Chapter one

1. Nature of Entrepreneurship

1
 1.1 Introduction
1.2 Historical origin of Entrepreneurship
• What is entrepreneurship? And who is an entrepreneur?
These two questions are asked more frequently reflecting the
increasing demand in the field of entrepreneurship.
• Here let us took in to the historical development of
entrepreneurship so as to grasp the meaning of the word
entrepreneurship.
• During the ancient period the word entrepreneur was used
to refer to a person managing large commercial
projects through the resources provided to him.
• In the 17th Century a person who has signed a contractual
agreement with the government to provide
stipulated/specified products or to perform service was
considered as entrepreneur. 2
 cont’d
• In the 18th Century the first theory of entrepreneur has
been developed by Richard Cantillon.
He said that an entrepreneur is a risk taker. If we
consider the merchant, farmers and /or the professionals
they all operate at risk. E.g for merchant buying with
known price and selling unknown price.
• In the late 19th and early 20th Century an entrepreneur was
viewed from economic perspectives. The entrepreneur
organizes and operates an enterprise for personal gain.
In the middle of the 20th Century the notion/concept of an
entrepreneur as an inventor as established.
3
 cont’d
• “The function of the entrepreneur is to reform or
revolutionize the pattern of production by exploiting
an invention or more generally untried
technological possibility for producing new
commodities or producing an old one in a new way or
opening a new outlet for products by reorganizing a
new industry.”
• Entrepreneur was evolved from managing
commercial project to the application of
innovation (creativity) in the business idea.

4
 1.3 Definitions of Entrepreneurship & Entrepreneur
• A number of concepts have been derived from the idea of the
entrepreneur such as entrepreneurial,
entrepreneurship and entrepreneurial process.
• The idea that the entrepreneur is some one who
undertakes certain projects offers an opening to
developing an understanding of the nature of
entrepreneurship.
• Undertaking particular projects demands that particular tasks
be engaged in with the objective of achieving specific
outcomes and that an individual take charge of the project.
Entrepreneurship is then what the entrepreneur does.
Entrepreneurial is an adjective describing how the
entrepreneur undertakes what he or she does.
5
 cont’d
• The entrepreneurial process in which the
entrepreneur engages is the means through which new
value is created as a result of the project:
Entrepreneurship is the art of identifying viable business
opportunities and mobilizing resources to convert those
opportunities into a successful enterprise through
creativity, innovation, risk taking and progressive
imagination by using factors of production, capital,
labor, and land as also intangible factors such as the
ability to mobilize scientific and technological
advances.
• The dynamic process of creating incremental
wealth by bringing together resources in new ways to
start and operate an enterprise (Robert Ronsadt). 6
 cont’d
• Entrepreneurship generally is a process
• Above all, entrepreneurship today is the product of team
work and the ability to create, build and work as a team.
Engaging in entrepreneurship shifts people from being “job
seekers” to “job creators”, which is critical in countries
that have high levels of unemployment.
➢ In general, the process of entrepreneurship includes five
critical elements.These are:
• The ability to perceive an opportunity.
• The ability to commercialize the perceived opportunity i.e.
innovation
• The ability to pursue it on a sustainable basis.
• The ability to pursue it through systematic means.
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• The acceptance of risk or failure.
 Definitions of Entrepreneur
✓ An entrepreneur is any person who:
• creates and develops a business idea and takes risk.
• The ability to gather the necessary resources, to take
advantage of opportunities
• takes the risk of setting up an enterprise to produce a
product or service which satisfies customer needs.
• create the job not a job-seeker;
• has a dream,
• has a vision;
• willing to take the risk and makes something out of nothing
Peter Drucker describes an entrepreneur as “someone who
always searches for change, responds to it, and
exploits it as an opportunity.”
8
 Cont’d
Other definition, views the term entrepreneur from three
perspectives; i.e. from the economist, psychologist and
capitalist philosopher’s point of view.
• To an economist an entrepreneur is one who brings
resource, labor, materials, and other assets into
combination that makes their value greater than before and
also one who introduces changes innovations.
• To a psychologist an entrepreneur is a person typically
driven by certain forces need to obtain or attain something,
to experiment, to accomplish or perhaps to escape the authority
of others.
• For the capitalist philosopher an entrepreneur is one who
creates wealth for others as well, who finds better way to
utilize resources and reduce waste and who produce job others
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 1.4 Types of Entrepreneurs
1. The individual entrepreneur: An individual
entrepreneur is someone who started; acquired or
franchised his/her own independent organization.
2. Intrapreneur: An Intrapreneur is a person who does
entrepreneurial work within large organization.
➢ The main difference between an Entrepreneur and an
Intrapreneur is that an Intrapreneur is an employee,
and an Entrepreneur is the founder who designs,
launches, and manages a new business, which almost
always starts out as a small business. 10
3. The Entrepreneurial Organization

