Like any activity you pursue, there are certain musts that are required to be successful in a chosen activity. To legally operate a vehicle on public roadways, one must have a driver's license; to excel in sports, one must train and practice; to retire comfortably, one must become an informed investor and actively invest for retirement. If your goal is success in business, then the formula is no different. There are certain musts that have to be fully developed, implemented and managed for your business to succeed. There are many business musts, but this article contains I believe to be some of the more important musts that are required to start, operate and grow a profitable home business.

What you get out of your business in the form of personal satisfaction, financial gain, stability and enjoyment will be the sum of what you put into your business. So if you don't enjoy what you're doing, in all likelihood it's safe to assume that will be reflected in the success of your business--or subsequent lack of success. In fact, if you don't enjoy what you're doing, chances are you won't succeed.

You cannot expect to be effective and successful in business unless you truly believe in your business and in the goods and services that you sell. Far too many home business owners fail to take their own businesses seriously enough, getting easily sidetracked and not staying motivated and keeping their noses to the grindstone. They also fall prey to naysayers who don't take them seriously because they don't work from an office building, office park, storefront, or factory. Little do these skeptics, who rain on the home business owner's parade, know is that the number of people working from home, and making very good annual incomes, has grown by leaps and bounds in recent years.

Planning every aspect of your home business is not only a must, but also builds habits that every home business owner should develop, implement, and maintain. The act of business planning is so important because it requires you to analyze each business situation, research and compile data, and make conclusions based mainly on the facts as revealed through the research. Business planning also serves a second function, which is having your goals and how you will achieve them, on paper. You can use the plan that you create both as map to take you from point A to Z and as a yardstick to measure the success of each individual plan or segment within the plan.

The lifeblood of any business enterprise is cash flow. You need it to buy inventory, pay for services, promote and market your business, repair and replace tools and equipment, and pay yourself so that you can continue to work. Therefore, all home business owners must become wise money managers to ensure that the cash keeps flowing and the bills get paid. There are two aspects to wise money management.

1. The money you receive from clients in exchange for your goods and services you provide (income)
2. The money you spend on inventory, supplies, wages and other items required to keep your business operating. (expenses)

A home business entrepreneur must always remember that marketing, advertising, or promotional activities are completely worthless, regardless of how clever, expensive, or perfectly targeted they are, unless one simple thing is accomplished-- ask for the sale. This is not to say that being a great salesperson, advertising copywriting whiz or a public relations specialist isn't a tremendous asset to your business. However, all of these skills will be for naught if you do not actively ask people to buy what you are selling.

Your home business is not about the products or services that you sell. Your home business is not about the prices that you charge for your goods and services. Your home business is not about your competition and how to beat them. Your business is all about your customers, or clients, period. After all, your customers are the people that will ultimately decide if your business goes boom or bust. Everything you do in business must be customer focused, including your policies, warranties, payment options, operating hours, presentations, advertising and promotional campaigns and website. In addition, you must know who your customers are inside out and upside down.

One of the greatest myths about personal or business success is that eventually your business, personal abilities, products or services will get discovered and be embraced by the masses that will beat a path to your door to buy what you are selling. But how can this happen if no one knows who you are, what you sell and why they should be buying? Self-promotion is one of the most beneficial, yet most underutilized, marketing tools that the majority of home business owners have at their immediate disposal.

You have but a passing moment to make a positive and memorable impression on people with whom you intend to do business. Home business owners must go out of their way and make a conscious effort to always project the most professional business image possible. The majority of home business owners do not have the advantage of elaborate offices or elegant storefronts and showrooms to wow prospects and impress customers. Instead, they must rely on imagination, creativity and attention to the smallest detail when creating and maintaining a professional image for their home business.

One of the biggest features and often the most significant competitive edge the home based entrepreneur has over the larger competitors is the he can offer personalized attention. Call it high-tech backlash if you will, but customers are sick and tired of hearing that their information is somewhere in the computer and must be retrieved, or told to push a dozen digits to finally get to the right department only to end up with voice mail--from which they never receive a return phone call.

The home business owner can actually answer phone calls, get to know customers, provide personal attention and win over repeat business by doing so. It's a researched fact that most business (80 percent) will come from repeat customers rather than new customers. Therefore, along with trying to draw newcomers, the more you can do to woo your regular customers, the better off you will be in the long run and personalized attention is very much appreciated and remembered in the modern high tech world.

You should avoid getting overly caught up in the high-tech world, but you should also know how to take advantage of using it. One of the most amazing aspects of the internet is that a one or two person business operating from a basement can have a superior website to a $50 million company, and nobody knows the difference. Make sure you're keeping up with the high-tech world as it suits your needs.. The best technology is that which helps you, not that which impresses your neighbors.

No one person can build a successful business alone. It's a task that requires a team that is as committed as you to the business and its success. Your business team may include family members, friends, suppliers, business alliances, employees, sub-contractors, industry and business associations, local government and the community. Of course the most important team members will be your customers or clients. Any or all may have a say in how your business will function and a stake in your business future.

When you have a problem that needs to be solved, do you seek just anyone's advice or do you seek an expert in the field to help solve your particular problem? Obviously, you want the most accurate information and assistance that you can get. You naturally seek an expert to help solve your problem. You call a plumber when the hot water tank leaks, a real estate agent when it's time to sell your home or a dentist when you have a toothache. Therefore, it only stands to reason that the more you become known for your expertise in your business, the more people will seek you out to tap into your expertise, creating more selling and referral opportunities. In effect, becoming known as an expert is another style of prospecting for new business, just in reverse. Instead of finding new and qualified people to sell to, these people seek you out for your expertise.

A home business must have a clearly defined unique selling proposition. This is nothing more than a fancy way of asking the vital question, "Why will people choose to do business with you or purchase your product or service instead of doing business with a competitor and buying his product or service?" In other words, what one aspect or combination of aspects is going to separate your business from your competition? Will it be better service, a longer warranty, better selection, longer business hours, more flexible payment options, lowest price, personalized service, better customer service, better return and exchange policies or a combination of several of these?

Top entrepreneurs buy and read business and marketing books, magazines, reports, journals, newsletters, websites and industry publications, knowing that these resources will improve their understanding of business and marketing functions and skills. They join business associations and clubs, and they network with other skilled business people to learn their secrets of success and help define their own goals and objectives. Top entrepreneurs attend business and marketing seminars, workshops and training courses, even if they have already mastered the subject matter of the event. They do this because they know that education is an ongoing process. There are usually ways to do things better, in less time, with less effort. In short, top entrepreneurs never stop investing in the most powerful, effective and best business and marketing tool at their immediate disposal--themselves.

We're living in a time when we all expect our fast food lunch at the drive-thru window to be ready in mere minutes, our dry cleaning to be ready for pick-up on the same day, our money to be available at the cash machine and our pizza delivered in 30 minutes or it's free. You see the pattern developing--you must make it as easy as you can for people to do business with you, regardless of the home business you operate.

You must remain cognizant of the fact that few people will work hard, go out of their way, or be inconvenienced just for the privilege of giving you their hard-earned money. The shoe is always on the other foot. Making it easy for people to do business with you means that you must be accessible and knowledgeable about your products and services. You must be able to provide customers with what they want, when they want it.

A good reputation is unquestionably one of the home business owner's most tangible and marketable assets. You can't simply buy a good reputation; it's something that you earn by honoring your promises. If you promise to have the merchandise in the customer's hands by Wednesday, you have no excuse not to have it there. If you offer to repair something, you need to make good on your offer. Consistency in what you offer is the other key factor. If you cannot come through with the same level of service (and products) for clients on a regular basis, they have no reason to trust you . . . and without trust, you won't have a good reputation.

Pushing product features is for inexperienced or wannabe entrepreneurs. Selling the benefits associated with owning and using the products and services you carry is what sales professionals worldwide focus on to create buying excitement and to sell, sell more, and sell more frequently to their customers. Your advertising, sales presentations, printed marketing materials, product packaging, website, newsletters, trade show exhibit and signage are vital. Every time and every medium used to communicate with your target audience must always be selling the benefits associated with owning your product or using your service.

Always go out of your way to get involved in the community that supports your business. You can do this in many ways, such as pitching in to help local charities or the food bank, becoming involved in organizing community events, and getting involved in local politics. You can join associations and clubs that concentrate on programs and policies designed to improve the local community. It's a fact that people like to do business with people they know, like and respect, and with people who do things to help them as members of the community.

Small-business owners cannot waste time, money and energy on promotional activities aimed at building awareness solely through long-term, repeated exposure. If you do, chances are you will go broke long before this goal is accomplished. Instead, every promotional activity you engage in, must put money back in your pocket so that you can continue to grab more attention and grow your business.

The ability to negotiate effectively is unquestionably a skill that every home business owner must make every effort to master. It's perhaps second in importance only to asking for the sale in terms of home business musts. In business, negotiation skills are used daily. Always remember that mastering the art of negotiation means that your skills are so finely tuned that you can always orchestrate a win-win situation. These win-win arrangements mean that everyone involved feels they have won, which is really the basis for building long-term and profitable business relationships.

Carefully plan and design your home office workspace to ensure maximum personal performance and productivity and, if necessary, to project professionalism for visiting clients. If at all possible, resist the temptation to turn a corner of the living room or your bedroom into your office. Ideally, you'll want a separate room with a door that closes to keep business activities in and family members out, at least during prime business and revenue generating hours of the day. A den, spare bedroom, basement or converted garage are all ideal candidates for your new home office. If this is not possible, you'll have to find a means of converting a room with a partition or simply find hours to do the bulk of your work when nobody else is home.

The key to staying organized is not about which type of file you have or whether you keep a stack or two of papers on your desk, but it's about managing your business. It's about having systems in place to do things. Therefore, you wan to establish a routine by which you can accomplish as much as possible in a given workday, whether that's three hours for a part-time business or seven or nine hours as a full-timer. In fact, you should develop systems and routines for just about every single business activity. Small things such as creating a to-do list at the end of each business day, or for the week, will help keep you on top of important tasks to tackle. Creating a single calendar to work from, not multiple sets for individual tasks or jobs, will also ensure that jobs are completed on schedule and appointments kept. Incorporating family and personal activities into your work calendar is also critical so that you work and plan from a single calendar.

The temptation to work around the clock is very real for some home business owners. After all, you don't have a manager telling you it's time to go home because they can't afford the overtime pay. Every person working from home must take time to establish a regular work schedule that includes time to stretch your legs and take lunch breaks, plus some days off and scheduled vacations. Create the schedule as soon as you have made the commitment to start a home business. Of course, your schedule will have to be flexible. You should, therefore, not fill every possible hour in the day. Give yourself a backup hour or two. All work and no play makes you burn out very fast and grumpy customer service is not what people want.

It's difficult for most business owners not to take a hands-on approach. They try to do as much as possible and tackle as many tasks as possible in their business. The ability to multitask, in fact, is a common trait shared by successful entrepreneurs. However, once in a while you have to stand back and look beyond today to determine what's in the best interest of your business and yourself over the long run. Most highly successful entrepreneurs will tell you that from the time they started out, they knew what they were good at and what tasks to delegate to others.

Constant contact, follow-up, and follow-through with customers, prospects, and business alliances should be the mantra of every home business owner, new or established. Constant and consistent follow-up enables you to turn prospects into customers, increase the value of each sale and buying frequency from existing customers, and build stronger business relationships with suppliers and your core business team. Follow-up is especially important with your existing customer base, as the real work begins after the sale. It's easy to sell one product or service, but it takes work to retain customers and keep them coming back.

This article has been excerpted from the Ultimate Home Based Business Handbook
by James Stephenson, available from Entrepreneur Press .

1. Mission: Leaders know what their mission is. They know why the organization exists. A superior leader has a well thought out (often written) mission describing the purpose of the organization. That purpose need not be esoteric or abstract, but rather descriptive, clear and understandable. Every employee should be able to identify with the mission and strive to achieve it.
2. Vision: Where do you want your organization to go? A vision needs to be abstract enough to encourage people to imagine it but concrete enough for followers to see it, understand it and be willing to climb onboard to fulfill it.
3. Goal: How is the organization going to achieve its mission and vision and how will you measure your progress? Like a vision, goals need to be operational; that is specific and measurable. If your output and results can't be readily measured, then it will be difficult to know if you have achieved your purpose. You may have wasted important resources (time, money, people, and equipment) pursuing a strategy or plan without knowing if it truly succeeded.

You must be seen by your advisors, stakeholders, employees, and the public as being an expert in your field or an expert in leadership. Unless your constituents see you as highly credentialed--either by academic degree or with specialized experience- -and capable of leading your company to success, it will be more difficult for you to be as respected, admired, or followed.

Practically speaking, not all executives immediately possess all of the characteristics that spell success. Many leaders learn along the way with hard work. As crises and challenges arise, those at the top of the hierarchy have key opportunities to demonstrate to others that they are in fact, qualified to be leaders. In actuality, greater competency can be achieved as a leader gains more on-the-job experiences.

Realistically, few executives possess all of the skills and abilities necessary to demonstrate total mastery of every requisite area within the organization. To complement the areas of weakness, a wise leader assembles effective teams of experienced, credentialed, and capable individuals who can supplement any voids in the leader's skill set. This ability is what sets leaders apart from others. However, the leader needs to be willing to admit he lacks certain abilities and go about finding trusted colleagues to complement those deficiencies. After building the team, the entrepreneur needs to trust that team to understand issues, create solutions, and to act on them.

It does little good to have a strong mission, vision, and goals--and even a solid budget--if the executive cannot easily and effectively convey his ideas to the stakeholders inside and outside of the organization. He must regularly be in touch with key individuals, by email, v-mail, meetings, or other forms of correspondence. Of course, the best way to ensure other people receive and understand the message is with face-to-face interactions.

