think you could become the number-one supplier in the market for this
product or service?
For a product or service to succeed, it must be the right product, being sold at the right time,
to the right customer, in the right market. It must be produced and sold by the right company,
and the right people. What you have to decide is this: Is this product right for you?
(https://www.entrepreneur.com/article/78778)

Criteria to Select a Product in Entrepreneurship
Product Selection Criteria – Factors to be Considered in New Products

Selection Process
What are the methods of selecting a new product in business? What are the criteria to be
considered in this selection process? The evolution in consumer behaviour has necessitated a
continuous development or rebranding of products to meet the continually changing taste of
consumers.
Special focus is given to the criteria involved in selecting products in entrepreneurship.
The practice of entrepreneurship is aimed at producing goods/services geared towards

satisfying the needs of customers. However, the second pronged approach is to extract profit
from this exchange of goods and services.
Many products and services offered today have evolved over the years, and will continue to
evolve, making the entire process of product/service provision and formulation a continuous
one. A key ingredient needed for success here is innovation.
But why do products need to be selected in entrepreneurship? Because consumer behaviour

vary with time and may develop preferences for certain products which if not provided may
result in outright rejection of available products in the market place.
Hence, the needs/preferences of the consumer or client need to be fully satisfied.
Product Selection and Process criteria
 Product Acceptance
This criteria used in selecting products in entrepreneurship is very important. The level of
acceptance a product gains in the market place is tied to how successful such product(s) will
fare.
However, the only way to know how well a product is accepted in the marketplace is by first
conducting a research. This can involve a considerable amount of financial resources.
Product testing in the open market place can go a long way in identifying the underlying
challenges that accompany certain products.
 Cost of Production

Cost of production forms part of the criteria for selecting a product in entrepreneurship.
Entrepreneurs need to produce goods that allow for appreciable profit margins, thereby
limiting the cost of production while increasing the possible gains. Products that give higher
profit margins are selected. The selected products are tailored to fit into, or be accepted by
the consumer.
 Conducting a Pre-Feasibility Study

What this means is that before a product is selected in entrepreneurship, ordinarily, a
feasibility study is expected to be conducted. But before this is conducted a pre-study is
conducted to sample how the product will perform in the open market. The only difference
between the pre-feasibility study and the feasibility study is that the pre-feasibility study is
not as detailed as the feasibility study.
A feasibility study examines how the product will perform or how viable the product will be in
the market place. This is similar to product acceptance. The result enables the entrepreneur
to select the product with the widest acceptance in the open market.
 The Future of the Product

This forms an important aspect of the process of product selection in entrepreneurship. The
future of the product contributes significantly to how well the product fares. Hence,
important answers need to be given to questions on the level of demand for the product, the
acceptance of the product at the price fixed for it, how feasible the product is and if there are
any margins for meaningful profits.
A product that has wide demand and at the same time offers impressive margins for profits
will most certainly be selected over those with lesser prospects.
 Does it satisfy a Need or Want?

Product selection in entrepreneurship focuses on important aspects of the product. Here, the
searchlight is beamed on the product and critical questions asked on what the product
satisfies. Consumers are driven by two forces; needs and wants. Needs are necessities, hence,
their demand tends to be more than products that satisfy wants.
Wants range from the cheap to the very expensive ones. Whatever the case may be, knowing
which group the product falls under, is of great importance and forms an important criterion
in selecting a product in entrepreneurship.
 Products that Give an Edge

When selecting products in entrepreneurship, a strong criterion is the possession of skills in
selecting products that give an edge over similar products.

Generally before products are selected, the market is examined for existing products similar
to the available products for sale. The product that performs best is selected over those that
might perform averagely in the marketplace.Therefore, being a critique of your product can
be useful exercise that ensures that only the best products are selected.
 Pricing Strategy
Before a product is being selected in entrepreneurship, the pricing of such a product needs to
be fully analysed.
Certain products, desirable as they may be, do not allow for profitability, as the cost of
production may be high.
Therefore, a pricing strategy that focuses on the profit potential of the product will go a long
way in improving the product’s performance. In this case, the product will be satisfying the
client’s needs, while meeting the profit expectation of the entrepreneur.
The criteria used in selecting a product in entrepreneurship are diverse, and require
expertise, and an eye that pays attention to detail. The services of a marketing consultant are
needed also to provide useful insights on how to select products in entrepreneurship.
(https://startupback.com/criteria-select-product-entrepreneurship/)
Market Assessment
Imagine that you are an entrepreneur looking to launch a new product on the market. Now,
how will you know if there is a demand for this product, whether there will be sales and if your
new endeavor will succeed? Well, to begin with, you will conduct a market assessment to help
you answer some of these tough questions. Let us understand the process and importance of
market assessment.
Market assessment or market analysis is a critical study of the potential a new product or
service or idea has in the market where it is to be launched.
It educates the entrepreneur about the needs of the markets and the barriers and pitfalls he
may face. Hence the entrepreneur can modify his strategies and develop a map or a plan
moving forward.
Whenever an entrepreneur plans entering a new market, launching a fresh product, making a
new investment or even all together starting a new business he must conduct a market
assessment.