➢ The entrepreneurial function need not be embodied

in a physical person.

➢ Every social environment has its own way of filling

the entrepreneurial function.

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 1.5 Role of Entrepreneurs in Economic
Development
• Entrepreneurial development is the most important input in
the economic development of any country.

✓ Improvement in per capital Income/Wealth Generation

✓ Generation of Employment Opportunities

✓ Inspire others Towards Entrepreneurship

✓ Balanced Regional Development

✓ Enhance the Number of Enterprise

✓ Economic Independence

✓ ………etc 12
 1.6 Entrepreneurial Competencies
✓ entrepreneurial mindset (who become an
entrepreneur; qualities of successful entrepreneurs
and entrepreneurial skills)
Who Becomes an Entrepreneur
✓ Anyone with the following characteristics can be an
entrepreneur.
➢ The Young Professional: skipping the experience of
working for an established organization and moving directly to
work on establishing their own ventures.
➢ The Inventor: The inventor is someone who has developed
an innovation and who has decided to make a career out of
presenting that innovation to the market. It my be new tech.
or traditional tech.
➢ The Excluded: Some people turn to an entrepreneurial
career because nothing is open to them.
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 Cont’d
Qualities of an Entrepreneur/ competencies
• Initiative
• Opportunity-seeking
• Persevering/non tired/continuing in a course of action despite
difficulty or delay in achieving success/
• Demanding for efficiency and quality/motivator for employees/
• Information-seeking
• Commitment to work contract
• Planning
• Persuasion and networking
• Building self-confidence
• Listening to others/not be arrogance
• Demonstrating leadership
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 Cont’d
Qualities / competencies of an Entrepreneur/
• Initiative – taking action beyond job requirements or the demand
for the situation. Doing things before being asked or forced by the
events.
• Opportunity-seeking: An opportunity is a favorable set of
circumstances that creates a need for a new product, service or
business. It includes access to credit, working premises/ land,
financing equipment, workspace /, education, trainings etc.
• Persevering/Persistence: takes repeated action to overcome
obstacle. Eg If I make up my mind to do something, I don’t let
anything stop me.
• Demanding for efficiency and quality :
Efficiency: Being efficient means producing results with little
wasted effort.
Quality refers to:
goods/services to meet the customer’s need in a way that exceeds
the customer’s expectations;
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 Cont’d
-characteristic of the product fit to use
-The ability of a product or service to meet a customer’s
expectations
• Information-seeking: Successful entrepreneurs do not rely
on guess work and do not rely on others for information.
• Commitment to work contract- place the highest priority
on getting a job completed.
• Planning: Planning is making a decision about the future in
terms of what to do, when to do, where to do, how to do, by
whom to do and using what resources.
• Persuasion – Successfully persuade others. Convince
someone to buy a product or service. E.g I team up well with
others for tasks which I cannot accomplish on my own.
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 Cont’d
• Building Self-confidence: Self-confidence is the state of
being certain that a chosen course of action is the best or most
effective given the circumstances.
-Risk-taking
-Independent
-Perseverance
-Ability to find happiness and contentment in work.
-Doing what you believe to be right, even if others mock or
criticize you for it.
-Admitting mistakes and learning from them
E.g I am happy with my work and am confident that I will make
progress and improvement in the future. 17
 Cont’d
Entrepreneurial Skills
• A skill is simply knowledge which is demonstrated by action.
• General management skills and
• People management skills
1. General management skills :These are skills required to organize the
physical and financial resources needed to run the venture.
❖ Strategy Skills
❖ Planning Skills
❖ Marketing Skills
❖ Financial Skills
❖ Project Management Skills
❖ Time Management Skills
2. People management skills. An entrepreneurial venture also needs the
support of people from outside the organization such as customers, suppliers
and investors.
➢ Communication Skills
➢ Leadership Skills
➢ Motivation Skills
➢ Delegation Skills 18
➢ Negotiation Skills
 THE ENTREPRENEURIAL TASKS
➢ A number of tasks have been associated with the
entrepreneur. Some of the more important are:
• Owning Organizations
• Founding New Organizations
• Bringing Innovations to Market
• Identification of Market Opportunity
• Application of Expertise
• Provision of leadership
• The entrepreneur as manager