Getting out of the office or touring different sites is an irreplaceable method of building rapport and sending and receiving messages. "Management By Walking Around," or MBWA, meeting employees at their workstations or conference rooms, or joining them for lunch are just a few of the many effective approaches leaders can use to develop positive contacts with employees.

Successful entrepreneurs are comfortable relating to other people; they easily create rapport and are at least more extroverted than they are introverted. These factors help leaders seem approachable, likeable, and comfortable in their position. Those qualities contribute to staff wanting to interact with their leader. They also help motivate employees to do a better job. When workers can relate to their boss, they believe that their boss is more concerned about them, with their performance, and with their output. Furthermore, they believe that they can go to their boss with problems they encounter on the job without fearing consequences for not knowing how to resolve issues.

Not all entrepreneurs are adept at interpersonal skills. Those that aren't, might find it helpful to take a course, choose a mentor or locate a therapist to help them build interpersonal skills. The intangible cost is too high to not improve these abilities. In addition, here's where a strong team comes into play. The less experienced leader who is still learning these skills can rely on the team to get out and to "press the flesh," interact with employees, and spread a positive attitude to help develop morale.

Nothing builds a picture of success more than achievement, and achievement is the number one factor that motivates just about everyone across all cultures. When employees see that their boss can lead and direct, has a clear vision and attainable goals, and actually gains results in a timely manner, then that person's credibility increases throughout the organization. Entrepreneurs must modestly demonstrate their skills to give their constituents valid reasons to appreciate and value their efforts.

Quite often, employees need someone to look up to for direction, guidance, and motivation. The entrepreneur needs to be that person. Hopefully, Human Resources has hired self-motivated individuals. Nevertheless, there are times, when many employees need the boss to inspire them by word or action. Employees need someone to look up to, admire, and follow. Even when the production or delivery of services looks like "it is all going well," the leader may at times need to step in personally to offer a suggestion or encouragement to ensure that employees perform their jobs in an optimal manner.

Resting on your laurels is bad for employee morale and entrepreneurial credibility. Employees need to be constantly striving for improvement and success; and they need to see the same and more in their leaders. When the boss is seen as someone who works to attain increasingly higher goals, employees will be impressed and more willing to mirror that behavior. It's a win-win for everyone.

The Department of Labor predicts that the #1 employer in 2010 will be "self." An Internet poll of 25-44 year olds revealed that 90% of them hoped to own their own businesses. A survey conducted by Ernst and Young found that 75% of influential Americans believe that entrepreneurship will be the defining trend of the 21st century. Some of the factors that have attributed to the rise of the modern day entrepreneurial spirit are access to technology, a global economy and corporate stagnation.

Many workers have experienced feelings of discontent - likely due to the upsizing, downsizing, and right-sizing of corporations. But whatever the reason, modern workers want to have more control over the work they do. And they want work that is meaningful and important to them. Now is a great time to become your own boss. In fact, the number of Americans who are running their own businesses will continue to grow as we move further into the millennium.. As workers' values are changing and people want more time to do the things they love with those they love, having employment that allows for a greater balance in their lives is critical to today's worker.

In fact, it is downright un-American not to believe in the principles of entrepreneurship. We started out working on the family farm or in the family-owned grocery store (or other small business), but as our country became more industrialized, families were pulled apart. We had to go where the work was. We left our homes and hometowns and ventured into the big cities. Big companies, industries and corporations popped up all over the country, and we became reliant on them to take care of us. Today, with the advent of the computer, we don't even have to leave home to conduct business. It frees us up to concentrate on the "business of life" again.

The new world of work encourages the entrepreneurial mindset, in that we need to learn to use our imagination to dream up new ideas, challenge assumptions and belief systems to find a better way, and break through worn-out thinking to create new and innovative products and services. This way of thinking is helpful whether you are working for yourself or someone else.

The characteristics of entrepreneur can be defined as 'anyone who undertakes a commercial risk for profit and/or tackles new challenges'. They are the change agents of society because they see a problem and want to find a way to solve it. They believe in being self-reliant and taking action to better their communities. Robert Schwartz's definition: "An entrepreneur is essentially a visualizer and actualizer. He can visualize something and when he visualizes it, he sees exactly how to make it happen."

Successful entrepreneurs realize that if it is to become a reality, they are the ones to make it happen. An entrepreneur is someone who is able to continually reinvent himself, and to rethink an entire project (and possibly start all over again) if he finds that something is not right. Thus, someone who has vision, flexibility, and a risk-taking nature fares very well in self-employment ventures.

Of course, like anything else, there are pros and cons to becoming an entrepreneur. One pro is that you are the boss. The con is that you still have other co-workers, customers, and vendors to rely on to get the job done. People who are self-employed often only have illusions of control. For instance, you may think you have everything under control and then something happens that puts everything out of your control. The difference is that being the boss means that it all comes down to you. You are fully responsible for your success. For many people this level of personal responsibility is part of the challenge and enjoyment. The truth is that any successful entrepreneur rolls with the punches and moves with the winds of change. Take this test to find out if you have what it takes to be an entrepreneur.
Are You the Entrepreneurial Type?

• Responsible
• Hard Worker
• Risk Taker
• Creative
• Flexible
• Follows through with ideas
• Personable
• Optimistic
• Perceptive
• Self-confident
• Determined
• High degree of energy
• Innovative
• Independent
• Ability to anticipate needs
• Effective communicator
• Responsive to criticism
• Able to take the lead
• Learn from mistakes
• Self-directed

• I am goal and action-oriented.
• I am a self-starter.
• I am self-confident.
• I am a persistent person.
• I like taking risks.
• I am flexible and adaptable when necessary.
• I am a problem-solver.
• I am an innovative thinker.
• I can sell myself and/or my product to others.
• I accept responsibility for my actions.
• I enjoy networking.
• I can function in an environment of uncertainty.
• I like being in charge.
• I am willing to devote whatever time and energy it takes to be successful.
• I am able to see what needs to be done and then do it.

Get Smart!

By: Michelle L. Casto

Without these basic features, though, it’s hard to do well even with the best of business ideas.

Plenty of business experts claim that you can’t get anywhere as an entrepreneur without vision or creativity, but that’s simply not the truth. Instead, the one quality that no entrepreneur can be successful without is discipline. To build an idea into a business, you have to have the discipline to spend time slogging through the least fun parts of running a business (like the bookkeeping), rather than taking that time to do something fun. When you’re the boss, there’s no one to keep you at work except yourself — and there’s no short-term consequences for skipping out early. Sure, if an entrepreneur plays hooky enough he knows that the business just won’t happen, but it’s very hard to convince someone that ‘just this once’ won’t hurt (and to keep ‘just this once’ from becoming a daily occurrence).

Things go wrong when you run your own business. Most entrepreneurs go through crises with their businesses — and more than a few wind up with outright failures on their hands. But when you’re responsible for a business, you have to be able to keep calm in any situation. Any other reaction — whether you lose your temper or get flustered — compounds the problem. Instead, a good entrepreneur must have the ability to keep his cool in an emergency or crisis. It may not make the problem easier to solve, but it certainly won’t make it harder. If an Entrepreneur can handle failure without frustration or anger, he can move past it to find success.

Restricting your attention to the big picture can be even more problematic than ‘sweating the small stuff.’ As an entrepreneur, unless venture capital has magically dropped out of the sky, a small expense can be a killer. It’s attention to detail that can make a small business successful when it has competition and it’s attention to detail that can keep costs down. Attention to detail can be difficult to maintain — going over ledgers can be tedious even when you aren’t trying to pay close attention — but keeping your eye on a long-term vision is just asking for a problem to sneak in under a radar. After a business grows, an entrepreneur might be able to hire someone to worry about the details. In the beginning, though, only one person can take responsibility for the details.

No entrepreneur has a sure thing, no matter how much money he stands to earn on a given product. Even if a product tests well, the market can change, the warehouse can burn down and a whole slew of other misfortune can befall a small business. It’s absolutely risky to run a business of your own and while you can get some insurance, it’s not like most investment options. Even worse, if something does go wrong, it’s the entrepreneur’s responsibility — no matter the actual cause. In order to deal with all of that without developing an ulcer, you have to have a good tolerance for risk. You don’t need to channel your inner frat boy and take on absolutely stupid risks, but you need to know just how much you can afford to risk — and get a good idea of how likely you are to lose it. If the numbers make you uncomfortable, the risk is too great. An entrepreneur has to be willing to accept pretty big risks, with some level of comfort.

You can take any characteristic too far. There’s a point at which attention to detail can become obsession or calm can become unemotional response. As an entrepreneur, you have to be able to balance your characteristics, getting the most of them without going over the edge. But balance for an entrepreneur goes far beyond keeping your characteristics in check, though. Just as an entrepreneur doesn’t have a boss to keep him at work when necessary, he doesn’t have one to send him home when he’s done. If you are working for yourself, you have to decide how to balance your work and home life — and if you have a day job to add into the equation, balance just gets more complicated.

A project must reflect the organization's mission, culture and strategic objectives. Explore the information on processes that work elsewhere, then work through the options and adapt the techniques and processes to your unique requirements. As importantly, you must commit to enforce these standards for project submission, approval, resource allocation and monitoring.

Distinguish between activities and achievements, stressing the many benefits of a result focus and the pitfalls to realize those results. This difficult concept lays the foundation for a project planning, but it requires intellectual capabilities that not everyone possesses. Ensure that every project is checked by an in-the-field decision-maker with the appropriate strategic vision.

When describing your business, generally you should explain:

• Legalities: business form: whether proprietorship, partnership, and corporation. The
  licenses or permits you will need.
• Business type: merchandizing, manufacturing or service.
• What your product or service is.
• Is it a new independent business, a takeover, an expansion, a franchise?
• Why your business will be profitable. What are the growth opportunities? Will franchising impact on growth opportunities? When your business will be open (days, hours)?
• What you have learned about your kind of business from outside sources (trade suppliers, bankers, other franchise owners, franchiser, publications).

A cover sheet goes before the description. It includes the name, address and telephone number of the business and the names of all principals. In the description of your business, describe the unique aspects and how or why they will appeal to consumers. Emphasize any special features that you feel will appeal to customers and explain how and why these features are appealing.

The description of your business should clearly identify goals and objectives and it should clarify why you are, or why you want to be, in business.

The location of your business can play a decisive role in its success or failure. Your location should be built around your customers, it should be accessible and it should provide a sense of security. Consider these questions when addressing this section of your project plan:

• What are your location needs?
• What kind of space will you need?
• Why is the area desirable? the building desirable?
• Is it easily accessible? Is public transportation available? Is street lighting adequate?
• Are market shifts or demographic shifts occurring?

Marketing plays a vital role in successful business ventures. How well you market you business, along with a few other considerations, will ultimately determine your degree of success or failure. The key element of a successful marketing plan is to know your customers-their likes, dislikes, expectations. By identifying these factors, you can develop a marketing strategy that will allow you to arouse and fulfill their needs.

Identify your customers by their age, sex, income/educational level and residence. At first, target only those customers who are more likely to purchase your product or service. As your customer base expands, you may need to consider modifying the marketing plan to include other customers.

Develop a marketing plan for your business by answering these questions. (Potential franchise owners will have to use the marketing strategy the franchisor has developed.) Your marketing plan should be included in your Project and contain answers to the questions outlined below.

• Who are your customers? Define your target market(s).
• Are your markets growing? Steady? Declining?
• Is your market share growing? Steady? Declining?
• If a franchise, how is your market segmented?
• Are your markets large enough to expand?
• How will you attract, hold, increase your market share? If a franchise, will the franchiser provide assistance in this area? Based on the franchiser’s strategy? How will you promote your sales?
• What pricing strategy have you devised?

Appendix I contains a sample Marketing Plan and Marketing Tips, Tricks and Traps, a condensed guide on how to market your product or service. Study these documents carefully when developing the marketing portion of your project plan.

Your pricing strategy is another marketing technique you can use to improve your overall competitiveness. Get a feel for the pricing strategy your competitors are using. That way you can determine if your prices are in line with competitors in your market area and if they are in line with industry averages.

• Retail cost and pricing
• Competitive position
• Pricing below competition
• Pricing above competition
• Price lining
• Multiple pricing
• Service costs and pricing (for service businesses only)
• Service components
• Material costs
• Labor costs
• Overhead costs

The key to success is to have a well-planned strategy, to establish your policies and to constantly monitor prices and operating costs to ensure profits. Even in a franchise where the franchiser provides operational procedures and materials, it is a good policy to keep abreast of the changes in the marketplace because these changes can affect your competitiveness and profit margins.

Appendix 1 contains a sample Price/Quality Matrix; review it for ideas on pricing strategies for your competitors. Determine which of the strategies they use, if it is effective and why it is effective.

How you advertise and promote your goods and services may make or break your business. Having a good product or service and not advertising and promoting it is akin to not having a business at all. Many business owners operate under the mistaken concept that the business promotes itself. Advertising and promotion, however, is the lifeline of a business and should be treated as such.

Devise a plan that uses advertising and networking as a means to promote your business. Develop short, descriptive copy (text material) that clearly identifies your goods or services, its location and price. Use catchy phrases to arouse the interest of your readers, listeners or viewers. In the case of a franchise, the franchiser provides advertising and promotional material as part of the franchise package; you may need approval to use any material that you develop. Whether or not this is the case, as a courtesy, allow the franchiser the opportunity to review, comment on and, if required, approve these materials before using them. Make sure the advertisements you create are consistent with the image the franchiser is trying to project. Remember, the more care and attention you devote to your marketing program, the more successful your business will be.

Managing a business requires more than just the desire to be your own boss. It demands dedication, persistence, the ability to make decisions and the ability to manage both employees and finances. Your management plan, along with your marketing and financial management plans, sets the foundation for and facilitates the success of your business. Like plants and equipment, people are resources - they are the most valuable asset to a business. It's imperative that you know what skills you possess and those you lack since you will have to hire personnel to supply the skills that you lack. Additionally, it is imperative that you know how to manage and treat your employees. Make them a part of the team. Keep them informed of, and get their feedback regarding, changes. Employees oftentimes have excellent ideas that can lead to new market areas, innovations to existing products or services or new product lines or services which can improve your overall competitiveness.