We have seen that too often a new product or campaign will be launched without adequate
research and fail miserably. Instead of re-evaluating or correcting your plan afterwards, the
smart thing to do would be to conduct your research beforehand.
There are still steps in the process of market research. Let us take a brief look.
How to Conduct a Market Analysis the Right Way
When you start a business, do you just wing it? Or, do you take time to plan and research
your strategies before you jump into the market? If you’re like most entrepreneurs, you
probably prepare your business before taking the plunge.
Before diving into a market or switching up a strategy, you need to do thorough research.
Otherwise, your business could quickly sink.
If you want to stay afloat in the business world, you need to know how to conduct a market
analysis.
What is a market analysis?
A market analysis is the process of gathering information about a market within an industry.
Your analysis studies the dynamics of a market and what makes potential customers tick.
A market analysis may seem complex, but it’s necessary if you want to lead your business in
the direction of success.
When you conduct a market analysis, you learn the following:
 Who are my potential customers?

 What are my customers’ shopping and buying habits?
 How large is my target market?
 How much are potential customers willing to pay?
 Who is my competition?
 What are my competitors’ strengths and weaknesses?
Your market analysis can make or break your startup. Analyzing markets helps you reduce
risks because you can better understand your customers and market conditions.
Your analysis also helps you clarify what makes you different from the competition. That way,
you know what makes you stand out. Or, you know what you need to do to set yourself apart.

Whether you’re starting a venture, introducing a new product, or growing your small
business, market research can help take you to the next level.
How to conduct a market analysis: 7 steps
Conducting and writing a market analysis takes time and lots of research. It’s not something
you can whip up overnight. To help guide you through your market assessment journey,
follow the seven market analysis steps below.
1. Determine the purpose of your study
There are many reasons why businesses might conduct market research. You may use them
to assess business risks (e.g., threats), reduce issues, or create opportunities.
You can look at past problems to decrease future risks. And, analyze past successes to see
what you need to continue to do in the future.
Before starting any market research, determine whether the analysis is for internal or
external purposes. Internal purposes include things like improving cash flow or business
operations. External purposes include trying convincing lenders to give you a business loan.
Make sure you determine whether your study will be internal, external or both before
proceeding with your research.
2. Look at your industry’s outlook
In your analysis, outline the current state of your industry. Include where the industry is
heading using metrics such as size, trends, and projected growth. Be sure to have relevant
data to back up your claims.
This section will let investors or lenders see that you’ve done your homework on your
business’s industry. And, it will show them whether or not your industry is worth their time
and money.
3. Pinpoint target customers
The truth is, not every person will be your customer. But that’s OK! When you analyze the
market, you must determine who your potential customers are. This part of the process is
called a target market analysis.

You need to fully understand who your customers are and where they come from. Your
research should paint a clear picture of your potential customers. Look at things like:
 Age
 Income
 Gender
 Location
 Occupation
 Education level
 Marital or family status
Once you narrow down who your customers are, find out their needs, interests, personalities,
and demographics.
Consider also creating customer personas based on your research. Many businesses have
multiple customer personas. After you compile different customers’ characteristics, build
different personas to represent your typical customers.
Pinpointing your target market can help you better cater to future customers and market
more efficiently.
As your business grows, your potential customers may evolve or change. Revisit your target
market from time to time to ensure they still fit your business.
4. Compare your competition
To further analyze the market, you need to understand your competition. And, you must
know who your competitors are trying to target.
Take the time to research what other businesses are out there. Look at things like your
competition’s offerings, location, targeted customers, and disadvantages in the market.
Make a list of all of your main competitors. Go through each one on the list and determine
their strengths and weaknesses (SWOT analysis). What does their business have that you
don’t? Why would a customer pick a competitor’s business over yours? Do they pose any
threat to your business?
Once you outline your competitors’ strengths, weaknesses, opportunities, and threats, rank
them from most to least threatening. Then, determine your startup’s advantages and
marketing position.

5. Gather additional data
Information is your greatest ally when it comes to conducting a market analysis. The more
information you gather and have the better off your business will be.
The data you have should be unbiased, relevant, and factual. You should be able to back up
your research and make decisions based on accurate information.
Use credible sources to gather additional data. You can take advantage of different resources,
such as:
 The Bureau of Labor Statistics

 The Census Bureau
 State and local commerce websites
 Trade journal articles
 Competitors’ strengths and weaknesses
 Target market surveys or questionnaires
 Information from interviews or focus groups within your target market
6. Analyze your findings
After you analyze the market, it’s time to take a look at your findings. Lay out all of your
research and organize it using different sections. Include sections for your purpose, target
market, and competition.
Here are some other things you should include in your findings:
 An overview of your industry’s size and growth rate

 Your projected market share percentage
 Your outlook for the industry
 Discounts you plan on offering
 Buying trends
 Your business’s forecasted growth
 Prices of your offerings
 How much customers are willing to pay
 Your cash flow projection
 Your customer groups
 Results of your other analyses