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 Wealth & Benefits of the Entrepreneur
• Wealth is money and anything that money can buy. It includes
money, knowledge and assets of the entrepreneur.

➢ No entrepreneur works in a vacuum. The venture they create

touches the lives of many other people.

➢ Peoples who have a part to play in the entrepreneurial venture

generally are called stakeholder.

➢ The stakeholder groups/beneficiaries are; employees, investor,

supplier, customer, the local community and government.

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ENTREPRENEURSHIP AND ENVIRONMENT
• Business environment refers to the factors external
to a business enterprise which influence its
operations and determine its effectiveness.
➢ A study of business environment offers the following benefits:
1) It provides information for successful operation of business
firms.
2) It opens up fresh avenues/street for the expansion of new
entrepreneurial operations.
3) Knowledge about changing environment enables businessmen
to adopt a dynamic approach and maintain harmony of
business operations with the environment.
4) By studying the environment entrepreneurs can make it
hospitable to the growth of business and thereby earn
popular support.
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 Phases of Business Environment
❖Business environment may be classified into two broad
categories; namely external; and internal environment
A) External Environment
• It is the environment which is external to the business and
hardly to influence independently. The following are the
components of external environment:
-Economic Environment:- Economic environment is of
multidimensional nature. It consists of the structure of the
economy, the industrial, agricultural, trade and transport policies
of the country, the growth and pattern of national income and its
distribution, the conditions prevailing in industrial, agricultural
and other sectors, the position relating to balance of trade and
balance of payments, and other miscellaneous conditions of the
economy
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• Legal Environment:-Business must function within
the framework of legal structure.

✓ Therefore, an adequate knowledge of laws and rules

is necessary for efficient managerial performance.

✓ Some laws differ from region to region and

amendments are made from time to time. Therefore,
the entrepreneur must always keep in touch with
those who know the latest position in law.

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• Political Environment;- In a democratic country,
politics cannot be ignored. Managers and entrepreneurs
should understand the working of the political system
Businessmen should, therefore, learn to take public
opinion into account in the decision-making process.

• Socio-Cultural Environment:- It consist the social

and cultural norms of a society in a given period of time.
The variables that are appraised are values, beliefs, norms,
fashions and fads of a particular society.

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Demographic Environment:- It assesses the
overall population pattern of a given geographical
region. It includes variables like age profile,
distribution, sex, education profile, income
distribution etc.

25
B) Internal Environment
• Internal environment is the environment which is
under the control of a given organization.
• Following are the components of internal
environment of a business
✓ Raw Material
✓ Production/Operation
✓ Finance
✓ Human Resource

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 Environmental Factors Affecting Entrepreneurship

• The interaction between the entrepreneur and his

environment is an ongoing process.
• At any given point of time, the entrepreneurs derive
meanings from the environment prevailing at that
time and try to adapt and/or change the environment
to suit their needs.
❑ Some of the environmental factors which hinder
entrepreneurial growth are given below:
Sudden changes in Government policy.
Sudden political upsurge/increase.
Outbreak of war or regional conflicts.
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Political instability or hostile Government attitude
towards industry.
Ideological and social conflicts.
Unreliable supply of power, materials, finance, labor
and other inputs.
Rise in the cost of inputs.
Unfavorable market fluctuations.
Non-cooperative attitude of banks and financial
institutions.
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 1.7 Creativity, Innovation
1.7 Creativity, Innovation and Entrepreneurship
and Entrepreneurship