• How does your background/business experience help you in this business?
• What are your weaknesses and how can you compensate for them?
• Who will be on the management team?
• What are their strengths/weaknesses?
• What are their duties?
• Are these duties clearly defined?
• If a franchise, what type of assistance can you expect from the franchisor?
• Will this assistance be ongoing?
• What are your current personnel needs?
• What are your plans for hiring and training personnel?
• What salaries, benefits, vacations, holidays will you offer? If a franchise, are these issues covered in the management package the franchisor will provide?
• What benefits, if any, can you afford at this point?

If a franchise, the operating procedures, manuals and materials devised by the franchisor should be included in this section of the business plan. Study these documents carefully when writing your business plan, and be sure to incorporate this material. The franchisor should assist you with managing your franchise. Take advantage of their expertise and develop a management plan that will ensure the success for your franchise and satisfy the needs and expectations of employees, as well as the franchisor.

- DIC = District Industries Center
- SISI = Small Industry Service Institute
- TCOs = Technical consultancy Organization
- SFCs = State Financial Corporations
- NSIC = National Small Industries Corporation
- DFRI = Defense Food Research Laboratory
- ED Inst. = Entrepreneurship Development Organization
- CFTRI = Central Food Technology Research Institute
- IDCs = Infrastructure Development Corporations
- LA = Local Authorities like Municipalities
- EPC (APEDA, MPEDA) = Export Promotion Council (Agriculture and Processed
- Food Export Development Authority, Marine Products Export Development Authority)

The overriding reason for anyone to think of establishing a SSI unit can be summarised in one word - opportunity. An opportunity to be your own boss, to provide a product or service, to implement your ideas which can generate sufficient surplus is reason to think of starting up a SSI unit. Starting a small business takes a lot of courage. To be successful - to stay in business - you need a combination of hard work, skill and perseverance. Generally, people who start their own businesses can be grouped into two broad categories. The first group consists of people who know exactly what they want to do and are merely looking for the opportunity or resources to do it. These people may have already developed many of the skills necessary to succeed in their chosen field and are also likely to be familiar with industry customs and practices, which can help during the startup phase of a new business. The second group consists of people who want to start their own business, but don't have any real definite ideas about what they'd like to do. They may have developed skills in the course of their employment or education, but may not be interested in opening a business in the same field of endeavour. How a person will proceed depends on, mainly, to which group they belong to. To evaluate the aptitude for small business ownership, an entrepreneur needs to:

Before starting a business entrepreneur should know what's involved in owning a business and what are the roles s(he)'ll have to play if they start on their own one? Most important fact to keep in mind is - Owning a small business is not just another job but a lot more than that. You are totally and completely responsible for its growth, development and its future. It's a completely different lifestyle. Entrepreneurs have to ask themselves whether they are ready for a complete commitment to the success of their business. As a small business owner, entrepreneurs are going to have less time for their personal life and probably be using much of what they own as collateral to raise money for the business. The pros and cons of owning a business are listed below.

Pros:

• You'll be your own boss and the boss of other people and make the decisions that are crucial to the business' success or failure.
• You'll have the chance to put your ideas into practice.
• You will make money for yourself rather than for someone else.
• You may participate in every aspect of running a business and learn more about every aspect of a business and gain experience in a variety of disciplines.
• You'll have the chance to work directly with your customers.
• You'll have the personal satisfaction of creating and running a successful business.
• You'll be able to work in a field or area that you really enjoy.
• You'll have the chance to build retirement value (for example, by selling the business when you retire).
• Last but not the least no one can fire you.

Cons:

• You may have to take a large financial risk and will probably have to work long hours and may have fewer opportunities to take vacations.
• You may end up spending a lot of your time attending to the details of running a business and less time on those things you really enjoys.
• You may find that your income is not steady and that there are times when you don't have much income coming in at all.
• You may have to undertake tasks you find unpleasant, such as firing someone or refusing to hire a friend or relative.
• You may have to learn many new disciplines, such as filing and bookkeeping, inventory control, production planning, advertising and promotion, market research, and general management.

Special Pros And Cons Of The Home-Based Business:

• Your startup costs will be lower.
• Your operating costs will be lower than they would if you were renting space and paying utilities.
• Your commute will be shorter.
• If your location is unimportant to your business, you can theoretically live anywhere and still operate your business.
• You may be more flexible in your schedule if your business can be conducted at your convenience or outside "normal" weekday business hours.
• On the other hand, you're much more vulnerable to interruptions from family members, neighbors, and door-to-door salespeople.
• You may have trouble attracting qualified employees.
• You may be less accessible to suppliers.
• You may have an image problem, although with the growing popularity of home businesses, that's less common.
• You may run out of space at home if your business grows.

What do you want from your business? If you want to "succeed," how will you know if you get there? What should be the next goal once you reach the initial goal. Knowing what you want from your business permeates all of the other decisions you'll have to make in starting a new business. It will affect which business you choose, how you evaluate your chances for success, and how you determine if you have the right skills.

Your life will change completely once you start your own business. Try to comprehend the degree to which your life is going to change when you become a business owner? Many of the more "secure" aspects of employee life does not exist/ will vanish once you open up your own business. You might have to be perform more than one function, work at all irregular hours, juggle between business and household demands. You will need to reprioritise your schedule, work and personal life.

Evaluate your own skills and make judgments about whether you're ready to own your own business. There are many entrepreneurial quizzes available on the net and with Entrepreneurship Development Institute, which test your entrepreneurial capabilities.

Successful small business owners know their own strengths and weaknesses. They build their businesses around their strengths and they compensate for their weaknesses. If you're to succeed, you'll have to be able to identify what you do well and what you don't do so well. While evaluating yourself, be honest otherwise you'll only hurt yourself if you're not. Also, don't panic if you discover that you have weaknesses. Every one including small business owner has them. The key to success is not so much in having every skill as it is in finding ways to compensate for those weaknesses. By evaluating yourself, you are making a list of what you like to do and what you don't like to do. Generally, you like to do things you are good at and you don't like doing things you're not good at. It's a simple approach, but it should help you start to focus.

Though the list is not exhaustive it does tell you about the major characteristic of a entrepreneur.

Entrepreneurs keep themselves physically resilient and in good health. They need to work for extended periods of time, and while they are in the process of building their business, good health is a must. In small businesses, where generally management resides in hand of 1 or 2 person, the leader must be there. In a new start up entrepreneur cannot afford a support staff to cover all business functions, and therefore he will need to work long hours. At the end of the eight-hour day, when everyone else leaves for home, you have to continue to work into the evening, developing new business ideas, checking out days work and chalk out strategy to deal with challenges and problems.

Most entrepreneurs believe they can do the job better than anyone else and will strive for maximum responsibility and accountability. An entrepreneur needs to maintain his/her calm even in face of adversity. Entrepreneur realises loosing temper won't help the situation.

Entrepreneurs enjoy creating business strategies and thrive on the process of achieving their goals. Once they achieve a goal, they quickly replace it with a greater goal. They strive to exert whatever influence they can over future events. They have a compelling need to do their own thing in their own way. They need the freedom to choose and to act according to their own perception of what actions will result in success.

Entrepreneurs are self-confident and tackle problems immediately with confidence and are persistent in their pursuit of their objectives. Most are at their best in the face of adversity, since they thrive on their own self-confidence. Before anyone else you have to believe in yourself and your product or services. It will show when you will meet your future customer, and suppliers.

Entrepreneurs have a never-ending sense of urgency to develop their ideas. Inactivity makes them impatient, tense, and uneasy. They thrive on activity and are tireless in the pursuit of their goals.

Successful entrepreneurs should have ability to comprehend complex situations that may include planning, making strategic decisions, and working on multiple business ideas simultaneously. They are farsighted and aware of important details, and they will continuously review all possibilities to achieve their business objectives. At the same time, they devote their energy to completing the tasks immediately before them.

Entrepreneurs are realistic, they accept things as they are and deal with them accordingly. They will change their direction when they see that change will improve their prospects for achieving their goals. They will verify any information they receive before they use it in making a decision.

Entrepreneur should possess the ability to identify relationships quickly in the midst of complex situations. They identify problems and begin working on their solution. They are not troubled by ambiguity and uncertainty because they are used to solving problems. Entrepreneurs are natural leaders and are usually the first to identify a problem to be overcome. They quickly identify an alternative problem-solving approach.

Entrepreneurs like the business they have built to be praised. When they need help, they will not hesitate to admit it especially in areas that are outside of their expertise. During tough business periods, entrepreneurs will concentrate their resources and energies on essential business operations. They want to be where the action is and will not stay in the office for extended periods of time.

Entrepreneurs are more concerned with people's accomplishments than with their feelings. They generally avoid becoming personally involved and will not hesitate to sever relationships that could hinder the progress of their business.
Entrepreneurs are impatient and drive themselves and everyone around them. They don't have the tolerance or empathy necessary for team building unless it's their team, and they will delegate very few key decisions.
Entrepreneurs need good interpersonal skills to be able to adjust and survive as their organization grows and becomes more structured. Top Emotional Stability
Entrepreneurs should have a considerable amount of self-control and should be able to handle business pressures. They should learn to relax in stress situations and are challenged rather than discouraged by setbacks or failures. Entrepreneurs are uncomfortable when things are going well. They'll frequently find some new activity on which to vent their pent-up energy. They are not content to leave well enough alone. Entrepreneurs tend to handle people problems with action plans without empathy. Their moderate interpersonal skills are often inadequate to provide for stable relationships. However, the divorce rate among entrepreneurs is about average.
You might possess three or more of the characteristic listed above, you don't necessarily need them all use your strengths to compensate for your weaknesses.
Once you've decided that you have the right stuff to be an entrepreneur, check out the following prime considerations for determining if your business idea has a chance to succeed before you pump your life savings into a small business.

• Does the idea fire up your motivation and is it adequate enough to keep you going for next 1-2 years?
• Is it a viable business proposition in your area?
• Does it match the needs of your clientele, local or otherwise?
• Check it out with basic market research.
• Test it out at market place
• Consult with the experts
• Look out for competition in the field
• Is it a sunrise industry?
• Your business opportunity
• Project conceptualisation

In short, ideas need to be filtered through a 5-layer sieve of

• Researching your industry- how can you learn more about your chosen industry and about the resources that are available to help you?
• Market assessment- is there a market for your product or service? If so, how much income can you expect to derive from it?
• Profitability assessment- how much will starting a new business cost you? Can you afford a lengthy "red ink" period following startup, as well as periodic lulls in cash flow? Can you afford to fail?
• Financing assessment- will you be able to obtain the necessary financing for your business? If so, from where?
• Legal assessment- what potential legal liabilities are you exposing yourself to by starting a new business? Are the costs of protecting yourself worth the trouble?

Once the ideas are screened and a viable business opportunity emerges the project has to be conceptualised in all its dimensions. The 4 P's of Project Conception are:

• Product (Shape, Size and Nature)
• Process (Technology to produce the product)
• Place (Location of Plant)
• Partner (Technological or Financial Collaborator)

Having a business plan will help you in defining these 4 P's and chalking out the strategy for future of your business. It will help you establish goals, targets and identify the strengths and weaknesses.

Provisional Registration Of The Unit In The Concerned State / Union Territory

Provisional Registration enables a party to take the necessary steps to bring the unit into existence. It should after providing satisfactory proof of the unit having come into existence be converted into a regular registration later. Application for Provisional Registration is submitted to the District Industries centre (DIC).
The issue of provisional registration is normally automatic and is given within seven days on the receipt of the Application, unless the proposed industry is one which needs raw materials which have been declared as not available to new units because of their acute scarcity. The Development Commissioner, Small Scale Industries from time to Time, circulate the list of industries for which raw materials are in scarcity.
The initial validity of the provisional registration is six months, it may be renewed for a further period of six months on submission of satisfactory proof that the party has taken effective steps to establish the unit but could not complete the same. When all the steps to establish the unit have been taken i.e. the factory building is ready, power connection is given, the machinery is installed, and Application may be made for the conversion of provisional Registration into permanent registration.
New enterprises to be located in the four major metropolitan cities of Bombay. Calcutta, Madras and New Delhi, where there is no DIC should obtain provisional certificate from the Directorate of industries or the designated offices in these cities.
The provisional registration may entitle a party to :

• Apply for a shed in an Industrial estate/developed site for construction of a shed to construction of a shed as the case may be
• Apply to corporation / municipal / panchayat/ the local authorities for permission to construct the shed to establish the unit
• Apply for power connection
• Apply for financial assistance to SFC / Nationalised Banks / other financial institutions on the basis of Project Report as may be required by them
• Apply to NSIC/ SSIC / other institutions for procuring machinery on Hire purchase basis.
• Make firm arrangements for working capital resources with Banks and other institutions
• Obtain other registrations whenever required, for sales tax, excise duties etc.
• Apply for import of raw materials
• To take other steps necessary to establish industrial units

Legal Aspects

Registering SSI Unit

Small Scale and ancillary units (i.e. undertaking with investment in plant and machinery of less than Rs. 6.0 million and Rs. 7.5 million respectively) should seek registration with the Director of Industries of the concerned State Government.
The main purpose of Registration is to maintain statistics and maintain a roll of such units for the purposes of providing incentives and support services.
States have generally adopted the uniform registration procedures as per the guidelines. However, there may be some modifications done by States. It must be noted that small industries is basically a state subject. States use the same registration scheme for implementing their own policies. It is possible that some states may have a 'SIDO registration scheme' and a 'State registration scheme'.