Based on your research, you will be able to forecast other things for your business, such as
your cash flow cycle, gross margin, and customers’ buying habits.
7. Put your analysis into action
Conducting a market analysis might seem like a daunting task, but your business will thank
you for it later.
Sure, you’ll spend a good chunk of time working on your marketing analysis. But, it’s well
worth it. Don’t put all that extensive research to waste. Put your analysis into action.
For internal purposes, look at how you can use your findings to improve your business. Use
your analysis to see if you can make any of your business processes more efficient.
If you conducted an analysis for external purposes, be prepared to speak with lenders about
your research and conclusions.
Don’t just box up your analysis and pack it away for “later.” Revisit your market analysis every
now and then for necessary tweaking.
Selection of Technology
Definition of Technology
What Is Technology? Technology is a body of knowledge devoted to creating tools,
processing actions and the extracting of materials. The term ‘Technology” is wide, and
everyone has their way of understanding its meaning. We use technology to accomplish
various tasks in our daily lives, in brief; we can describe technology as products and processes
used to simplify our daily lives. We use technology to extend our abilities, making people the
most crucial part of any technological system.
Technology is also an application of science used to solve problems. But it is vital to know that
technology and science are different subjects which work hand-in-hand to accomplish specific
tasks or solve problems.
We apply technology in almost everything we do in our daily lives; we use technology at

work, we use technology for communication, transportation, learning, manufacturing,
securing data, scaling businesses and so much more. Technology is human knowledge which

involves tools, materials, and systems. The application of technology typically results in
products. If technology is well applied, it benefits humans, but the opposite is true, if used for
malicious reasons.
Many businesses are using technology to stay competitive, they create new products and
services using technology, and they also use technology to deliver those products and services
to their customers on time and within budget. A good example is mobile phones companies
like Apple & Samsung, these mobile empires, use high-end technology to create new smart
phones and other electronic devices to stay competitive. This competitive edge is gained
through employing advanced technology.
The Importance of Technology in Entrepreneurship

It is evident that the impact of technology on our day to day lives has grown exponentially
over the past decade. Whether it is laptops or cell phones, technology helps us connected
with the world around us and acts as a portal to vast amounts of knowledge which can be
accessed with ease. However, many new entrepreneurs do not utilize technology to its full
extent to propel themselves to new heights. Following is a list of reasons of why
entrepreneurs should incorporate technology in their businesses:
 Communication: good communication is necessary to allow efficient flow of information in

a business. Technology provides multiple channels for businesses to communicate both
internally and externally. Whether it’s setting up virtual workspaces where employees can
interact and develop ideas, or connecting to international businesses through the use of
video conferencing, technology can be used as an outlet which allows businesses to collect
feedback from their customers, which can used to improve or alter a product to suit the
needs of the customers better.
 Research and Development: through the use of technology, businesses can research the
market through the use of secondary data. This is extremely useful as it provides businesses
with in-depth knowledge about markets before penetrating them. Along with secondary
research, businesses can use technology to conduct primary research in addition to
using online surveys and customer feedback.
 Web Based Advertising: one the most beneficial use of technology is advertising to millions
of people around the globe just at a click of a button. Web based advertising consists of
websites and social media. Websites can be built using DIY tools such as WordPress or
SquareSpace or professional web developers can be hired to create them. Unlike websites,
social media accounts are very easy to build for your business and provide exposure on a
wide variety of platforms such as Facebook, Twitter and YouTube.
Six Tips for Choosing the Right Technology for Your Business
Technology is supposed to make life easier: increasing productivity, helping to keep your
small business organized, and giving you the competitive edge. Whether to improve customer
service or communication, productivity or profitability, the efficient use of technology within
a small business can go a long way towards making it a success. But with so much rapidly
evolving technologies available, how should you go about making the right decisions about
your business’ needs? Taking the plunge and investing in technology can be daunting, but if
done well, can dramatically help your business’ growth.
1. Analyze Your Business Needs
Conduct a technology inventory of your business as it stands. What technology do you
already have in place? How well is it serving your business? Put all of your current technology
into three categories (good, bad, needs improvement) in order to assess where the holes in
your technological infrastructure are.
When you’re used to outdated or sometimes even difficult methods of working, ways to
improve can sometimes be difficult to see. Try to think how your business processes could be
made easier by improving the technology available to you and your employees.
Common areas for improvements in technology include:
 Accounting and Financing

 Order Taking and Tracking
 Database Management
 Communication (both internal and with customers)
 HR Management
2. Choose Technology That Grows with Your Business

Purchasing new technology is likely to be expensive, so you should carefully consider what
you’re going to buy. A useful method of assessing potential purchases is to look around
industry-specific business forums. What are other, similar small businesses using? Have they
experienced any difficulties? Or found a particular device or software package to become
outdated quickly?
There is always a risk that whatever technology you purchase could become outdated faster
than you anticipated. When this happens, you’re stuck with expensive equipment that you’ll
have to donate, recycle or sell. To counteract this risk, there is always the option of leasing
technological equipment in order to stay up-to-date with more sophisticated technology.
However, this comes with its own array of potential downfalls (paying more in the long run,
for example) so is certainly not for everyone.