Creativity :
•✓ Creativity
the tendencyis tothinking
generate new things, ideas,
or recognize and innovation is
alternatives, or
doing new things
possibilities that maywhat beis entrepreneurship
useful in solvingis creating value
problems,
incommunicating
the market place.
with others, and entertaining ourselves and
others.
• Entrepreneurship is the applying of creativity and innovation
✓ the ability to come up with new idea and to identify new and
to solve problems and to exploit opportunities that people face
different ways of looking at a problem and opportunities.
every day.
Are creative persons born or made?
•Innovation
Innovation is not just creation of new ideas/thoughts, but it is
✓ also
the about translating of
implementation themnewinto products/service.
idea at the individual, group or
• Innovation is the successful exploitation of new ideas
organizational level
✓ incorporating new of
Innovation is process technology, design and best practices.
doing new things.
Innovation is the process of conceptualizing an idea and
transforming that idea into product/service.
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 Steps in the Creative Process
1. Opportunity or problem Recognition: A person
discovers that a new opportunity exists or a problem needs
resolution.
2. Immersion: the individual concentrates on the problem
and becomes immersed in it. He or she will recall and
collect information that seems relevant, dreaming up
alternatives without refining or evaluating them.
3. Incubation: the person keeps the assembled information
in mind for a while.
4. Insight: the problem-conquering solution flashes into the
person’s mind at an unexpected time, such as on the verge
of sleep, during a shower, or while running. Insight is also
called the Aha! Experience.
5. Verification and Application
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 Cont’d
types of innovation, these are as follows:
• Invention - described as the creation of a new
product, service or process
• Extension - the expansion of a product, service or
process
• Duplication - defined as replication of an already
existing product, service or process
• Synthesis - the combination of existing concepts and
factors into a new formulation

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 THE INNOVATION PROCESS
Analytical planning: carefully identifying the
product or service features, design as well as the
resources that will be needed.
Resources organization: obtaining the required
resources, materials, technology, human or capital
resources
Implementation: applying the resources in order to
accomplish the plans
Commercial application: the provision of values to
customers, reward employees and satisfy the
stakeholders.
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MAJOR AREAS OF INNOVATION
»New product
»New service
»New production techniques
»New Way of Delivering the Product or Service to
the Customer:
»New Operating Practices
»New Means of Informing the Customer about
the Product:
»New Means of Managing Relationship within the
Organization

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 Cont’d

• Entrepreneurship = creativity + innovation.

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35
Chapter Objectives
After completing this chapter, students will be able
to:
Identify opportunity in the environment,
Evaluate the opportunities in the
environment,
Generate business idea,
Explain the concept of business planning,
Identify components of business plan,
Develop business plan,
2.1 Opportunity Identification and Evaluation
• Most authors agree that the initial stage in the
entrepreneurial process is the identification and
refinement of a viable economic opportunity that
exists in the market.
• Without the recognition of an opportunity the
entrepreneurial process is likely to result in failure.
• The opportunity identification and evaluation stage
can be divided into five main steps namely:
1. Getting the idea/scanning the environment,
2. Identifying the opportunity,
3. Developing the opportunity,
4. Evaluating the opportunity and
5. Evaluating the team.
1. Scanning the Environment/ Getting the Idea
• Idea is a thought or suggestion about a
possible course of action. Synonymous with
“idea” are the terms thought, intention,
scheme, suggestion, proposal, initiative,
impulse, brainwave, insight, concept and
connotation.
• Opportunity is a favorable time or set of
circumstances for doing something.
Synonymous with opportunity are chance,
opening and prospect.
• A business opportunity is a gap left in a market
by those who currently serve it.
• The difference between an idea and an
opportunity is that an opportunity is the
possibility of occupying the market with a
specific innovative product that will satisfy a
real need and for which customers are willing
to pay but idea is all about opinion about
anything we can have.
2. Opportunity Identification
• Opportunity identification is ability to see,
to discover and exploit opportunities that
others miss.
• It is the process of seeking out better ways
of competing.
• It includes scanning the informational
environment, being able to capture,
recognize and make effective use of
abstract, implicit and changing information
from the changing external environments.
3. Opportunity Development
 Having recognized the opportunity, timely
adaptation of that opportunity to suit actual
market need is key to new venture success.
 Opportunity development is the process of
combining resources to pursue a market
opportunity identified.
 This involves systematic research to refine
the idea to the most promising high potential
opportunity that can be transformed into
marketable items.
4. Opportunity Evaluation
Opportunity screening and evaluation is a critical
element of the entrepreneurial process.