Benefits Of Registering

The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt. The regime of incentives offered by the Centre generally contains the following:

• Credit prescription (Priority sector lending), differential rates of interest etc.
• Excise Exemption Scheme
• Exemption under Direct Tax Laws
• Statutory support such as reservation and the Interest on Delayed Payments Act

(It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word SSI in their exemption notifications. Though in many cases they may define it differently. However, generally the registration certificate issued by the registering authority is seen as proof of being SSI).
States/UTs have their own package of facilities and incentives for small scale. They relate to development of industrial estates, tax subsidies, power tariff subsidies, capital investment subsidies and other support. Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to units registered with them.

Objectives Of The Registration Scheme

They are summarised as follows:

• To enumerate and maintain a roll of small industries to which the package of incentives and support are targeted
• To provide a certificate enabling the units to avail statutory benefits mainly in terms of protection
• To serve the purpose of collection of statistics
• To create nodal centres at the Centre, State and District levels to promote SSI

Features Of The Scheme

Features of the scheme are as follows:

• DIC is the primary registering centre
• Registration is voluntary and not compulsory.
• Two types of registration is done in all States. First a provisional registration certificate is given. And after commencement of production, a permanent registration certificate is given.
• PRC is normally valid for 5 years and permanent registration is given in perpetuity.

Provisional Registration Certificate (PRC)

• This is given for the pre-operative period and enables the units to obtain the term loans and working capital from financial institutions/banks under priority sector lending.
• Obtain facilities for accommodation, land, other approvals etc.
• Obtain various necessary NOC's and clearances from regulatory bodies such as Pollution Control Board, Labour Regulations etc.

Permanent Registration Certificate

Enables the unit to get the following incentives/concessions:

• Excise exemptions
• Income-Tax exemption and Sales Tax exemption as per State Govt. Policy.
• Incentives and concessions in power tariff etc.
• Price and purchase preference for goods produced.
• Availability of raw material depending on existing policy.

Procedure For Registration

Features of the present procedures are as follows:

• A unit can apply for PRC for any item that does not require industrial license which means items listed in Schedule-III and items not listed in Schedule-I or Schedule-II of the licensing Exemption Notification. Units employing less than 50/100 workers with/without power can apply for registration even for those items included in Schedule-II.
• Unit applies for PRC in prescribed application form. No field enquiry is done and PRC is issued.
• PRC is valid for five years. If the entrepreneur is unable to set up the unit in this period, he can apply afresh at the end of five years period.
• Once the unit commences production, it has to apply for permanent registration on the prescribed form.

The following form basis of evaluation:

• The unit has obtained all necessary clearances whether statutory or administrative. e.g. drug license under drug control order, NOC from Pollution Control Board, if required etc.
• Unit does not violate any locational restrictions in force, at the time of evaluation.
• Value of plant and machinery is within prescribed limits.
• Unit is not owned, controlled or subsidiary of any other industrial undertaking as per notification.

De-Registration

A Small Scale Unit can violate the regulations in the following ways which will make it liable for de-registration:

• It crosses the investment limits.
• It starts manufacturing any new item or items that require an industrial license or other kind of statutory license.
• It does not satisfy the condition of being owned, controlled or being a subsidiary of any other industrial undertaking.

Labour Laws

The small units manufacturing items reserved for manufacture in small scale sector do not require any prior license. This is a major relaxation where no licensing or restriction in production in small scale sectors exists. The Locational restrictions have also been minimised. Similarly, Labour Act has simplified in 1988 to assist the small establishments. The Act, namely "Labour Laws (exemption from furnishing returns and maintaining registers by certain establishment) Act, 1988" covers labour related acts and thus provides :

• Establishment employing 10-19 persons require to maintain only 3 register and to submit an annual core return only.
• Establishment employing less than 10 persons to maintain only 1 register and submit only an annual core return.
• Only one Inspector will be responsible for various labour laws, except in case of Factory Act and Boiler Act.
• The Labour Minister has also accepted in principle to transform the enforcement of labour laws for SSI's from a regime of regulation to an era of self-discipline and voluntary compliance.

The following documents are required in the cases where provisional registration is required at office address :

• Application form duly filled and signed by the proprietor/ partners / directors, as the case may be, depending on whether the unit is proprietary, a partnership or a private limited company.
• Prescribed court fee stamp.
• Passport size photo (3 copies) of proprietors/ partners / directors who have signed the application Performa.
• Copy of Project Profile.
• Photocopy of ration card of proprietors / partners / directors as the case may be.
• Affidavit as per format on appropriate stamp paper.
• Photocopy of partnership Deed of the unit if it is a partnership concern.
• In case the applicant unit is a private limited company, photocopy of the memorandum and articles of association with certificate of incorporation.

(B) In cases where the unit wants addition of factory premises in the application for registration , the following documents are required in addition to those mentioned in (A) above.

• Municipal Licence is not required in cases of approved areas, household category and sophisticated industries, In cases other than these, the MCL is required.
• Rent receipt or NOC (NO Objection Certificate) from landlord (with ownership proof) or photocopy of House Tax receipt for legality of possession.

The issue of a Provisional Registration Certificate from District Industry Centre is done within seven days after receipt of the duly completed application, unless the proposed industry is one which needs scarce raw materials because of their acute scarcity.

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Many first time entrepreneurs do not have a clear perspective of the issues, legal or otherwise, involved in choosing one or the other form of a business. This often results in avoidable mistakes, which later cost time and money to rectify. The options of the form of business with their pros and cons have been explained below. In India setting up a private limited company was the most popular choice among our sample of entrepreneurs.
Franchising is also emerging as a major business format. An extensive overview of its features is provided since it is believed that it will grow the same way in India as it has abroad.
Throughout in most of the parts of world, three main types of legal forms are used predominantly to run small business organisations. These forms are as follows :

• Sole proprietorship where generally only one person funds the business activities.
• Partnerships, where two or more people band together to finance or run a venture.
• Corporations/limited companies where it is possible for many thousands to subscribe for a share in business ownership and, in theory at least, in its governance and direction.

The co-operative is a fourth and minority legal form, which nevertheless has a part to play in the small business world in some countries.

Sole Proprietorship

The vast majority of new businesses set up each year in Indian choose to do so as sole proprietors. The form has the merit of being relatively formality-free; there are no rules about the records you have to keep. Nor is there a requirement for your accounts to be audited, or for financial information on your business to be filed at the registrar of companies.
As a sole proprietor, there is no legal distinction between you and your business-your business is one of your assets, just as your house or car is. It follows from this that if your business should fail your creditors have a right not only to the assets of the business, but also to your personal assets, subject only to the provisions of the bankruptcy Act (these allow you to keep only a few absolutely basic essential for yourself and family).
It is possible to avoid the worst of these consequences by ensuring that your private assets are the legal property of your spouse, against whom your creditors have no claim. (You must be solvent when the transfer is made, and that transfer must have been made at least two years prior to your business running into trouble.) However, to be effective such a transfer must be absolute and you can have no say in how your spouse chooses to dispose of his or her new-found wealth!
The capital to get the business going must come from either you or from loans. There is no access to equity capital, which has the attraction of being risk free. In return for these drawbacks you can have the pleasure of being your own boss immediately, subject only to declaring your profits on your tax return. (In practice you would be wise to take professional advice before doing so.)
Although there is nothing you are required to do legally as a sole proprietor, it is sensible to do the following :

• Open separate bank accounts for the business. Do not pay for business expenses from personal accounts. Also, withdraw your personal expenses regularly from the business accounts.
• Get your accountant to give you some indication of allowable business expenses.
• Take out full insurance cover against possible loss or damage to any equipment-if you have invested in any.
• Take out personal injury/illness insurance.

The advantages and disadvantages of being a sole proprietor are as follows :

Advantages

• Easy to set up-you can start the business in a small way, from your home if you want to.
• You are the boss. You can run the business at your own pace and in your own way.
• Your keep the profits.
• You can offset some business expenses against earnings for tax purposes.
• No public disclosure of your affairs.
• Profit or loss in one trade can be set off against profit and loss in any other business your run.

Disadvantages

• You are totally responsible for any debts your business incurs. If you go bankrupt, your creditors are entitled to size and sell your possessions-personal as well as business.
• It can be lonely.
• You have a low status.

Most countries have sole proprietorship as a legal structure in the way described here. Some countries have variations on the same theme. For example, in France where nearly 70 per cent of all active businesses are operated as sole trader ships, husbands and wives may be jointly responsible. In the United Kingdom husbands and wives would need to form either a partnership or a limited company to share the `ownership' of a venture.

Partnerships

Partnerships are effectively collections of sole proprietors and, as such, the legal problems attached to personal liability. There are very few restrictions to setting up in business with another person (or persons) in partnership, and several definite advantages. By pooling resources you may have more capital; you will be bringing, it is to be hoped, several sets of skills to the business; and if you are ill the business can still carry on.
There are two serious drawbacks that merit particular attention. First, if your partner makes a business mistake, perhaps by signing a disastrous contract, without your knowledge or consent, every member of the partnership must shoulder the consequences. Under these circumstances your personal assets could be taken to pay the creditors even though the mistake was no fault of your own.
Second, if your partner goes bankrupt in his personal capacity, for whatever reason, his or her share of the partnership can be seized by his creditors. As a private individual you are not liable for your partner's private debts, but having to buy him or her out of the partnership at short notice could put you and the business in financial jeopardy. Even death may not release you from partnership obligations and in some circumstances your estate can remain liable. Unless you take `public' leave of your partnership by notifying your business contacts, and advertising your retirement, you will remain liable indefinitely.
The legal regulations governing this field are set out in the Act, which in essence assumes that competent businessmen and women should know what they are doing. The Act merely provides a framework of agreement, which applies `in the absence of agreement to the contrary'. It follows from this that many partnerships are entered into without legal formalities-and sometimes without the parties themselves being aware that they have entered a partnership!
The main provisions of the partnership Act are as follows :

• All partners contribute capital equally.
• All partners share profits and losses equally.
• No partner shall have interest paid on his or her capital.
• No partner shall be paid a salary.
• All partners have an equal say in the management of the business.

It is unlikely that all these provisions will suit you so you would be well advised to get a `partnership agreement' drawn up in writing by a solicitor at the outset of your venture.

Why you Might Consider a Partnership.

• As a means of starting up with increased capital (presuming both you and partners put money in.)
• You might not feel confident to start a business entirely on your own and would prefer to share the responsibilities with someone else.
• You have complementary skills-one of you may have specialist skills and the other management flair, or one the money, the other the ideas.

Choosing a Partner

If the business is going to have any chance of success, if is essential that the partners trust each other and can work together harmoniously. Also, since you and your partner(s) have unlimited financial liability for the firm, if things go wrong regardless of whose fault it is-creditors can claim the personal possessions of each and every partner. A partnership is therefore almost as close a relationship as a marriage. So the choice of partner must be made with as much care as selecting a wife or husband!
If you are considering a partnership, ask yourself first if you have the right temperament to be a partner. Some people are too independent to be able to cope with pooling their ideas and resources on an equal footing, as the case that follows illustrates.
Mr. Dave opted out of the highly successful computer business he had painstakingly set up and nurtured for seven years within a year of taking a partner. He took the partner because he needed additional capital for expansion but he couldn't tolerate what he saw as the partner's `interference' with the way the business was run. He now admits-with hindsight-that the partner was perfectly entitled to express his views on what had, after all, become a joint project. Mr. Dave agrees that his personality was the problem. `I' am better off on my,' he admits.
There are no hard-and-fast rules about selecting a partner, but the most successful partnerships do seem to be those where the partners have known each other for some time-either as friends or business associates-and where they have complementary skills and personalities. For instance, one partner may be a technical person who looks after the manufacturing side of the operation while the other is good at dealing with people and looks after sales, or the combination may be of an ideas person with a down-to-earth sort of person who can implement the ideas. Matching entrepreneurial skills also helps in selecting a partner.

Partnership Agreements

As already stated, the provisions of the partnership Act apply if there is no other agreement between the partners, but it is sensible, if not essential, to get a solicitor to draw up a deed of partnership between you and your partners. You may want to vary the rules laid down in the 'partnership Act and to cover points not mentioned. This documents also regulates exactly how the business is run. It should cover the points listed below.

• Profit Sharing: How profits and losses are to the divided. If, for example, one partner has sunk more capital into the business than the other, profits won't be shared in equal proportions; or you might decide to distribute profits according to the number of contracts completed, the number of hours worked, or by some other methods.
• Withdrawing Money: It is important to limit the amount of money each partner can take out of the business each month, otherwise you may find you have insufficient working capital.
• Time off: The length and frequency of holidays should be laid down, as well as what rules apply if a partner is incapacitated through illness. The partner will be entitled to a share of the profits, so you may consider it important to stipulate a time limit after which the partnership can be dissolved.
• Duration of Partnership: How long do you want your partnership to last-one, three, five or ten years? Or you might prefer it to be for an indefinite period, terminating after, say, three months' notice.
• Admitting or Expelling a Partner: The consent of every partner is necessary before a new partner can be admitted. If you want the right to have a relative, say your wife, admitted as a partner later, this should be stated in the agreement. Unless the agreement states otherwise, you must get a court order if you want to expel a partner, so the partnership deed should set out in detail the circumstances in which a partner can be expelled.
• Dissolving or Rescinding The Partnership: Dissolution will occur automatically on the death or bankruptcy of a partner-unless the partnership agreement provides otherwise. If you discover your partner has given you false information you may apply to the court to rescind the partnership agreement.
• Getting Capital Out: When dissolution occurs, a partner is entitled to have the partnership property sold and all assets distributed. After the assets have been realised and outstanding debts paid, any surplus must be distributed among the partners in equal shares-unless you make a different arrangement in the partnership deed.

The proceeds from the sale of assets must be applies in the following order, although, again, the partnership deed can vary this;

• Payment of creditors who are not partners
• repaying loans made by the partners
• paying back partners their capital contribution
• surplus divided among partners.

If there aren't enough assets partners must make up the deficiency in the proportions in which they shared profits.