3. Always Think in Terms of Need
This point harks back to determining what your business needs, but is important enough to
address again. Thinking in terms of need (and not just desire) is incredibly important for the
successful implementation of new technologies within a business. Once you have jumped on
the technological bandwagon, you’ll notice how rapidly it moves. Only make changes and
purchase devices that your business actually needs, and make a comprehensive plan as to
where it will be of use in your business.
For example, if you have employees that are constantly on-the-go, meeting with clients and
conducting business outside the office, then it may make sense to invest in gadgets like a
tablet. As well as this, think outside the box. You may like a particular package, but there may
be other, more industry-specific software available to your business that is likely to make
things run a lot more smoothly.
4. Have a Backup Plan

Technology fails. It’s a fact of life. If you don’t plan for this eventuality, then you could be
faced with the prospect of your business shutting down entirely for a period of time, leading
to considerable losses. If you completely depend on technology, it’s important to complete
a Business Impact Analysis (BIA) to predict the consequences of the disruption of a business
process. Doing this will help you to gather the information you will need to develop a
recovery strategy in the event of a technological disaster.
Disaster recovery plans can include backup power supplies, hardware, and cloud storage, and
no matter how small your business, can save you devastating downtime.
5. Get Support
Often the right person to deal with technological services such as installation, upgrades,
troubleshooting and security is a professional, so consider hiring specific IT support. Once this
individual or service is in place, ensure that you have a thorough protocol for staff to report
any IT problems and make sure that your employees are familiar with it.
6. Don’t Forget Training

You can invest thousands upon thousands in up-to-the-minute technology, but if nobody
knows how to use it effectively then your business will still not be working at optimum
efficiency. Developing an ongoing training process so that your employees can benefit from
your IT investments and keep up to date with continuing improvements is essential to make
the most out of your investment.

Managing Technology in Operations Management
In last decade or so technology has changed the way organization conduct their business.
Advent of technology in operation management has increased productivity of the
organization.
Technology and Operations Management

The scope of Technology and operation management has evolved over a period of time and
has moved from development of products into design, management and improvement of
operating system and processes.
Usage of technology in operation management has ensured that organizations are able to
reduce the cost, improve the delivery process, standardize and improve quality and focus on
customization, thereby creating value for customers.
Integration of Technology with Production System

Technology drives efficiency in organization and increases’ productivity of the organization.
However, bringing technology in the production system is highly complex process, and it
needs to following steps:
 Technology Acquisition: technology acquired should align with overall objectives of

the organization and should be approved after elaborate cost-benefit analysis.
 Technology Integration: technology affects all aspects of production i.e. capital,
labour and customer. Therefore, a solid technology integration plan is required.
 Technology Verification: once technology integrated, it is important to check whether
technology is delivering operational effectiveness and is been used to its fullest.
Technology in Manufacturing and Design

Technology is getting extensively used in customization of design products and services. The
usage of computers and supporting electronic systems is integral part of modern industrial
and services industry. Current techniques can be broadly classified into following categories:
Computer-Aided Design (CAD): CAD facilitates linking of two more complex components of
design at very high level of accuracy thus delivering higher productivity.
Computer-Aided Manufacturing System (CAM): Precision is very essential in operating any
machines and therefore, Computerized Numerically Controlled machines are used, thus
ensuring highest level of accuracy.
Standard for the Exchange of Product Data: As the name suggests product design is
transmitted among CAM and CAM in three dimensions. Standard for The Exchange of Product

Data process sharing of product across all phases of product life cycle and serves as neutral
file exchange.
Software Systems in Manufacturing

There are various software systems available to integrated operations and manufacturing
functions with other business functions of organization. Some of the common software
systems are Enterprise Resource Planning (ERP), Supply-Chain Management (SCM), New-
Product Development (NPD) and Customer Relationship Management (CRM).
Enterprises Resources Planning (ERP) links all business functions like manufacturing,
marketing, human resource and finance through a common software platform. The main
benefits of the ERP solution are that it not only reduces database errors but also delivers
value to customer through faster delivery and order fulfillment.
Automation in Production and Operations

Automation reduces manual intervention in the manufacturing process. It increases
productivity and reduces margin of error thereby facilitating economies of scale. There is this-
advantages of automation also, such as unemployment, high breakdown cost and initial
capital investment. Therefore, automation may not be suitable in all situations and in the end
alignment with an overall organization objective is important.
Challenges
Technology can be facilitating factor in bringing about change in operations and production
management. But it may not be feasible to use technology in all aspects with challenge
coming through high initial cost of investment, high cost of maintenance and
mismanagement.
Site Selection
For many small businesses, business location is an essential component in its eventual success
or failure. Site selection can be pivotal in all sorts of businesses, including retail, service,
wholesale, and manufacturing efforts. In fact, studies conducted by some organizations
indicate that poor location is one of the primary causes of business failure. Conversely, a good
business location can be enormously beneficial to a small firm. In the retail business
especially, the adage from real estate applies: Location, location, location.