A professional executed evaluation can tell whether the

specific product or service has the returns needed to
justify the investment and the risk to be taken.

it allows the entrepreneur to assess whether the

specific product or service has the returns needed for
the resources required.
This evaluation process involves looking at:

 the creation and length of the opportunity,

 its real and perceived value,

 its risks and returns,

 its fit with the personal skills and goals of the

entrepreneur, and

 its differential advantage in its competitive

environment.
5. Assessment of the Entrepreneurial Team

• Regardless of how right the opportunity may

seem to be, it will not make a successful
business unless it is developed by a team with
strong skills.
• Gartner et al (1999:230) advices that once the
opportunity has been evaluated, the next step
is to ask pertinent questions about the people
who would run the company.
 2.2 Business Idea Development

A business idea is a short and precise description of the

basic operation of an intended business. There are three
types of business ideas. They are:

1. Old Idea – Here an individual copies an existing business idea

from someone.
2. Old Idea with Modification – In this case the person accepts an
old idea from someone and then modifies it in some way to fit a
potential customer’s demand.

3. A New Idea – This one involves the invention of something new

for the first time
2.3 Business Idea Identification
• Before you start a business, you need to have a clear
idea of the sort of business you want to run. Your
business idea will tell you:
FWhich need will your business fulfill for the
customers and what kind of customers willyou
attract?
FWhat good or service will your business sell?
F Who will your business sell to?
F How is your business going to sell its goods or
services?
F How much will your business depend upon and
impact the environment?
 Relation between business and environment
Your business can only be sustainable in the long run if it works in
harmony with the social and natural environment.
 How much does your business depend on the environment?
 Does it rely on the weather, soil or other natural resources?
 Does it need any specific type of labor from the local community?
 Does it need the local community to support it?
 What should you do to make sure that your business nurtures the
natural environment and helps the local community?
 Will your business nurture the natural environment or will it have a
detrimental impact?
 How would you minimize or reverse any negative effect that your
business might have?
 Methods of generating business ideas
a)Learn from successful business owners
b)Draw from experience
-your own experience
-other peoples experience
c)Survey your local business area
d)Scanning your environment
-natural resources
-characteristics and skills of people in the local community
-waste products
-import substitutions
-publications
-trade fairs and exhibitions
e)Brainstorming
• Brain storming is a technique for creative problem-
solving as well as for generating ideas.
• The objective is to come up with as many ideas as
possible.
• It is done between family, friends and classmates.
There are four rules for brainstorming:
1. Don’t criticize or judge the ideas of others
2. Freewheeling is encouraged-ideas that seem to be
wild or crazy are welcome.
3. Quantity is desirable – the greater the number of
ideas, the better the ideas.
4. Combine and improve upon the ideas of others.
f)Structured Brainstorming
• Provides certain rules that participants must follow
in order to make the gathering of input more orderly
and evenly distributed
• It encourages creative thinking between team
members
• Structured brainstorming is when you think of the
different processes that are involved in the
operation of a particular business
-those involved in the production
-those involved in the selling process
-those involved in re-cycling or re-using
materials
g)Focus group
• Focus group is a group of individuals providing
information on a structured format which is led by
moderators.
• It is characterized by an open and in depth discussion:
rather than simply asking questions
h) Problem inventory analysis
• It is similar to focus group to generate new product
ideas. The difference is rather than generating new idea
themselves, consumers are provided with a list of
problems in general product category.
• It is a method of obtaining “New Idea” and solutions
by focusing on problems.
i)Free association
• Is one of the simplest methods that entrepreneurs use
• First, a word or phrase related to the problem is written down,
then another and another, with each new word attempting to add
something new to the ongoing thought processes, thereby creating
a chain of ideas ending with a new product/service idea emerging.
j) Forced relationships - is the process of forcing relationships
among some product combinations.
• is a technique that asks questions about objects or ideas in an
effort to develop a new idea.
k) Attribute listing - is an idea-finding technique that has the
entrepreneur list the attributes of an item or problem and then look at
each from a variety of viewpoints.
• originally unrelated objects can be brought together to form a new
combination and possibly a new product/service that better
satisfies a need.
Screening Business Ideas
1. Macro Screening Criteria (first stage screening)
 Marketability,
 Availability of raw material,
 Ease of implementation,
 Financial ability of the entrepreneur, etc.
2. Micro Screening Criteria (Second stage screening)
i. Marketing Viability- product, target market, size of target market,
demand and supply situation, competition and marketing practices
ii. Technical Viability- technology, source of technology, raw
materials, infrastructure and facilities, location , skills and cost
iii. Organizational and Management Viability- Abilities,
competencies, skills, values and motivations of management/key
officers as per the requirements of project and appropriate legal
personality and organization.
iv. Financial Viability- project cost, sources of financing and
profitability
v. Ecological viability- the project should not affect the
environment
3. Scoring the suitability of business idea
• This approach is most appropriate when deciding on starting a
business.
• When there are more than one possible business ideas and one needs
to decide which one to follow.
• After we score the ideas we sum the total and select the idea with
the highest score.
Collecting information on your business idea gives you an opportunity
to promote your business idea and to present yourself as a potential
entrepreneur. In this process, there are four important groups that you
should talk to:
-potential customers
-competitors, suppliers, and entities with financial resources
-financial institutions
-key informants and opinion leaders
 2.5 Concept of Business Plan