• Notice of Withdrawal From A Partnership: The agreement should state how much notice should be given to each of the other partners if one partner wants to withdraw. Remember, if you are withdrawing, that you are still responsible for all obligations, which your firm incurred while you were a partner. Give notice to all customers and suppliers that you are withdrawing and make sure your name is removed from the stationery. Advertise the fact in the newspaper.
• Conflicting Interests: Partners are free to engage in other business activities unless the partnership agreement prohibits this. However, no partner may engage in any activity, which competes with the partnership business. It might be sensible to provide for limited partnerships.

Limited Liability Companies

As the name suggests, in this forms of business your liability is limited to the amount you contribute by way of share capital.
A company registered in accordance with the companies Act is a separate legal entity, distinct from both its shareholders, directors and managers. The liability of the shareholders is limited to the amount paid or unpaid on issued share capital. A company has unlimited life and no limit is placed on the number of shareholders. The companies Act does, however, place many restrictions on the company. It must maintain certain books of accounts, appoint an auditor and file an annual return with the registrar of companies which includes the accounts as well as details of directors and mortgages.
A minimum of there shareholders and one of these as managing director is required to form a company. There are in fact two types of company limited by shares. The first is a `public company (plc) which has a minimum authorised and allotted share capital. This is a company which, according to its memorandum of association, may invite the public to subscribe for its shares. Any company, which is not `public', is called `private'. Public companies have further onerous legal requirements and restrictions placed upon them. Generally, most companies start life as `private' and only become `public' when they need funds from a wider range of shareholders. Companies pay `corporate tax' on their taxable profits.

Advantages of the limited company

• Members' (the directors and shareholders) financial liability is limited to the amount of money they have paid for shares.
• The management structure is clearly defined, which makes it easy to appoint, retire or remove directors.
• If extra capital is needed it can be raised by selling more shares privately.
• It is simple to admit more members.
• The death, bankruptcy or withdrawal of capital by one member does not affect the company's ability to trade.
• The disposal of the whole or part of the business is easily arranged.
• High status.

Disadvantages

• Requirement to register the company with the registrar of companies and provide annual returns and accounts-which must be audited. All details of the company are available for public inspection so there can be no secrecy. There are penalties for failing to make returns.
• Can be more expensive to set up.
• May need professional help to form.
• As a director you are treated as an employee and must pay tax.
• The advantages of limited liability status are increasingly being undermined by banks, finance house, landlords and suppliers who require personal guarantees from the directors before they will do business.

Requirements For A Private Limited Company

• A Registered Business Name: This must be followed by the world Limited or Ltd. The Companies Registration Office exercises some control over the choice of name-it can't be identical (or very similar to) the name of an existing company. It won't be considered if it is offensive or illegal and the use of certain words in a company (for example, `Institute', `National') can only be used in certain circumstances. The company name must be displayed in a conspicuous place at every office, or other premises where the company carries out business.
• A Registered Office: This need not necessarily be the same address as the business is conducted from. Quite frequently the address used for the registered office is that of the firm's solicitor or accountant. This is the address, through, where all official correspondence will go.
• Shareholders: There must be a minimum of two shareholders (also described as `members' or `subscribes'). A private company can have up to fifty shareholders.
• Share Capital: The company must be formed with a stated, nominal share capital divided into shares of fixed amounts. Small companies are frequently formed with a nominal share capital of Rs.100.
• Memorandum of Association: The memorandum is the company's charter. It states the company's name; the situation of its registered office; its share capital; the fact that liability is limited and, most importantly, the object for which the company has been formed. In theory, the company can only operate in the areas mentioned in the objects clause but in practice the clause is drawn to cover as wide an area as possible, and anyway a 75 per cent majority of the members of the company can change the objects whenever they like. Nevertheless, it is worth bearing in mind that directors of the company will incur personal liability if the company engages in a type of business which is not authorised by the objects clause. The memorandum must be signed by at least three shareholders.
• Articles of Association: The document contains the internal regulations of the company-the relationship of the company to its shareholders and the relationship between the individual shareholders. Many companies don't bother to draw up their own articles but adopt (sometimes with some modifications) articles set out in the companies. Act, which are quire satisfactory for the majority of private companies. The articles must be signed by the initial shareholders.
• Certificate of Incorporation: This is the document, which the registrar of companies issues to you once he has approved you choice of name and your memorandum. When you receive this document your company legally exists and is ready to trade.
• Auditors: Every company must appoint a qualified auditor. The auditor's duty is to report to the treasurer whether or not the books of the company have been properly kept, and that the balance sheet and profit and loss account presents (or doesn't present) a true and fair view of the company's affairs and complies with the companies Act. Auditors are appointed or re-appointed at general meetings at which annual accounts are presented, and they hold office from the conclusion of the meeting until the next general meeting.
• Accounts: The companies Act lays down strict rules on accounting. Every company must maintain a set of records, which show the financial position at any one time with reasonable accuracy. The accounts comprise a profit and loss account and balance sheet with the auditors' and directors' reports appended. A new company's accounting reference period beings on its incorporation and runs until the following 31 March-unless the company notifies the registrar of companies otherwise. Within ten months of the end of an accounting reference period, and audited set of accounts must be laid before the shareholders at a general meeting and a set delivered to the registrar of companies.
• Registers, etc.: In addition to the accounts books, companies are required to have: a register of members and share ledger; a register of directors and secretaries; a register of share transfers; a register of charges; a register of debenture holders; a book can be purchased to hold all of the above. This will be provided automatically if you buy a running concern.
• Company Seal: All companies must have an engraved seal. This must be impressed on share certificates and must be used whenever the company has to execute a deed. Again, this is included in the ready-made company package.

It is certainly not a legal structure designed to give entrepreneurs control of their own destiny and maximum profits. However, if this is to be the system adopted you can register with the registrar of companies. You must have at least seven members at the outset. They do not have to be full-time workers at first. As in a limited company, a registered co-operative has limited liability (see under limited liability companies) for its members and must file annual accounts, but there is no charge for this. Not all co-operatives bother to register, as it isn't mandatory, in which case they are treated in law as a partnership with unlimited liability.
Co-operatives are not common throughout the entire entrepreneurial world, although some countries provide for companies with a structure similar to the Indian-style co-operatives
For example, in Denmark the AMBA is a special kind of limited company: a tax-free co-operative with its own legal regulations. The co-operative movement started at the turn of the century in the farming industry, and production of farm-related products, establishing dairies, slaughterhouses and other manufacturing units. They also include some wholesale and retail distribution channels for daily consumption goods, often officially controlled by the consumers.

Franchising

Franchising is something of a halfway house, lying somewhere between entrepreneurship and employment. It holds many of the attractions of running a small business whilst at the same time eliminating some of the more unappealing risks. For example, the failure rate for both franchisers and franchisees is much lower than for the small business sector as a whole.
Let us look at the various types of relationship between licensee and licenser, which are described under the general heading franchises.

A Distributorship

This could be for a particular product, such as a make of car. It is also sometimes referred to as an agency, but there is a fundamental difference between these two concepts. An agent acts on behalf of a principal, and even though he or she may have an agency for the products and services of more than one principal, what the agent does, says or represents to third parties is binding on the principal in question, as if they were employer and employee. A distributorship, however, is an arrangement where both parties are legally independent, as vendor and purchaser, except that the purchaser, in exchange for certain exclusive territorial rights, backed up by the vendor's advertising, promotion and, possibly, training of staff, will be expected to hold adequate stock and maintain the premises in a way that reflects well on the vendor's product or service.

A License to Manufacture

This applies to a certain product within a certain territory and over a given period of time. The licensee may have access to any secret process this involves and can use the product's brand name in exchange for a royalty on sales.
This arrangement resembles a dictatorship. Licenser and licensee are independent of each other, except that the licenser will no doubt insist that the licensee complies in order to preserve the good name of the product. The arrangement is often found in industry and a well-known example is Modi Xerox's license to produce the photocopying devices pioneered by the Xerox Corporation.

The Use of a Celebrity Name

The name of a well-known person can be used to enhance the sales appeal of a product and guarantee, at least by implication, its quality.
The most common example is the endorsement, by a sports personality, of equipment associated with the sports person's field of sport and bearing his or her name, in return for a royalty payment by the manufacturer.
The realisation that a `personality' can sell things bearing his or her name came about principally through the extensive exposure given to sports in the medial. In the 1930s there were some attempts to capitalise on movie stars' names in a similar way-an early poster associating Ronald Reagan with a brand of cigarettes has been much reprinted since he become prominent in another sphere-but sports persons have been more ready, and perhaps better organised, to cash in on the advertising spin-off from the media coverage they get. A name can be franchised, at least for a while, to validate a product, particularly if there appears to be a direct connection between them: Arnold Palmer golf clubs, for instance.

The Use Of A Trade Mark

Here a widely recognised product is exploited commercially for a fee-subject to certain licensing conditions-rather than the name of an individual. An instance with which many readers will be familiar was Rubik's cube, always shown with the symbol TM beside it.

Business Format Franchising

The term `franchising', which is borrowed from the French, originally meant being free from slavery. Today, business format franchising is the name given to a relationship in which the owner of a product, a process, or a service allows a local operator to set up a business under that name, for a specified period of time. The local operator (the franchisee) pays the parent organisation (the franchiser) an initial fee and, usually, continuing royalties for the privilege.
The franchiser lays down a blueprint on how the business should be operated: the content and nature of the goods and services being offered, the price and quality of these goods, and even the location, size and layout of any premises to be used. The franchiser also provides the franchisee with training and other back-up support, such as accounting systems, advertising programmes and personnel recruitment and selection advice.
In essence, franchising thrives because it merges the incentive of owning a business with the management skills of big business. And personal ownership is one of the best incentives yet created to spur hard work.
Franchising may benefit not only the franchisee but also the franchiser. For example, it may enable the franchiser to grow rapidly by using other people's (that is, the franchisee's) money. That is largely how giant franchisers like McDonald's and Baskin-Robbins have mushroomed into billion-dollar businesses in so short a time.
The idea that franchisees are independent business people is something of a myth. Franchisees generally are not free to run their business as they see fit. They are often hamstrung by the franchiser's policies, standards and procedures.
One franchiser describes the ideal franchisee as the sergeant type- midway between the general who gives the orders, and the private who merely follows them. People who want their own business to escape taking orders from others frequently see franchising as the answer. They are subsequently frustrated by lack of autonomy.

Franchise: Pros And Cons

The advantages and disadvantages of taking up a franchise depend to some extent on the content of the agreement, but there is a core of balancing factors, which are largely common because they relate to the kind of activity which franchising involves.

The franchiser

Advantages

From the franchiser's point of view, the advantages are that the does not have any direct investment in an outlet bearing his name. The inventory and equipment are owned by the franchisee. Because of the shortage of prime sites, there is a growing trend for franchisers to acquire leases on behalf of franchisees, or at any rate to stand as guarantors. Nevertheless, the effect on the liquidity of the franchiser, in contrast to expansion by opening branches, is enormous-though if the franchiser does his job properly there are heavy start-up costs in piloting the franchise and in such aspects as training. Thereafter there are further costs in providing a continuing service to franchisees in such matters as research and development, promotion, administrative backup and feedback and communication within the network. The expectation is that these costs will be offset by the fact that the franchisee, as the owner of the business, is more likely to be highly motivated than an employee and more responsive to local market needs and conditions; that the franchiser receives an income from the franchise; and that, without direct financial involvement, he may in this way derive some of the benefits of expansion, in as much as franchising provides economies of scale from centralised purchasing and, where feasible, some degree of centralised administrative facilities.

Disadvantages

The disadvantages are that, although the failure of an individual franchise may reflect badly on the franchise operation as a whole, all the franchiser can control is the format itself and he can only influence the running of individual operations by pulling the reins on this or that clause in the agreement-the broad terms of which we shall discuss shortly. In extreme cases the franchiser may terminate the agreement or at any rate not renew it, but he cannot throw the franchisee out as if he were an employee. The franchiser is therefore dependent on the willingness of the franchisee to observe the rules and play the game. A failure to do so can be damaging to the franchiser and the franchisee as a whole.
Another disadvantage sometimes turns out to lie in the curious mixture of dependence and independence that franchising produces. The franchisee is encouraged to think of him as an independent business entity, and to a large extent this is indeed the situation. Nevertheless, he is operating the franchiser's business concept under a license for which a fee is payable. There are cases where franchisees identify so closely with the particular business they are running that they ultimately resent the payment of the fee. The success is felt to be due to the franchisee's own effort, not to the franchise concept or to the franchiser. This is apt to be particularly so if the franchiser adopts a lower profile than he should, either in terms of direct help or in matters such as national advertising. Clearly, of course, the franchisee would be obliged to pay under the terms of agreement, but a sour relationship is not good for either party, so it is up to the franchiser to maintain his part of the bargain both in letter and in spirit. Franchises are a matter of mutual interest and obligations.

The franchisee

From the point of view of the franchisee also there are certain plus and minus points.

Advantages

• A business format or product which has already been market tested and, presumably, been found to work. As a consequence, major problems can be avoided in the start-up period.
• A recognised name of which the public is already aware and which has credibility with the suppliers.
• Publicity, both direct, in that the franchiser advertises his product or services, and indirect promotion through signage and other corporate image promotion in all the franchiser's outlets.
• Although taking up a franchise is not cheaper than starting on you own, it is considered that the percentage of expensive errors made by individuals starting on their own is substantially reduced by the adoption of a tested format.
• Direct and close assistance during the start-up period.
• A period of training on production and management aspects.
• A set of standard management, accounting, sales and stock control procedures incorporated in an operating manual.
• Better terms for centralised bulk purchase negotiated through the franchiser, though he may be looking for mark-ups in this area as a source of revenue from the franchise.
• The benefit of the franchiser's research and development in improving the product.
• Feedback throughout the network on operating procedures and the facility to compare notes with other franchisees.
• Design of the premises to an established scheme saves on interior design fees and may eliminate these altogether where the franchiser has a set of specifications.
• The benefit of the franchiser's advice on equipment selection and initial inventory levels, though this may be partial where the franchiser is also the supplier.
• Help with site selection, negotiating with planning officers and developers.
• Possibly, though not universally, access to the franchiser's legal and financial advisers.
• The protected or privileged rights to the franchise within a given area.
• Improved prospects of obtaining loan facilities from the bank.
• The backing of a known trading name when negotiating for good sites with letting agents or building owners.