Location Needs of Various Business Types
Each of the above-mentioned business types—retail, service, wholesale, and manufacturing—
have different site needs that need to be considered when settling upon a location for
starting or relocating a business.
Retail Businesses
The success of retail establishments is often predicated to a large degree on their location.
Since location is so important, small business retailers often have to make significant
expenditures to secure a good site on which to operate.
Property owners that offer land or buildings or office space for lease or sale in already-
thriving retail areas know that they can command a higher price because of the volume and
quality of business that the location will bring to the company.
Service Businesses
Many service-oriented businesses also need to operate in "high traffic" regions, but there are
exceptions to this. Most home-based business owners, for example, package their talents in
service-oriented businesses (software development, freelance writing, home improvement,
etc.). Others, such as pest control services or landscaping services, secure the majority of their
customers through the Yellow Pages, etc., and thus do not need to worry as much about their
location (although location can become a problem because of other factors; for example, a
service business that has to travel great distances to take care of the majority of its customers
might consider relocating closer to its primary customer base).
Still other service-oriented businesses, of course, rely to a great degree on their location. Dry
cleaners, hair salons, and other businesses can not afford to locate themselves on the
outskirts of a business district. Many of their customers frequent their business precisely
because of the convenience of their location; if that benefit dries up, so too do the customers.
Wholesale Businesses
Whereas the primary consideration for retailers and some service businesses is to locate
themselves in high traffic areas—hence the ubiquity of such businesses in shopping centers
and malls—the major location concern of wholesalers is to find a site that has good shipping
and receiving facilities and close proximity to transportation routes. Zoning laws are also a
consideration. Most communities maintain zoning laws that restrict where wholesalers can
set up their businesses.
Manufacturing Businesses
As with wholesalers, businesses engaged in manufacturing usually have limited site location
options because of local zoning laws. But manufacturers generally do not lack for options
when the time comes to build or relocate a facility. Most communities have any number of
sites to choose from. The key is to select the land or building that will be most beneficial to
the company in the long run, taking into consideration the company's primary market, the
available labor force, transportation factors, availability of raw materials, available buildings
or building sites, community attitudes toward the industry, expense, and convenience of
access for customers.
Location Options
Small businesses have a number of different choices in the realm of site selection. The type of
facility most often embraced by retail and many service establishments is the shopping
center. The shopping center, which houses a variety of different stores (often including well-
known chain stores), can take several different forms, but the best known of these is the mall.
These establishments provide their tenants with large numbers of potential customers and
professional marketing and maintenance services, but in return, tenants often pay high rent
and additional fees (to cover maintenance costs, etc.)
Many other small businesses, meanwhile, are located in smaller shopping centers that are
sometimes known as strip malls or neighborhood shopping centers. These centers, which rely
on a smaller customer base than their mega-mall cousins, are typically anchored by one or
two large supermarkets or discount stores. The rest of the stores are usually small retail or
service establishments of one type or another. The rent at strip malls is generally much less
than it is at major malls, but of course, the level of traffic is generally not as high either.
The small business owner who wishes to establish his or her store in a shopping center must
carefully weigh the financial advantages and pitfalls of each of these options before moving
forward. Other retailers or service businesses prefer to set up their businesses in freestanding
locations. Restaurants, for instance, often choose to set up their business in a lone building,
attracted by the lower fixed rent that often accompanies such arrangements.
Another facility option for the small business is the business park or office building. Indeed,
many professionals (doctors, architects, attorneys) choose this option, attracted by the
professional image that such trappings convey and the ability to share maintenance costs
with other tenants. Some service businesses also operate from these facilities, especially if
their primary clientele are other businesses.
Other Factors in Business Site Selection
There are myriad factors that need to be evaluated when deciding where to locate a business.
Settling on a site that is both convenient and comfortable for the company's primary

customers is, of course, vital, but that is only one piece of the site selection puzzle. These
considerations include:
 Will projected revenues cover the total costs of leasing or purchasing the site?
 Will ancillary costs associated with business establishment or relocation (purchase
and/or transportation of equipment, computer wiring requirements, etc.) be
prohibitive?
 Will it be possible to secure lenders to help cover costs associated with moving into
the new business site?
 Are there restrictive ordinances that will unduly interfere with business operations?
 Is the facility itself in good condition (including both exterior and interior), and does it
meet layout requirements? If not, how expensive will refurbishment be?
Are the grounds (landscaping, light fixtures, drainage, storage facilities) in good condition?
 If sharing costs of maintenance/housekeeping services, do other tenants view services

favorably?
 How secure is the facility?
 Is the site large enough for your business?
 Can the site accommodate future growth?
 Are nearby business establishments successful, and are they likely to attract
customers to your business?
 Are regional competitors successful?
 Does the site provide for adequate parking and access for customers?
 Might the area surrounding the facility (neighboring lots, parking facilities, buildings)
undergo a dramatic change because of sale and/or construction?
 What sort of advertising expenditures (if any, in the case of malls, etc.) will be
necessary?
 What sort of leasehold improvements (if any) will be necessary?
 Will customer service be interrupted by a relocation? If so, for how long?
 Will major system changes (addition or subtraction of equipment or processes) be
necessary?
 What impact will the business site have on workforce needs?
 Should the choice of facility reflect changes in the industry or market in which you are
operating?
 Are there any existing or proposed government regulations that could change the
value of the facility?
 What is the climate as far as business taxation is concerned?
 Are important suppliers located nearby?

