CHAPTER 9

SMALL BUSINESS AND ENTREPRENEURSHIP DEVELOPMENT

SMALL BUSINESS:
A business which operates on small scale and requires less capital, less labour and less machines
is called small business. The goods are produced on a small scale and the business is operated
and managed by the owners of the business.

Micro, Small and Medium Enterprises Development (MSMED)

The definition used by the Government of India to describe MSME is based on the investment in plant
and machinery and turnover. The MSMED Act, 2006 came into force w.e.f., October, 2006.

Types of small business or classification of MSMSED ACT

Category Manufacturing Unit Service Providers Micro Enterprise Less than Rs.
25 Lakhs Less than Rs. 10 Lakhs
Small Enterprise Between Rs. 25 Lakhs to Rs. 10 Crore
Rs. 5 Crore Between Rs. 10 Lakhs to Rs. 2 Crore
Medium Enterprise Between Rs. 5 Crore to Between Rs. 2 Crore to Rs. 5 Crore

Small business are broadly classifiesd into manufacturing and services.

1) MANUFACTURING
There are three types of enterprises under manufacturing:
i. MICRO ENTERPRISE: Where the investment in plant and machinery does not exceed
twenty five lakh rupees.
ii. SMALL ENTERPRISE: Where the investment in plant and machinery is more than
twenty five lakhs rupees but does not exceed five crore rupees.
iii. MEDIUM ENTERPRISE: Where the investment in plant and machinery is more than
five crore rupees but does not exceed ten crores rupees.
2) SERVICES
In the case of enterprises engaged in rendering services there are three types of
enterprises:
i. MICRO ENTERPRISE: Where the investment in equipment does not exceed
ten lakh rupees
ii. SMALL ENTERPRISE: Where the investment in equipment is more than ten
lakhs rupees but does not exceed two crore rupees.
iii. MEDIUM ENTERPRISE: Where the investment in equipment is more than two
crore rupees but does not exceed five crores rupees.
 3) Village Industries Village industry has been defined as any industry located in a rural
area which produces any goods, renders any service with or without the use of power
and in which the fixed capital investment per head or artisan or worker is specified by
the central government, from time to time.
4) Cottage Industries Cottage industries are also known as rural industries or traditional
industries. They are not defined by capital investment criteria as in the case of other
small scale industries.They are characterized by certain feature like the following:
i. These are organized by individuals with private resources.
ii. Normally use family members and locally available talents
iii. Simple equipment are used
iv. Small capital investment
v. Production of goods using indigenous technology

Role of Small business in India.

The following points highlight their contribution.

1. The contribution of these industries to the balanced regional development of our country is
noteworthy. Small industries in India account for 95 per cent of the industrial units in the country. 2.
They generate more number of employment opportunities per unit of capital invested compared to
large industries.
3. MSME in our country supply an enormous variety of products which include mass consumption
goods, readymade garments, hosiery goods, stationery items, soaps and detergents, domestic
utensils etc.
4. Small business can be widely spread without any locational constraints, the benefits of
industrialization can be reaped by every region. They, thus, contribute significantly to the
balanced development of the country.
5. MSME provide ample opportunity for entrepreneurship. The latent skills and talents of people
can be channeled into business ideas which can be converted into reality with little capital
investment and almost nil formalities to start a small business.
6. MSME also enjoy the advantage of low cost of production. Locally available resources are less
expensive.
7. Due to the small size of the organizations, quick and timely decisions can be taken without
consulting many people as it happens in large sized organisations.

Role of Small business in Rural India.

1. Providing employment opportunity in the rural areas especially for the traditional artisans
and weaker sections of society.
2. These industries contribute in reduction of unemployment, poverty, income inequalites
etc.
3. Encourage people in rural areas for setting up agro based industries.
4. Prevents migration of rural populations to urban areas.
 5. Helps in industrialization and development of rural areas.