Disadvantages

• Business format franchising is, of necessity, something of a cloning exercise. There is virtually no scope for individual initiative in matter of product, service or design. However, the franchiser will demand uniformly high standards of maintenance, appearance and packaging in whatever the franchise entails. These are usually monitored by regular inspection.
• The royalty (sometimes called a management fee) paid to the franchiser. This is usually based on gross turnover or on profit. The problem here is that if the franchiser is not pulling his weight, or if the franchisee is not pulling his weight, or if the franchisee does not feel this to be the case, the royalty can be subject to bitter dispute. The franchisee may than feel justified in withholding all or part of the royalty on the grounds of non-performance by the franchiser, but this is always a difficult matter to prove in the courts. Furthermore, the franchiser's resources to conduct a long-drawn-out proceeding will usually be greater than the franchisee's.
• A further problem is that a high turnover does not necessarily imply a highly profitable operation. If the franchiser's income is wholly or partially based on turnover, he or she may try to push for this at the expense of profitability.
• The franchisee is not absolutely at liberty to sell the franchise even though he is in many respects operating the business independently. The sale has to be approved by the franchiser, who is also entitled to vet the vendor and charge the cost of any investigations made to the existing franchise. Furthermore, although the business would be valued as a going concern in trading terms, the goodwill remains the property of the franchiser. Again, the franchisee may feel that, at least to some extent, the goodwill has been built up by his or her own efforts. The resale of a franchise, in other words, is a process rich in those gray areas, which can lead to expensive litigation.
• Territory agreements may be difficult to enforce in practice. For instance, the hypothetical firm of Calorie. Countdown may have the exclusive rights in the suburb in which it is located, but there is nothing to prevent the citizens of that suburb from buying their slimmer's meals in some other neighboring Calorie Countdown outlet.
• The franchisee, as well as paying a royalty to the franchiser, may be obliged to buy goods and services from his as well-possibly at disadvantageous rates.
• Through the franchiser please all sorts of control and obligations on the franchisee to maintain the quality of his image, the scope for doing the reverse is more limited. If the franchiser's products or service gets bad publicity, this is bound to affect the franchisee adversely, and there is very little he could do about it. Equally, the franchiser may engage in promotional activities (and involve the franchisee in them as well), which, though perfectly harmless, may, from the point of view of a particular outlet, be a waste of time.
• The failure of a franchiser may leave the franchisee with a business, which is not viable in isolation.

A Mutual Dependence

From this list of advantages and disadvantages to both parties, a more detailed picture emerges of the business format franchise as a relationship of mutual dependence, which allows each party to utilise its strengths to their mutual and, at best, equal advantage.
The franchiser is able to expand without further investment and though the return is obviously lower than from expansion by ownership, he does receive an income from the franchisee as well as getting both an outlet for his product and more muscle in negotiating the purchase of materials and equipment. The franchisee, on the other hand, is able to concentrate his entrepreneurial skills at the sharp end of sales and customer service, while the administrative headaches of setting up the business are mitigated by the uniform nature of the format. By the same token, he s saved, through feedback to the franchiser of the accumulated experience of the franchises, from making the errors to which businesses are prone in their earlier and most vulnerable stages. This relationship is expressed as agreements-the purchase agreement and the franchise agreement. But before considering these, it is necessary to evaluate the franchise as a whole.
A study of the personal franchisee characteristics required for success carried out by Professor Russell M. Knight of the University of Western Ontario concluded that franchisees and franchisers have a large measure of agreement on what makes for success.
They disagreed only in rating management ability and creativity-a point that may provide some clues as to what franchisers are really looking for in a franchise.

Make a careful analysis of the product or service you are choosing, sometimes in short run, there is a shortage of a particular commodity in the market, you may even come to know you will get almost two weeks in advance to supply fresh stock. Does that mean you can jump into that business. First thing in such a condition is to analyse the situation. Keep in mind that shortages may occur due to a number of reasons and a good entrepreneur always examine the pros and cons before setting up a business. It may tempt you to think that perhaps you have found a good businesses idea. But do not be easily influenced by these temporary shortages. Carefully analyse the future demand-supply position of the product, say for the next 3 to 5 years. Only when you are certain that the shortage will remain there for considerable period of time and you would be able to generate enough profits in the very first or second year of operation and that you can produce quality item within an acceptable pricing, then only you should venture into such a business.
There are many organizations which are in possession of information on business opportunities, you can contact these organisations to get an idea about product.

• District Industry Centres
• Technical Consultancy Organizations
• Centres for Entrepreneurship Development
• Small Industry Service Institutes
• Lead Bank
• Industrial Extensions Bureaus (These exist in several states) They are known by such names as iNDEXTb, Udyog Mitra, Udyog Sahayk and so on).
• National Industrial Development Corporation, New Delhi
• Khadi and Village Industries Commission, New Delhi
• Commissioner of Cottage Industries
• Entrepreneurship Development Institute of India, Ahmedabad
• National Institute of Entrepreneurship and Small Business Development, New Delhi
• National Institute of Small Industry Extension and Training, Hyderabad
• Small Industries Development Bank of India, Lucknow.

This information could be in the form of:

• Project profiles
• Feasibility studies
• Industry studies
• Area development studies.

For a given industry, there are in organizations which undertake monitoring, research, market - development, export promotion or such other work.

• Confederation of Indian Food Trade and Industry, New Delhi
• Agricultural and Processed Food Products Export Development Authority (APEDA), New Delhi
• Indian Institute of Packaging, Bombay
• Central Food and Technological Research Institute, Mysore
• Indian Institute of Horticultural Research, Bangalore
• Post-harvest Technology Centre, IIT, Kharagpur
• National Horticultural Board, New Delhi

You need to get in touch with such organizations. You might get valuable information on your product and opportunities that exist.
In a project conceptualisation stage while making a product choice following factors related to the product needs to be considered:

• CEasy availability of raw-material
• CProcess Technology
• CEasy accessibility in the market
• CIncentive and support from Government
• CProduct Line - Depth, Width
• CMarket information
• CPackaging
• CBranding
• CWarranties
• CAfter Sales Service

Another point to keep in mind while deciding about products is to avoid the Products, which are likely to have a number of players in the market. Some such products in the recent past have been, plastic footwear, audio cassettes, disposable gloves and bulk drugs. In case the entrepreneur is looking for a product which has export potential, s(he) should consider the following additional questions :

• What should be the contents of export-product portfolio ?
• What are the special requirements for packaging if one has to export the products ?
• What product adaptations are needed to be made for exporting a product to a specific country? Does it meet the product's quality specification of the country concerned?

The development of export-product portfolio can be done by considering 4 parameters viz.

• External demand conditions
• Internal supply capability
• Complexity of Marketing Tasks
• Amount of investment required to penetrate the market

Analysis can be conducted using this four dimensional model. The choice should be a product which scores a high rating on first two parameters and low rating on last two parameters.
EXIM (Export Import Bank of India) Bank has also developed an excellent model to conduct the export-product portfolio analysis based on three parameters viz.

• Supply Capability in product group
• Domestic environment
• Export market attractiveness

This analysis gives rise to product groups with high potential or low potential. Some high potential areas are:

• Leather Garments
• Yarns and Thread
• Apparel - Woven and Knitted
• B & W TV Sets
• Costume Jewellery

With regard to special packaging requirements one has to be careful about laws of the country one is exporting to. Product adaptations for country's specific needs look into things like whether voltage supply is 220 V or 110 V for electric appliances and for automobiles whether left-hand drive or right-hand drive is appropriate.

Tiny enterprises currently defined as those having investment in plant and machinery up to Rs. 25 lakhs constitute about 95% of the small scale sector. Government has taken various steps for the promotion of the tiny enterprises. These steps include earmarking of 60% of credit flowing to SSI sector under priority sector lending programme of banks for tiny units (40% for tiny units having investment in plant and machinery up to Rs.5 lakhs and 20% share to units having investment in plant and machinery between Rs. 5 lakhs to Rs. 25 lakhs). Tiny enterprises have been made eligible for same rate of excise exemption as available to registered units since 1994-95. Excise exemption limit for SSI's including tiny units has been enhanced from Rs. 30 lakhs to Rs. 50 lakhs. This will give inducement to the tiny units for increasing their production. Government has decided to adopt additional measures for the promotion of Tiny Enterprises by earmarking facilities for Tiny Units under the Integrated Infrastructural Development (IID) Scheme. The NSIC would earmark 40% of the assistance to the tiny units under various schemes viz., supply of machinery on hire purchase, marketing support, technology assistance, training facilities etc. In order to ensure flow of credit to tiny units, a consistent and higher flow of credit to tiny units, the SIDBI will endeavor that up to 60% of its refinance flows to tiny sector.

In India products have been Reserved for exclusive manufacture in the SSI Sector for promoting this sector. Currently the investment limit for items to be manufactured in SSI is 1 crore. At present 812 items are reserved for manufacture in this sector. This Policy got a legal backing when the I (D&R) Act was amended in March, 1984 empowering the Government to reserve items under this Act. This Act also provided for the Constitution of an Advisory Committee headed by Secretary (SSI & ARI).

The overwhelming consideration for reservation of an item is its suitability and feasibility for being made in the small scale sector without compromising quality aspects.

After the introduction of economic reforms with emphasis on liberalisation, de-licensing and de-regulation, a need was felt by the Government to review the reservation policy. Accordingly, a Committee was constituted under the Chairmanship of Shri T.S Vijayaraghavan, former Additional Secretary in the Ministry of Commerce who has recommended to the Government for de-reservation of 91 items out of 821 items presently reserved in this sector. Another committee known as Expert Committee under the Chairmanship of Shri Abid Hussain was also constituted to review the policies in the changed economic scenario for SSIs sector who had recommended for total abolition of the reservation for SSIs. Advisory Committee on Reservation constituted under the I (D & R) Act in its meeting held on 19th February 1997 recommended to the Government that the complete de-reservation at this stage is not desirable and de-reservation should be done in a phased manner.

As per policy no medium/large including multi-national companies are allowed to manufacture reserved items except under 50% export obligation. Those who had been manufacturing reserved items prior to the date of reservation can continue to do so after obtaining a Carry-On Business (COB) Licence from the Government.
Any violation of the policy of reservation is punishable under Section 24 of I (D&R) Act. Appropriate action on the cases of violations of the Policy of Reservation is taken up suitably by the concerned Administrative Ministry/Department.
812 products reserved for exclusive production in the small scale sector.
The reserved items fall under the following broad categories:-

• Food and allied industries;
• Textile products including hosiery;
• Wood and wood products;
• Paper products;
• Leather and leather products including footwear;
• Rubber products;
• Plastic products;
• Chemical and chemical products;
• Glass and ceramics;
• Mechanical engineering;
• Electrical machines, appliances etc.;
• Electronic equipments and components;
• Transport equipment, auto-parts, bicycle parts and
• Miscellaneous (sports goods, stationery items etc.)

The small units manufacturing items served for manufacture in small scale sector do not require any prior licence. This is a major relaxation where no licensing or restriction in production in small scale sector exists. The location restrictions have also been minimised. Similarly, Labour Act has been simplified in 1988 to assist the small establishments. The Act, namely "Labour Laws (Exemption from furnishing Returns and maintaining registers by certain Establishments), Act, 1988" covers labour related acts and thus provides:-

• Establishments employing 10-19 persons require to maintain only 3 registers and to submit an annual core return only.
• Establishments employing less than 10 persons to maintain only 1 register and submit only one annual core return.
• Earlier inspections under the EPF Scheme were conducted six monthly in normal cases and quarterly in default cases. Now inspections in normal cases are being conducted on annual basis. However, in default cases establishments are liable for random inspections. Earlier in the ESI Scheme establishments were liable for inspections once in a year. Now after liberalisation small scale establishments employing up to 20 persons are inspected once in 2 years, whereas establishments employing more than 20 persons are inspected annually.
• Steps are also being taken to have better self-discipline regarding enforcement of labour laws in the small scale sector.
• Simplification and rationalisation of forms/returns to be submitted by the Establishments/Industries is under process.
• Simplification of Labour legislation with a view to bringing them nearer to Labour Market and simplification of procedures with a view to minimising the adverse impact of excessive inspections and having joint inspection by the inspectors of the Ministry of Labour, is under process.