• Planning is the first and the most crucial step for

starting a business. A carefully charted and
meticulously designed business plan can convert a
simple idea/innovation into a successful business
venture.
• A business plan is a road map for starting and
running a business
• A business plan is the blueprint of the step-by-step
procedure that would be followed to convert a
business idea into a successful business venture.
• A well-crafted business plan:
identifies opportunities,
scans the external and internal environment to
assess the feasibility of business and
allocates resources in the best possible way, which
finally leads to the success of the plan.
• It provides information to all concerned people like
the venture capitalist and other financial institutions,
the investors, the employees.
• It provides information about the various functional
requirements (marketing, finance, operations and
human resources) for running a business.
The objectives of a business plan are to:
Give directions to the vision formulated by
entrepreneur.
Objectively evaluate the prospects of business.
Monitor the progress after implementing the
plan.
Persuade others to join the business.
Seek loans from financial institutions.
Visualize the concept in terms of market
availability, organizational, operational and
financial feasibility.
Guide the entrepreneur in the actual implementation
of the plan.
 Identify the strengths and weakness of the plan.
Identify challenges in terms of opportunities and
threats
Clarify ideas and identify gaps in management
information about their business, competitors and
the market.
Identify the resources that would be required to
implement the plan.
Document ownership arrangements, future prospects
and projected growths of the business venture.
 2.6 Developing a Business Plan