GOVERNMENT ASSISTANCE TO SMALL INDUSTRIES AND SMALL BUSINESS UNITS

1. NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)
NSIC was set in1955, with the view to promote ,aid and foster the growth of small
business units in the country. This focuses on the commercial aspects of these functions.
i. Supply indigenous and imported machines on easy hire purchase terms.
ii. Procure , supply and distribute indigenous and imported raw materials
iii. Export the products of small business units and develops export worthiness. iv.
Mentoring and advisory services
a. Serve as technology business incubator
b. Creating awareness in the technological upgradation.
c. Developing software technology parks and technology transfer centers.
2. THE DISTRICT INDUSTRIES CENTERS (DICs)
The DICs was launched on 1 May 1978, with a view to providing an integrated
administrative framework at the district level, which would look at the problem of
industrialization in then district. Identification of suitable schemes, preparation of
feasibility reports, arranging for credit, machinery and equipment ,provision of raw
material and other extension services are the main activities undertaken by these
centers.
ENTREPRENEURSHIP DEVELOPMENT:
Entrepreneurship is the process of setting up one’s own business as distinct from pursuing any
other economic activity, be it employment or practicing some profession. The person who set-up
his business is called an entrepreneur. The output of the process, that is, the business unit is
called an enterprise. Entrepreneurship means the process of creating a business unit to earn
profit under the conditions of risk and uncertainty.
CHARACTERISTICS OF ENTREPRENEURSHIP
The following are the characteristics of entrepreneurship:
(i) S y s t e m a t i c A c t i v i t y : Entrepreneurship is a systematic, step-by-step and
purposeful activity. One has to take various steps one after the other to achieve it. One
need special knowledge to complete this activity in a disciplined manner. This special
knowledge can be acquired through education, training and experience.
(ii) Lawful and Purposeful Activity: The object of entrepreneurship is lawful business.
Therefore any illegal activity cannot be called as entrepreneurship simply because it
involves risk.
(iii) Innovation: innovation means something new. Entrepreneurship is creative in the sense
that it involves creation of value. Entrepreneurship is creative also in the sense that it
involves innovationintroduction of new products, discovery of new markets and
sources of supply of inputs, introduction of newer organisational forms for doing
 things better, cheaper, faster and, in the present context, in a manner that causes the
least harm to the ecology/ environment.
(iv) Organization of Production:Under entrepreneurship new methods of production are
adopted an entrepreneur happens to be thinker and talented individual who tries to

find out good opportunities and makes good use of them. When an entrepreneur gets
information about the need for sources of production, their availability and ensure s
their better utilization, it is called organizational production.
(v) Risk-taking: It is generally believed that entrepreneurs take high risks. Yes, individuals
opting for a career in entrepreneurship take a bigger risk that involved in a career in
employment or practice of a profession as there is no “assured” payoff.
NEED FOR ENTREPRENURSHIP:
1. Initiating the process of development: in the developing countries the need for
entrepreneurship originated to start the process of development. Entrepreneurship
results in the establishment of business. The establishment more and more businesses
are reflects the development of country.
2. Sustaining the development: in the developed countries entrepreneurship is need to
maintain the rate of development. In order ton sustain it is essential to keep
innovating in the previously established business units. This id possible only with the
help of entrepreneurship.
3. Providing employement opportunity:
Absence of employment opportunity in the public sector creates the danger of
unemployment. This danger can be faced or eliminated by establishing new business
units, which provides self employment to the entrepreneur and provide employment
to others.
PROCESS OF ENTREPRENEURSHIP DEVELOPMENT:
Entrepreneurship is not born automatically but it is encouraged both by the environment and
the individual itself. The factors affecting entrepreneurship development are as follows: A.
Role of environmental factors in entrepreneurship development:
The following characteristics off economic environment help in the development of
entrepreneurship
i. Economic system
ii. Strong infrastrcture
iii. Reduced rate of interest
iv. Reduced taxation
v. Moderate inflation etc
B. Role of individual factors in entrepreneurship development:
This includes
i. Competency or ability of an individual.
ii. Willingness of an individual.

STARTUP INDIA SCHEME

 The Government of India aims to empower startups to grow through innovation and
design. The scheme specifically aims to:
(i) Trigger an entrepreneurial culture and inculcate entrepreneurial values in the
society at large and influence the mindset of people towards entrepreneurship,
(ii) create awareness about the charms of being an entrepreneur and the process of
entrepreneurship, especially among the youth,

(iii) encourage more dynamic startups by motivating educated youth, scientists

and technologists to consider entrepreneurship as a lucrative, preferred and
viable career, and
(iv) support the early phase of entrepreneurship development, including the pre
startup, nascent, as well as, early post startup phase and growth enterprises.
(v) Broad base the entrepreneurial supply by meeting specific needs of under
represented target groups, like women, socially and economically backward
communities, scheduled castes and scheduled tribes;
CONDITION TO CONSIDER A BUSINESS UNIT AS START UP:
As per the notification dated February 17, 2017, issued by the Ministry of Commerce
and Industry, a startup means:
(i) An entity incorporated or registered in India.
(ii) Not older than five years.
(iii) Annual turnover does not exceed ` 25 crore in any preceding year.
(iv) Working towards innovation, development or commercialization of
products/service/ processes driven by technology or IPRs and patent.