Ownership Vs. Leasing
Whether starting up a new business or moving an already established one, small business
owners are faced with the question of whether to lease or purchase the land and/or facility
that they choose as the site for their company. Most small businesses operate under lease
arrangements—indeed, many small business owners do not have the necessary capital to buy
the facility where they will operate—but some do choose to go the purchase route, swayed
by the following advantages:
 Increased sense of permanence and credibility in the marketplace

 Property taxes and interest payments are tax-deductible
 Facility improvements increase the value of the business's property rather than the
landlord's property
 Increased net worth through appreciation of both the business and the facility
(including land and buildings)
 No forfeiture of asset at the end of term
 Ability to liquidate (lessors often have far less freedom in this area)
Of course, there are also factors associated with ownership that either convince small
business owners to stick with lease agreements or preclude ownership as a viable option.
 Risk that value of the land and/or facilities will actually go down over time because of
business trends (a neighboring anchor store goes bankrupt) or regional events (a
flood, massive layoffs)
 Financial risks associated with purchasing are greater, and put a greater financial drain
on small establishments that often have other needs (purchasing typically requires
greater initial capital investment and entails higher monthly costs)
 Property can be claimed by creditors as an asset if the business goes bankrupt
Planning For the Future
An important factor that small business owners need to consider when weighing various
business location alternatives is the site's ability to address the company's future needs. It is
usually easier to shrink than to expand space in the same location. Thus the growing company
is wise to locate in a building or a shopping center where there is room to expand without
undertaking the costs of a big move. Sometimes technological considerations enter into
planning. The higher lease costs of a building located on a railroad siding may be a worthwhile
anticipation of volume climbing to levels where rail service will be needed either to supply or

to distribute the businesses volume—or both. If relocation becomes unavoidable, it can
sometimes be done in stages—moving operations to new locations one at a time.
Sources to Consult When Selecting a Business Site
Local assistance in selecting a site for a new business can usually be found from a number of
sources. These include local utilities, some of which have departments designed to provide
help in this area; local Chambers of Commerce; banks and insurance agencies; real estate
agents who specialize in commercial and industrial property; and state agencies. More
informal networking with members of the local business community can also provide both
leads and warnings about various regional properties.
Organizational and Ownership structure

What is the “ownership structure” for a business entity?
Ownership structure concerns the internal organization of a business entity and the rights and
duties of the individuals holding a legal or equitable interest in that business. As owner of the
business entity, it is important to understand how the ownership structure of a particular
business entity is organized and what that means for the owner’s rights.
o Example: A shareholder, as owner of a corporation, has certain rights. These rights are distinct
from those of members of a limited liability company. Further, within the corporation, a
holder of preferred stock may have different rights than the holder of common stock.
One of the decisions that a business owner has to make is what type of organizational
structure their business is going to use.
Types of Business Structures in India

The following are the different business structures in India:
A. Sole Proprietorship
B. Partnership Firm
C. Private Limited Company
D. Public Limited Company
E. Limited Liability Partnership

A. Sole Proprietorship Firm:
This is the oldest and most common form of business. It is a one-man organisation where a
single individual owns, manages and controls the whole business. The liability of the owner is
unlimited. A Sole Proprietorship business is suitable where the market is limited, localized and
where customers give importance to personal attention. This form of organisation is suitable
where the nature of business is simple and requires quick decisions. This type of organisation
is suitable where the capital required is limited and the risk- involvement is not great. It is also
considered suitable for the production of goods which involve manual skill e.g. handicrafts,
filigree works, jewellery-making, tailoring, haircutting, etc.
The key features are:

• Ownership by a one single individual who has a legal title to the assets and properties of the
business.
• The entire profit goes to the sole proprietor. Similarly, he also bears the entire risk or losses
of the firm.
• The owner of the business is the sole manager of the business.
• The entire capital of the business is provided by the owner. He may raise more funds from
outside through borrowings
• The proprietor and the business enterprise are one and the same in the eyes of the law.
• The liability of proprietor is unlimited.
• There are less legal formalities.
B. Partnership Firm:
A partnership is defined as a relation between two or more persons who have agreed to share
the profits of a business carried on by them or any of them acting for all. The owners of a
partnership business are individually known as partners and collectively as a firm. In a
partnership firm, persons from different walks of life, with ability, managerial talent and skill,
combine to form a business. This increases the administrative strength of the organisation,
the financial resources, the skill and expertise, while reducing risk. Such firms are most
suitable for comparatively small businesses such as retail and wholesale trade, professional
services, medium-sized mercantile houses and small manufacturing units. Generally, it is seen
that many organisations are initially started as partnership firms and, later, when it is
economically viable and financially attractive for the investors, it is converted into a company.

The key features of a Partnership Firm are:
• A minimum of two persons are required to start a partnership business. The maximum
number of partners is 10 in the case of a banking business and 20 in any other case.
• The relation between the partners of a partnership firm is created by contract which may be
verbal, written or implied and it is known as the “Partnership Deed”.
• The partners can share profits in any ratio as agreed.
• The partners have unlimited liability.
• The business in a partnership firm may be carried on by all the partners or any of them
acting for all. There is a Principal – Agent relationship between all the partners. There should
be mutual trust and faith.
• The law does not recognise the firm as a separate entity distinct from the partners
• The registration of a partnership is not compulsory.
C. Private Limited Company:

A private company is a company which has the following ingredients:
• The Shareholders’ right to transfer shares is restricted.