2.6.1 Business Planning Process

• A plan, which looks very feasible at the first
instance, might actually not be when the
details are drawn.
• Hence documenting the business plan is one of
the early steps that an entrepreneur should
take.
• As discussed above, the successful
entrepreneur lays down a step-by-step plan
that she/he follows in starting a new business.
• The various steps involved in business planning
process are discussed here below:
1. Preliminary Investigation
Before preparing the plan entrepreneur should:
Review available business plans (if any).
Draw key business assumptions on which the plans
will be based (e.g. inflation, exchange rates, market
growth, competitive pressures, etc.).
Scan the external environment and internal
environment to assess the strengths, weakness,
opportunities and threats.
Seek professional advice from a friend/relative or a
person who is already into similar business (if any).
2. Opportunity Identification and Idea Generation
• Entrepreneurship is not just limited to innovation
(generation of an entirely new concept, product or
service, but it also encompasses incremental value
addition to the concept/product/ services offered to
the consumer, shareholder and employee).
• Opportunity identification and business idea
generation is the first stage of business planning
process.
• It involves generation of new concepts, ideas,
products or services to satisfy demand.
3.Environmental Scanning
• Once a promising idea emerges through
idea generation phase the next step is
environmental scanning, which is carried
out to analyze the prospective strengths,
weakness, opportunities and threats of the
business enterprise.
4. Feasibility Analysis
• Feasibility study is done to find whether the proposed
project (considering the above environmental
scanning) would be feasible or not.
• It is important to demarcate environmental scanning
and feasibility study at this point.
• Environmental scanning is carried out to assess the
external and internal environment of the geographical
area/areas where, entrepreneur intends to set up his
business enterprise,
• whereas feasibility study is carried out to assess the
feasibility of the project itself in a particular
environment in greater detail.
5. Report Preparation
• After environmental scanning and
feasibility analysis, a business plan
report is prepared.
• It is a written document that describes
step-by- step, the strategies involved in
starting and running a business.
 2.6.2 Essential Components of Business Plan
1. Cover Sheet:
• Cover sheet is like the cover page of the book.
• It mentions the name of the project, address of the
headquarters (if any) and name and address of the
promoters.
2. Executive Summary:
• Executive summary is the first impression about the
business proposal.
• As the saying goes, the first impression is the last
impression.
• A careful presentation of information should be done
to attract the attention of the evaluators.
• It should be in brief (not more than two or
three pages) yet it should have all the factual
details about the project that can improve its
marketability.
• It should briefly describe the company;
mention some financial figures and some
salient features of the project.
• Generating interest in the minds of the
readers is the prime motive of the executive
summary.
3. The Business:
• This will give details about the business concept.
• It will discuss the objective of the business, a brief
history about the past performance of the company (if
it is an old company), what would be the form of
ownership (whether it would be a single proprietor,
partnership, cooperative society or a company under
company law).
• It would also label the address of the proposed
headquarters.
4. Funding Requirement:
• A careful, well-planned funding requirement should be
documented.
• It is also necessary to project how these requirements would be
fulfilled.
• Debt equity ratio should be prepared
5. The Product or Services:
• A brief description of product/services is given in this
subsection.
• It includes the key features of the product, the product range
that would be provided to the customers and
• the advantages that the product holds over and above the
similar products/ substitute products available in the market.
• It also gives details about the patents, trademarks, copyrights,
franchises, and licensing agreements.
6. The Plan:
• Now the functional plans for marketing, finance,
human resources and operations are to be drawn.
I. Marketing Plan: Marketing mix strategies are to be
drawn, based on the market research.
II.Operational Plan: The operational plan would give
information about
• Plant location: why was a particular location chosen?
• Plan for material requirements, inventory management
and quality control are also drawn for identifying further
costs and intricacies of the business.
• Finally, the budget for operational plan is also drawn.
III. Organizational Plan:
• The organizational plan indicates the pattern of
flow of responsibilities and duties amongst
people in the organization,
• it provides details about the manpower plan
that would be required to put life into the
business and
• it would also enlist the details about the laws
that would be governed in managing the
employees of the organization.
• In the end the organizational plan is also
budgeted.
IV. Financial Plan:
• The financial plan is usually drawn for two
to five years for an existing company. For a
new organization the following projections
are drawn:
a) Projected Sales

b) Projected Income and Expenditure Statement

c) Projected Break Even Point

d) Projected Profit and Loss Statement

e) Projected Balance Sheet

f) Projected Cash Flows

g) Projected Ratios
V. Critical Risks:
• The investors are interested in knowing the tentative risks to
evaluate the viability of the business and to measure the risks
involved in the business.
• This can further give confidence to the investors as they can
calculate the risks involved in the business from their
perspectives as well.
VI. Exit Strategy:
• The exit strategies would provide details about how the
organization would be dissolved, what would be the share of
each stakeholder in case of winding-up of the organization.
VII. Appendix:
• The appendix can provide information about the Curriculum
Vitae of the owners, Ownership Agreement and the like.