WAYS TO FUND STARTUP:

In addition to the government plans that offer startup capital and bank loans, the funding
for startups can also be availed in the following ways:

(i) Boot strapping: Commonly known as self financing, it is considered as the first funding
option because by stretching out your personal savings and resources, you are tied to your
business. Also, at a later stage, investors consider it as your merit.
However, it is a good option of funding only if the initial requirement is small and
handy.
(ii) Crowdfunding: It is the pooling of resources by a group of people for a common goal.
Crowdfunding is not new to India. There are many instances of organisations
reaching out to common people for funding. However, the emergence of platforms
that promote crowdfunding is fairly recent to India. These platforms help startups or
small businesses to meet their funding requirements.
(iii) Angel investment: Angel investors are individuals with surplus cash who have keen
interest to invest in upcoming startups. They also offer mentoring or advice alongside
 capital.
(iv) Venture capital: There are professionally managed funds which are invested in
companies that have huge potential. Venture capitalists provide expertise, mentorship
and act as a litmus test of where a business organisation is going, evaluating business
from sustainability and scalability point of view.
(v) Business incubators and accelerators: Early stage business can consider incubator
and accelerator programmes as a funding option. These programmes assist hundreds

of startup businesses every year. These two are generally used interchangeably.
However, incubator is like a parent who nurtures the business (child), whereas,
accelerator helps to run or take a giant leap in business. Incubators and accelerators
ably connect the startups with mentors, investors and fellow startups using this
platform.
(vi) Microfinance and NFBCs: Micro finance is basically access to financial services to
those who either do not have access to conventional banking services or have not qualified
for a bank loan. Similarly, NBFCs (Non Banking Financial Corporation) provides banking
services without meeting legal requirement/definition of a bank.
(vii) Winning contest fund: under this method start up fund the competition for the
entrepreneurs engaged in startup is organized. In the competition all of them present
their respective startup plans . the one who give better presentation will be declared
as winner and gets the funds.
(viii) Bank loan: under this method loans can be borrowed by banks.
(ix) Government offer: to give financial help to the startups ,the government has
arranged Rs. 10,000 crores.
(x) Quick money: this includes getting payment prior to the sale of product, sale pf
properties, use of credit card etc.

INTELLECTUAL PROPERTY RIGHTS (IPR)

INTELLECTUAL PROPERTY (IP) refers to the creations of the human mind, like
inventions, literary and artistic works, symbols, names, images and designs used in
business.
INTELLECTUAL PROPERTY RIGHTS (IPR)
All inventions of creations begin with an 'idea'. Once the idea becomes an actual product,
i.e., Intellectual Property, one can apply to the authority concerned under the Government of
India for protection. Legal rights conferred on such products are called 'Intellectual Property
Rights' (IPR).
TYPES OF IPRS
1. Copyright :
 Copyright is the right to "not copy". It is offered when an original idea is expressed
by the creator or author. It is a right conferred upon the creators of literary, artistic,
musical, sound recording and cinematographic film. The copyright is an exclusive
right of the creator to prohibit the unauthorized use of the content which includes
reproducing and distributing copies of the subject matter.
2. Trademark:
A trademark is any word, name, or symbol (or their combination) that lets us identify
the goods made by an individual, company, organization, etc. Trademarks also let us
differentiate the goods of one company from another. In a single brand or logo,
trademarks can let you know many things about a company's reputation, goodwill,

products and services. A trademark helps in distinguishing similar products in the

market from its competitors.
3. Patent :
Patent is a right given to an inventor , under which upto a fixed period only the
inventor can use his invention. Here the invention refers to the creation of some new,
useful and non obvious product or process. Here process refers to the method ,
formula idea etc.
4. Geographical Indication:
it refers to such indications as distinguish a unique product on the basis of its area pf
production, for eg: Darjeeling Tea, Mizo Chilli, Banaras Sarees, Kashmir Pashmina
etc.
5. Tarde secrets:
Trade secrets is an information as is kept secret and it provides the holder a lead over
his competitors. This information can be formula, pattern , process etc