• The number of shareholders is limited to fifty.
• An invitation to the public to subscribe to any shares or debentures is prohibited.
D. Public Limited Company:

A Public Limited Company is a company limited by shares in which there is no restriction on
the maximum number of shareholders, transfer of shares and acceptance of public deposits.
The liability of each shareholder is limited to the extent of the unpaid amount of the face
value of the shares and the premium thereon, in respect of the shares held by him. However,
the liability of a Director / Manager of such a company can, at times, be unlimited. The
minimum number of shareholders is 7.
E. Limited Liability Partnership:

The government has passed the LLP Act, 2008 in January, 2009. This Act proposes LLP as a
new corporate form of business to provide an alternative to the traditional partnership
business, with unlimited personal liability on the one hand, and the statute-based governance

structure of the limited liability company, on the other, so that businesses can organise
themselves and operate in a flexible, innovative and efficient manner.
III. What are the different characteristics of various types of organisations?
A. HUF (Hindu Undivided Family):

• There is no membership other than the members of a Hindu family.
• All coparceners have an equal share in the profit of the business.
• The management of the business is in the hands of the senior most family member who is
known as the Karta.
• The liability of each member of HUF is limited to the extent of his/her share in the business,
but the liability of the Karta is unlimited.
• The individual share of each coparcener. This is because every birth of a male child in the
family adds to the number of coparceners and every death of a coparcener reduces the
number.
• A Joint Hindu family business continues to exist on the death of any coparcener. Even on
the death of the Karta, it continues to exist as the next senior most family member becomes
the Karta. However, a joint Hindu family business can be dissolved at any time, either through
mutual agreement between members or by division of its assets.
B. Co-operative:
• Individuals having a common interest can come together to form a co-operative society
• The minimum membership required to form a co-operative society is 10 and the maximum
number is unlimited
• The registration of a society under the Co-operative Societies Act is mandatory. Once it is
registered, it becomes a body corporate and enjoys certain privileges just like a joint stock
company.
• The primary objective of any co-operative organisation is to render services to its members,
in particular, and to society in general
• Every member has a right to take part in the management of the society. Each member has
one vote. Generally the members elect a committee known as the Executive Committee to

look after the day to day administration and the said committee is responsible to the general
body of members
• A co-operative organisation starts with a fund contributed by its members in the form of
units called shares. It can also easily raise loans and secure grants from the government.
• The return on capital subscribed by the members is in the form of a fixed rate of dividend
after necessary deductions from the profits.
C. Public Limited Company & Private Limited Company:

• The company is different and distinct from its members in law. It has its own name and its
own seal, its assets and liabilities are separate and distinct from those of its members. It is
capable of owning a property, incurring debts, and borrowing money, having a bank account,
employing people, entering into contracts and suing and being sued separately.
• The liability of the members of the company is limited to their contribution to the assets of
the company up to the face value of shares held by them.
• A company does not die or cease to exist, unless it is specifically wound up or the task for
which it was formed has been completed. Membership of a company may keep on changing
from time to time, but that does not affect the life of the company. Death or insolvency of a
member does not affect the existence of the company.
• Shares in a company are freely transferable, subject to certain conditions, such that no
share-holder is permanently or necessarily wedded to a company. When a member transfers
his shares to another person, the transferee steps into the shoes of the transferor and
acquires all the rights of the transferor in respect of those shares.
• A company is an artificial person and does not have a physical presence. Therefore, it acts
through its Board of Directors to carry out its activities and enter into various agreements.
Such contracts must be under the seal of the company. The common seal is the official
signature of the company. The name of the company must be engraved on the common seal.
Any document not bearing the seal of the company may not be accepted as authentic and
may not have any legal force.
• A company is administered and managed by its managerial personnel i.e. the Board of
Directors. The shareholders are simply the holders of the shares in the company and need not
necessarily be the managers of the company.
D. Limited Liability Partnership (LLP):

• It is very easy to form an LLP, as the process is very simple compared to that required by
companies and it does not involve much formality
• Just like a company, an LLP is also a body corporate, which means it has its own existence,
compared to a partnership. An LLP and its partners are distinct entities in the eyes of the law.
An LLP will be known by its own name and not by the name of its partners
• LLPs exist as separate legal entities from the personal life of the partner. Both an LLP and
the person who owns it are separate entities and both function separately. Liability for
repayment of debts and lawsuits incurred by the LLP lies on it and not the owner. Any
business with potential for lawsuits should consider the incorporation an LLP; it will offer an
added layer of protection
• An incorporated LLP has perpetual succession. Notwithstanding any changes in the partners
of the LLP, the LLP will be the same entity with the same privileges, immunities, estates and
possessions. The LLP shall continue to exist till it is wound up in accordance with the
provisions of the relevant law
• The LLP Act, 2008, gives an LLP the utmost freedom to manage its own affairs. The partners
can decide the way they want to run and manage the LLP, in the form of an LLP Agreement.
The LLP Act does not regulate the LLP to a large extent; instead it allows the partners the
liberty to manage it as they wish.
• It is easy to become a partner or leave the LLP and also to transfer the ownership in
accordance with the terms of the LLP agreement
• Another major benefit of incorporation is the taxation of an LLP. LLPs are taxed at a lower
rate compared to a company. Moreover, LLPs are not subject to Dividend Distribution Tax
compared to a company, so there will not be any tax while profits are distributed among the
partners.
IV. Which form of business is suitable and when?

A. Sole Proprietorship:
It is aptly said that "one-man control is the best in the world, if that man is big enough to
manage everything." Although sole proprietorship business suffers from certain limitations, it
has its own merits. Besides its limitations, it is suitable because it involves low capital
investment, personalised services, quick decisions and flexible operations, besides being
equipped to serve local needs as well as those of big businesses.