The programme of ancillarisation includes motivation of public and private sector units to offload production of components, parts, sub-assemblies, tools, intermediates, services etc., to ancillary units. The programme of ancillary development has specific advantages both for large as well as small industries and also for the total economy of the country. The large scale units have the advantages in the form of savings in investments, inventories, employment of labour, etc. and getting the items of the desired specifications, while the small scale units have the advantage of getting assured market for their products, availability of technical assistance and improved technology from the parent units. This programme also helps in overall economy of the country.
Small Industry Development Organisation (SIDO) is a nodal agency of the Central Government and Ancillary Division at Headquarters continued its function for the promotion of ancillarisation programme in the country. Constant liaison has been maintained with Administrative Ministries both at Central & State Levels, Department of Public enterprises, public/private sector undertakings and other industrial developmental agencies through various programmed such as Vendor Development Programmes, Buyer- Sellers Meet, Ancillary Exhibition, Seminars, Workshops, State Level Ancillary Advisory Meetings, Plant Level Committee Meetings and PSU's and visit to public/private sector undertakings for the promotion of small ancillary & sub-contracting units.
Sub-contracting exchanges are functioning as a part of major SISIs in the country at important cities for the promotion of fruitful and lasting contracts between large & medium undertakings and small scale ancillary units. The spare capacity for different facilities as available with the competent small scale units are registered with these SCXs. These SCXs also obtain such items from large units which are required by them and can be manufactured in the small scale sector. These SCXs organise contacts between Buyers & Sellers by way of organising Vendor Development Programmes, Buyers & Sellers Meet and Exhibition, etc.
In new Industrial Policy, stress has been given on the development of ancillary industry in the country by strengthening existing SCXs and setting up of new SCXs by industrial associations and other non-Governmental organisations. As a follow-up of new industrial policy, existing SCXs have been equipped with latest equipments like Plain Paper Copiers and Electronic Typewriters. Further efforts are being made to equip these SCXs with other facilities like FAX, Computer Terminals, etc. for effective and better utilisation of services. CXs established by industrial organisations will be eligible for registration as SSSBE and will be entitled to get benefits as available to tiny sector units.
A great difficulty was being experienced by most of the ancillary units in getting timely payments from their parent units. In order to provide help, in this regard, an Act has been passed under which interest is payable on the delayed payments by large undertakings.
For providing advisory assistance, State Level Ancillary Advisory committees have been set up in almost all the States to provide infrastructural facilities and to recommend measures for the promotion of ancillary industry in the State and to monitor the outcome of these efforts. SLAACs have members from SISIs, State Industries Departments, Industrial Associations, Large Undertakings, Industrial Development Agencies, Banks, Financial Institutions etc.
The requirement of the spares of Defence was being met mainly by imports from USSR, but due to political changes in that country these spares are not easily available and Ministry of Defence have come forward with an ambitious programme for the indigenisation of items required by them to be developed in the country. During the year greater stress has been given on the indigenisation of the items required by Defence.
Other activities

• Vendor development programme
• Indigenisation of defence items
• State level Ancillary Advisory Committee meeting
• Plant level Committee meetings
• Registration with SCXs
• Supplies to public sector undertakings
• Standing Committee/Ancillary development

Small industries have tended to concentrate in the vicinity of large industries or in metropolises and big cities. The pull of the market, availability of physical and social infrastructural facilities and skilled labour have been major considerations. The setting up of large public sector / private sector undertakings in some places has encouraged growth of small scale industries in those areas (e.g. Bangalore, Rourkela, Ranchi, etc.), manufacturing ancillary products and providing auxiliary services. Over the years small units have exhibited significant growth in some new towns and cities. Government Suport Programmes, Entrepreneurship, Raw material availability, improved infrastructure, increasing demand and a lot of other factors have contributed to this phenomenon. A major aspect of "spatial concentration" of SSI is that clusters of certain product lines have come up. The clusters of some selected industries in some areas are indicated below.

Some people may like to go into businesses as quickly as possible without actually entering into manufacturing and start earning at the earliest. For such people, there are several easy-to-start methods are available. Some of them are as follows:

• Become a franchisee
• Start a Turn-key or Packaged Business
• Join Multi-level Marketing Schemes
• Buy an Existing Business

Before selecting a particular method each of these methods needs to be examined carefully as each of them have their own advantages as well as limitations.

Franchisee is a person or a firm or a company that acquires a franchise, a commercial concession granted by the franchiser to exclusively sell their products or provide services in a specific area. Franchises can be found in in almost any type of business. Franchises often succeed because product is a known brand and has been launched in the market, involvement of the owner-manager and backing of the franchiser. Usually a Franchisees have to make an upfront payment to the franchisers and may be an annual royalty, too.

Some firms offer to teach their prospective customers how to set-up a business using their equipments and ingredients. For example, Kodak not only sell its machines but also train the buyer how to operate the machine, produce different jobs and set-up their business. There is no royalty payment involved. However, one should evaluate these types of business opportunities with thorough diligence and not get carried away by the hype.

In multi level marketing scheme the company appoints agents, these agents in turn recruit other agents and they in turn recruit their own agents and chain continues. In India in products such as soaps, cosmetics or jewellery are sold through multi level marketing schemes. Amway cleaning products, Modicare soaps, Oriflame cosmetics or Tupperware plastic products are good examples. This facilitates a rather low-cost market entry for an individual. Ironically, most of the profit is made in recruiting sub-agents rather than by selling the products

Purchasing an existing business may save a considerable time and reduce risk, too. Some businesses are sold by the existing owners, some businesses command even a premium, too. A word of mouth is usually be the best source of information to pick a business for a good bargain. Moreover, if the unit is sick then turning around a sick business may be tall order. Before buying a business a person should check out the actual position of the business and problems he might face once he buys it. There are many methods to help examine the businesses up for sale and arrive at a reasonable purchase price. Thus, quick-start methods offer a simple route to entrepreneurship. But it does requires deep pockets and a good judgment.

After deciding the issues of product, the next important question is, where to set up the unit ? For many tiny units and service based units, the home is perhaps the best starting point. But not all type of SSI can be set up in home either due to size or due to nature of the industry. Then the entrepreneurs may like to locate their business in industrial estates, areas, parks, complexes developed by concerned state government organisation or private bodies or in a privately leased land subject to approvals by various state and municipal bodies. State level Government agencies like DSIDC, HPSIDC, GIDC, TIDCO, UPSIDC assist entrepreneurs in identifying suitable locations/sites for the project, besides helping in the process of getting all the necessary clearances for the project. All utilities such as power, water supply etc. are available at site in case the units are located in any of the industrial estates developed by these agencies. Of late, private sector has also got into development of industrial parks; an example being the Mahindra Auto-ancillary park being developed jointly by the Mahindra group and TIDCO. Ideally, identify two or three locations and then select a few possible sites at each of these locations. Next, compare these locations/sites in relation to your requirements. Checklist of points to be considered for evaluation of land /sites are as follows :

A. General Considerations

• Location (city/town/village)
• Nearest large city (name and distance)
• Connections to nearest and major cities (rail, road, air-distance, frequency)
• Distance from important geographical markets and to relevant ports (in case of export/import oriented enterprises)
• Distance from major raw material sources
• Availability of manpower with required skills and prevailing wage rates
• Law and order situation in the area
• Level of industrial development in the area and anticipated tempo
• Composition on industrial development (in terms of types of industry and size/health of existing enterprises)
• Whether built up factory shed is available at the location and whether its size confirms to your need

B. Industrial Infrastructure Position

• Land: availability and price
• Existence of an organized industrial estate
• Water Supply : source (river, canal, tube well), distance, quality (PH, hardness), rate, common storage facility, operating authority (Public Works Department, Estate-Corporation, Municipality)
• Power supply : nearest substation, feeder type (industrial/rural) availability, quality of power etc.
• Effluent treatment and disposal (if relevant): disposal point (land, sea, river), arrangement for treatment (individual, common), drainage arrangement for conveying the effluent (open, underground), treatment and conveyance charges
• Approach road/internal roads, Street lighting
• Responsibility for maintaining roads, drainage and street lighting (single or multiple agencies)
• Postal, telegram and Telecommunication facility (availability of new telephone connections, manual or automatic exchange, STD facility, telex facility, etc.)
• Bank facility
• Transport-operator facility
• Typing/photocopying
• Warehousing facility (if required)
• Proximity of offices of law-enforcing agencies (excise, sales tax, labour laws, factory inspection, pollution control etc.), Proximity of offices of industry - assisting agencies (State Financial corporation, industrial infrastructure corporation, raw material/marketing corporation, district Industries Centre which sanctions and disburses financial incentives)
• Building/electrical/fabrication contractor facility
• Shops for building material, spare parts and such other things
• Motor-rewinding, painting, gas-supply and such other industrial service
• Professional resource position (management/industrial consultants, financial/legal advisers, management/productivity associations).

C. Financial Incentive Position

• Investment subsidy (Central Govt./State Govt.)
• Income-tax concession
• Sales tax exemption/interest-free sales-tax loan
• Promoter's contribution (margin) and interest-rate policy followed by State Financial Corporation
• Octori-exemption, electricity-duty exemption, local-tax exemption and such other incentives.

D. Social Infrastructure Position

• Housing: availability, quality, price (ownership and rent), public housing (actual and planned housing by State Housing Board, infrastructure corporation or such other agencies)
• Education: primary, secondary and university education facility (quality, number of seats, ease of admission, medium of instruction)
• Health: dispensary, hospitals, specialties

E. Site-specific Considerations

• Vantage or otherwise location (e.g. on the highway), frontage, approach etc.
• Direction of town-growth with reference to the site
• Non-agricultural status of the site
• Site-contours ( levelled, hilly, pits, ravines, brick-kilns), site-shape (regular/irregular)
• Proximity to railway line, national highway, state highway *
• Overhead telephones or power lines or underground water/drainage/gas line passing through the site*
• Access to national/state highway or other roads provided by the state
• Wind direction in relation to the site #
• Soil-type +

Omit the items in list, depending on circumstances, points or items that are not very relevant to your project. Similarly, in many cases just preliminary or qualitative information may be enough.

Note :

* This may imply leaving out some portions of a plot for building purpose.
# In India, normal wind-direction, except during winter, is north-south. If there is a dense population concentration in south, a factory involving gas/smell emission may cause a problem
+ Loose soil may increase construction cost. Top

There are many businesses especially in the service sector which can be run efficiently from home. A list of some of such industries follows :

• Courier and messenger service
• Outdoor catering service
• Childcare (creche) service
• Mail order retailing
• Beauty parlours
• Health clubs
• Travel agencies
• Clearing and maintenance service
• Data processing
• Medical clinics

A point to be kept in mind while opening an service sector enterprise is that setting up an establishment in service sector is much more than putting a sign board up and waiting for customers to walk in. Setting up also requires negotiating a favourable plot or shed purchase, organising for proper construction or reconstruction of building, design of interiors and finding good deals for equipment and machinery. Most of the items mentioned in the checklist applies for the home based business also.

A Business Plan is an document where you plan your Business to have an organized and effective response to a situation which may arise in future. Business plan is not just for a start up company but also for those which are growing. It can be used it to establish realistic goals or targets to achieve and to determine the current position. A workable business plan.

• Determine where the company needs to go
• Forewarn of possible roadblocks along the way
• Formulate responses to contingencies
• Keep the business on track to reach its planned goals

Start a business plan with describing your business and product or services. Tell about the market you are targeting and the stage of development your company is in. If you get stuck up on a particular part of the plan-leave it for time being-and come back later and finish it . You can't make a perfect first draft- so just get some thoughts down to start the process and you can always come back and change it or polish it up later. While making a business plan keep following points in mind.

While writing your business plan keep in mind the intended audience and why you are writing the plan. For example, if you are trying to get debt financing emphasis should not be on the huge profit potential - but on the certainty that the debt can be repaid. If you are writing a plan to help you run the business better you may start with general background information on the company and the industry, and focus on the areas of your plan that are currently most important to you.

Basically the first part of the business plan should be geared towards helping develop and support solid business strategy. The plan should explain the market, the industry, target customers and competitors. Write about customer needs and the benefits of current products and services. Evaluate the strengths and weaknesses of each competing firm and draw out the opportunities for your product or service in the marketplace. All of these steps largely aims to help you in creating a strategy for your business. The second half of the business plan should explain how to execute your selected business strategy. Your products and services, your marketing and operations should all closely tie in with your strategy. Have a strategy that will set the course for your business rather than having a smart-sounding strategy for your plan,

In present competitive market, you would probably be facing some serious competition sooner or later no matter how unique your business idea is. You need to think competitively throughout your business plan. As an entrepreneur, you need to identify where you will do things in similar manner as your competitors, where you will do things differently, what will be your real strengths and real weaknesses, where will you create your niche. Focus your plan on being different than your competitors and compete with existing players less directly. Find a particular market niche to focus on. Think over the points, can you find a unique strategy? Can you position your products differently? Can you use different sales or marketing vehicles? Your business plan should be able to answer these questions.

Lots of business plans sound good on paper, but don't work in the real world marketplace. It's difficult to attract people to a new product or service, just because it's better. People or companies have established buying patterns and are currently doing business with someone else. To do business with you, it takes more than attracting them to your business. You've got to steal your customers from someone else's business and create your own base of loyal customers. It is possible that your competitors may launch new products or services or cut their prices to counter your entry in the current market. For a new start up company it's easy to overestimate sales projections as it's easy to underestimate costs. There are always going to be some unseen expenditure, hefty amount of cost overruns, expensive problems, and items that you simply overlooked. So forecast conservatively and try to have an extra cushion of cash tucked in reserve.

In seeking fund from banks, venture capitalists or other outside investors, you will increase your chances of success if you get someone committed to your management team who at least have a recognizable name. Alternately, you can include as exhibits to your plan any positive media clippings you can find, such as items from trade publications, about members of your management team. If you don't have any clippings, try contacting relevant publications to get media coverage-perhaps about your start-up business proposal.

Try to keep the plan factual, don't use hyperbole or generalizations to describe the potential of your business plan. Use more factual information you present to reach their own conclusions. Keep it succinct. Don't put too much detail when creating plans. If a business plan is too long, it might be skimmed and focus on what is really important might be lost.

Involve use expert opinion or key employees to create business plan. Then work with them until you are satisfied. Have key people get together to get the plan in synchronised fashion and to get any disagreements out in the open. The more input people have in creating the plan, the more responsibility they will feel toward it.

Choices of process technology emerge once the product is finalised. For some complex products, process know-how has to be imported. In such cases agreements for technology transfer should be made with due care to safeguard interest. A lot of appropriate technology is being developed at CSIR and Defence Research Labs and some of these technology can now be bought. There are some intermediaries like APCTT, TBSE, which can help you to locate the relevant technologies. Besides there are some In-house R & D centres of companies which develop technologies and sell them to interested parties. Indigenously developed process know-how has intrinsic benefits such as appropriateness, relative inexpensiveness and possibility to work with technology developer.
While checking out on a process technology, the following things need to be considered with utmost care:

• Whether Process requires very high level of skilled workers or complex machines ?
• Whether Process requires large quantities of water and / or power ?
• Whether any Process or Product patent needs to be honored while utiising the selected process technology.
• Any special Pollution or Environmental regulation.
• The appropriateness to the Indian environment and conditions.