B. HUF (Hindu Undivided Family) - The success of the Joint Hindu Family business is
mostly dependent upon the efficiency of the karta and the mutual understanding between
the co-partners. Nevertheless, this type of business is losing its ground with the gradual
decline in the Joint Hindu family system.
C. Partnership Firm:
A partnership firm is suitable in the case of a business where the initial capital requirement is
medium i.e. it is neither too large nor too small. In a partnership firm, partners with different
abilities, managerial talents, skills and expertise combine with each partner’s contribution
based on his area of specialisation and experience.
D. Private and Public Limited Company:

A joint stock company is suitable where the volume of business is quite large, the area of
operation is widespread, the risk involved is great and there is a need for huge financial
resources and manpower. It is also preferred when there is a need for professional
management and flexibility of operations. In certain businesses, such as banking and
insurance, business can only be undertaken by joint stock companies.
E. Co-operative Society:
When the purpose of business is to provide service rather than to earn profit and to promote
a common economic interest, the co-operative society is the only alternative. Co-operatives
are also preferred as it is easier to raise capital through assistance from financial institutions
and the government. Generally, a co-operative society is suitable for small and medium-sized
operations. However, the large-sized ‘IFFCO’ [Indian Farmers and Fertilizers Cooperative] and
the Kaira Co-operative Processing Milk under the brand name ‘AMUL’ are the illustrious
exceptions.
F. Limited Liability Partnership (LLP):

LLPs offer clear advantages over Partnership Firms and Companies for small and medium-
sized businesses. A registered "Limited Company" in India (private or public) has a lot of
complicated formalities, including mandatory director board meetings, auditing etc. The
additional overheads in managing a Private Limited Company make LLPs attractive for small
firms.
V. What are the principal laws governing various types of

organisations?

A. Partnership - Indian Partnership Act, 1932
B. HUF (Hindu Undivided Family) - Hindu Law
C. Co-operative - Co-operative Societies Act, 1912 and State Co-operative

Societies Act.
D. Private Limited Company - The Companies Act, 1956
E. Public Limited Company - The Companies Act, 1956
F. Public Sector Unit (PSU) - Special Parliamentary Act
G. Unlimited Company - The Companies Act, 1956
H. Limited Liability Partnership - Limited Liability Partnership Act 2008 and

Rules 2009
VI. How should one choose the appropriate form of business?

The selection of a suitable form of business organisation on the basis of ownership and
management is one of the most important tasks of the entrepreneur. Once the form of
organisation is chosen, it is very difficult to switch over to another form, because it needs the
winding-up of the existing organisation which is a waste of time, effort and money.
Therefore, the form of an organisation must be chosen after careful thought and
consideration. There are a number of factors to be considered while selecting an appropriate
form of business organisation. Let us look at those factors which are inter-related and inter-
dependent as well:
 Nature of business
 Volume of business
 Area of operation
 Finance
 Ownership and control
 Liability
 Independence

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BBA- 603.

Establishment of a New Enterprise

Section 1: Steps for Setting up of a business enterprise

1. Identification of business opportunity.

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 1

Step1. Identification of business opportunity:

 Identify Market Inefficiencies

Step 2. Generation of business idea:

This is the most important function of an entrepreneur.

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 2

 Role of Innovation and Creativity:

Entrepreneurship process involves innovation and creativity. Entrepreneurs are innovators.

 Stages In Creativity Process

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 3

The Creative Process

Step3. Feasibility Study:

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 4

Feasibility study is a detailed investigation of the proposed project to determine whether

Feasibility study is conducted in the following areas:

 Market/ commercial Feasibility:

 Socio- economic Feasibility:

Preparation of Feasibility Report:

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 5

Step 4: Preparation of a business plan:

A business plan, as defined by Entrepreneur, is a “written document describing the nature of

 Need and purpose of a business plan:

 Maintaining Business Focus.

 Contents of a business plan:

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 6

e. Description of Management and Organization

f. Breakdown of Your Products and Services

i. Manufacturing and Operational Plan

k. Appendices and Exhibits

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 8

Note: Add a Title Page and Table of Contents

Step 5: Launching the enterprise and managing the business

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 9

1. Lack of legal knowledge:

5. Problem of human resource:

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 10

Challenges Faced By Entrepreneurs

The following are the challenges before Indian entrepreneurs:

a. Lack of knowledge and information:

Startup Registration India – 7 Steps to Register your Startup

A startup is a newly established business, usually small, started by 1 or a group of individuals.

What is Startup India?

How to register your startup with Startup India

Step 1: Incorporate your Business

Step 2: Register with Startup India

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 12

Step 3: Get DPIIT Recognition

Step 4: Recognition Application

Step 5: Documents for Registration

 Incorporation/Registration Certificate of your startup

Step 6: Recognition Number

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 13

However, be careful while uploading the documents. If on subsequent verification, it is found

Step 7: Other Areas

a) Patents, trademarks and/or design registration

c) Self Certification under Employment and Labour Laws

2. BBA 603 Entrepreneurship Unit-II. Spring 2020-21 Page 14

Requirements which are Waived Off

Key features of the Fund of Funds

FAQ on Startup Registration India