Materials procurement and planning are critical to success, of a start-up SSI unit. Inventory management can lead to manageable cash flow situations, otherwise if too much is ordered too soon considerable amount of working capital gets locked up. On the other hand, non-availability may result in production hold-ups, and idle machine and manpower, hence increased cost. For essential imported raw material whose lead time are large proper planning is all the more essential. Buy raw materials from reputed dealers and agencies only, before ordering compare the prices and get quotation from at least 3-4 places and also check whether price is inclusive or exclusive of transportation cost. While receiving the delivery check the quality and quantity of the materials.

Choosing and ordering of right machinery is also of paramount importance. In many cases technology or process provides us with specifications which is not provided, then an extensive techno-economic survey of machinery and equipment available must be carried out. International trade fairs and engineering fairs are good places to look at available options. The entrepreneur must also consult experts, dealers / suppliers as well as users, prior to making a selection of equipment and machinery. The advice of DIC, SISI and NSIC can also be sought. Many SSI entrepreneurs buy second hand machines and equipments. This leads to one of the major deficiencies in the small industry that of the prevalence of outdated production and management methods hindering the efficient operation of small scale units. It was also found that the most important reason for the reluctance of the small industrialists to install modern machinery and equipment was the lack of invest able funds. The main objective of National Small Industries Corporation (NSIC) is to provide machinery and equipment to small industrial units offering them long repayment period with moderate rate of interest.

• The hire purchase application is to be made on the prescribed form.
• The Director of Industries of the State under whose jurisdiction the applicant falls, forwards the application to the head office of the NSIC at Delhi with his recommendation and comments.
• All applications for indigenous or imported machines are considered by acceptance committees comprising of the representatives of the Chief Controller of Imports, Development Commissioner, Small Scale Industries and other concerned departments.
• Decision of these committees are conveyed to the parties concerned with copies to the regional offices of the NSIC and the concerned Directorate of Industries.
• It is open to an applicant whose case has been rejected to get his application reviewed by a high powered committee known Performa invoice.
• Once all these formalities are completed by the hirer, instructions are sent to the suppliers to despatch the consignment (duly insured for transit risk) to the hirer and to send the R/R or C/R as the case may be, to the regional office.
• The NSIC after ensuring that all dues have been paid by the hirer, releases the R/R or C/R to him for taking delivery of the machines.
• In case of imported machines, the procedure is slightly different in as much as the shipping documents are sent to the clearing agents for clearing the consignment from the Customs and dispatching it to the hirer.

Rs. 7.5 lakhs, F.O.R. or landed cost as the case may be.

5% or 10% of the value of machinery depending on whether the equipment is imported or indigenous. In the case of furnaces and a few other items of equipment, the rate of earnest money is different. Interest 9 per cent per annum with a rebate of 2 per cent on prompt payment. This interest is calculated on the value of machines outstanding after deducting payment of earnest money.

2 per cent on the sales value of machines and its recovery by the NSIC is spread over the total installment period.

The value of the machines, after deducting the earnest money received, called the Balance Value, is payable along with interest and administrative charge in 7 years. -+

• The first installment is payable after one year and six months from the delivery of machines
• The second and subsequent installment are payable half-yearly thereafter.

In case of certain type of machines which become operative immediately on installation in the service sector industries and job order establishment, a gestation period of only 6 months shall be allowed both to the new and existing units. A rebate of 2% per annum is allowed on the interest rates, in case an installment is paid on or before the due date. In case the payment of installment is not made within one month of its separate due date, interest @ 2% per annum over and above the normal rate is charged on the defaulted amount from the date of default to the date of actual payment. Remission in interests is allowed in case one or more than one installment is paid in advance of the due date(s).

After deciding the location and site three important factors to be kept in mind before purchasing/ leasing the land are :

• Availability of basic amenities like power, water,
• Connectivity to nearest rail, road or port and
• Price of the land.

Purchase/ lease the land judiciously, because once you have committed, most probably you will be working there for next 10 year or so.
Once an industrial plot for the unit is secured, then the next job is that of finding a suitable architect to design the outlay of area and factory. Design of factory building has to be in consonance with the type of industry. Have an appropriate plant layout. If you are setting business in home, plan the area which is to be used as your production centre or office judiciously. You may like to take help of a professional to ensure that the area is utilised optimally.
An architect's estimate of building construction is essential for loan applications. Further, architect's certificate for money spent on building is needed for disbursement of loan.

Incentives:

The state government offers incentives like land and building tax concessions, providing land at cheaper rates through the state government agencies to new and existing entrepreneurs.

Among the utilities, of prime importance are power and water. Other utilities that might be required are steam, compressed air, fuel. Assess your requirement of such utilities, make arrangement to get these and ascertain the cost of consuming these. Water Supply : Check out what is source of your water supply is it river, canal, tube well or something else, how far is it from your land, quality of water (PH, hardness), does it meet you specific requirements, rate/ water charges applicable, common storage facility, who is the operating authority (Public Works Department, Estate-Corporation, Municipality). Power Supply : Nearest substation from where you will get power, power tariff rate, feeder type (industrial/rural) availability, quality of power, duration etc. In many cases getting power connection causes delay in setting up of plant. Therefore it is imperative to commence work on these aspects with diligent follow up. Power connections are generally of either LT (Low Tension) or HT (High tension) type. If connected load is up to 75 HP, LT connection is provided. For connected loads of 130 HP or higher only HT connection is provided. A formal application needs to be made in a specific form to the state electricity board. An electrical inspector is deputed for evaluation of application to factory site, after which the load is sanctioned. In areas of power shortage, it is advisable to augment the power supply with a captive generating set. Water connection is also obtained likewise by applying in advance in formal forms. The water supply can be augmented by installation of tube well.

Incentives:

The State Government offers a number of concessions and incentives to industry like Concessions in water tariff, Power subsidy, Subsidy on Generating sets, Transport Subsidy, Incentive for Pollution control and quality equipment depending on the location, size of investment and category of the industry.

Small Scale and ancillary units (i.e. undertaking with investment in plant and machinery of less than Rs. 6.0 million and Rs. 7.5 million respectively) should seek registration with the Director of Industries of the concerned State Government. The main purpose of Registration is to maintain statistics and maintain a roll of such units for the purposes of providing incentives and support services. States have generally adopted the uniform registration procedures as per the guidelines. However, there may be some modifications done by States. It must be noted that small industries is basically a state subject. States use the same registration scheme for implementing their own policies. It is possible that some states may have a 'SIDO registration scheme' and a 'State registration scheme'.

The registration scheme has no statutory basis. Units would normally get registered to avail some benefits, incentives or support given either by the Central or State Govt. The regime of incentives offered by the Centre generally contains the following:

• Credit prescription (Priority sector lending), differential rates of interest etc.
• Excise Exemption Scheme
• Exemption under Direct Tax Laws
• Statutory support such as reservation and the Interest on Delayed Payments Act

(It is to be noted that the Banking Laws, Excise Law and the Direct Taxes Law have incorporated the word SSI in their exemption notifications. Though in many cases they may define it differently. However, generally the registration certificate issued by the registering authority is seen as proof of being SSI).
States/UTs have their own package of facilities and incentives for small scale. They relate to development of industrial estates, tax subsidies, power tariff subsidies, capital investment subsidies and other support. Both the Centre and the State, whether under law or otherwise, target their incentives and support packages generally to units registered with them.

They are summarised as follows:

• To enumerate and maintain a roll of small industries to which the package of incentives and support are targeted
• To provide a certificate enabling the units to avail statutory benefits mainly in terms of protection
• To serve the purpose of collection of statistics
• To create nodal centres at the Centre, State and District levels to promote SSI

Features of the scheme are as follows:

• DIC is the primary registering centre
• Registration is voluntary and not compulsory.
• Two types of registration is done in all States. First a provisional registration certificate is given. And after commencement of production, a permanent registration certificate is given.
• PRC is normally valid for 5 years and permanent registration is given in perpetuity.

• This is given for the pre-operative period and enables the units to obtain the term loans and working capital from financial institutions/banks under priority sector lending.
• Obtain facilities for accommodation, land, other approvals etc.
• Obtain various necessary NOC's and clearances from regulatory bodies such as Pollution Control Board, Labour Regulations etc.

Enables the unit to get the following incentives/concessions:

• Excise exemptions
• Income-Tax exemption and Sales Tax exemption as per State Govt. Policy.
• Incentives and concessions in power tariff etc.
• Price and purchase preference for goods produced.
• Availability of raw material depending on existing policy.

Features of the present procedures are as follows:

• A unit can apply for PRC for any item that does not require industrial license which means items listed in Schedule-III and items not listed in Schedule-I or Schedule-II of the licensing Exemption Notification. Units employing less than 50/100 workers with/without power can apply for registration even for those items included in Schedule-II.
• Unit applies for PRC in prescribed application form. No field enquiry is done and PRC is issued.
• PRC is valid for five years. If the entrepreneur is unable to set up the unit in this period, he can apply afresh at the end of five years period.
• Once the unit commences production, it has to apply for permanent registration on the prescribed form.

The following form basis of evaluation:

• The unit has obtained all necessary clearances whether statutory or administrative. e.g. drug license under drug control order, NOC from Pollution Control Board, if required etc.
• Unit does not violate any locational restrictions in force, at the time of evaluation.
• Value of plant and machinery is within prescribed limits.
• Unit is not owned, controlled or subsidiary of any other industrial undertaking as per notification.

A Small Scale Unit can violate the regulations in the following ways which will make it liable for de-registration:

• It crosses the investment limits.
• It starts manufacturing any new item or items that require an industrial license or other kind of statutory license.
• It does not satisfy the condition of being owned, controlled or being a subsidiary of any other industrial undertaking.

The small units manufacturing items reserved for manufacture in small scale sector do not require any prior license. This is a major relaxation where no licensing or restriction in production in small scale sectors exists. The Locational restrictions have also been minimised. Similarly, Labour Act has simplified in 1988 to assist the small establishments. The Act, namely "Labour Laws (exemption from furnishing returns and maintaining registers by certain establishment) Act, 1988" covers labour related acts and thus provides :

• Establishment employing 10-19 persons require to maintain only 3 register and to submit an annual core return only.
• Establishment employing less than 10 persons to maintain only 1 register and submit only an annual core return.
• Only one Inspector will be responsible for various labour laws, except in case of Factory Act and Boiler Act.
• The Labour Minister has also accepted in principle to transform the enforcement of labour laws for SSI's from a regime of regulation to an era of self-discipline and voluntary compliance

To start and set up their business all SSI units need monetary support. Before seeking fund estimate the cost including that of working capital required for a minimum of 6-8 months and always keep a provision for buffer. you can take help of an CA or concerned officials in Entrepreneurship Development Institutes to work out the total financial cost of your project. Decide the form in which you are going to raise the capital i.e. should it be equity finance, debt finance, loans or a combination of these.
The financial assistance in India for SSI unit is available from a variety of institutions. The important ones are

• SIDBI: Small Industries Development Bank of India (refinance and direct lending)
• SFC's: State level Financial Corporation e.g. Delhi Financial Corporation (DFC), Gujarat State Financial Corporation (GSFC).
• NSIC: National Small Industry Corporation.
• Small Industry Development Corporations of various states.
• Commercial/Co-operative Banks.
• DIC: District Industry Centre.
• In addition, large term loans are also available from All India financial institutions such as IDBI, IFCI and ICICI. The EXIM Bank (Export Import Bank of India) and the ECGC (Export Credit and Guarantee Corporation) are Federal agencies which provide credit for export/import and exim guarantees respectively.

This need for finance can be classified into following types:

• Long and medium term loans
• Short term or working capital requirements
• Risk Capital
• Seed Capital/Marginal Money
• Bridge loans

Long and medium term loans are provided by State Financial Corporations, SIDBI and State Industrial Development Corporations. Banks also finance term loans. This type of financing is needed to fund purchase of land, construction of factory building/shed and for purchase of machinery and equipment. The term loans are secured against mortgage of assets such as land, building, machines, equipment and other stocks. The short term loans are required for working capital requirements, which fund the purchase of raw material and consumable, payment of wages and other immediate manufacturing and administrative expenses. Such loans are generally available from commercial banks.
There is, however, a SINGLE WINDOW SCHEME, for SSI units. Under the scheme, one agency, either the bank or the financial institution, funds both the term loan and working capital requirements. This scheme applies to all SSI projects with project cost up to Rs 50 Lakhs. The working capital loan is generally secured against

• Pledging of stocks, raw materials and finished goods,
• Advances against work-in-progress (WIP),
• Advance against bills.

For loans from financial institutions and commercial banks a formal application needs to be made. The details of documentation that need to be provided with the loan application are shown here.

• Documentation for Loan Application
• Balance Sheet and Profit Loss Statement for last three consecutive years of firms held by promoters
• Income Tax Assessment Certificates of Partners/Directors
• Proof of Possession of Land/Building
• Architects estimate for construction cost
• Partnership deed/Memorandum and Articles of Associations of Company.
• Project Report
• Budgetary Quotations of Plant and Machinery

A sanction or rejection letter is issued by bank after its assessment of the application. After receiving a sanction letter applicants need to indicate in writing their acceptance of terms and conditions laid down by FI/ Banks.
Subsequent loan is disbursed according to the phased implementation of the project.
In today's environment there are other choices apart from commercial banks and Government owned financial institutions. These options include venture capital funds and non-government finance companies.

Human Resource is an important element to be kept in consideration while setting up an business. Though, projections for manpower and staffing is made in the project report, however it is necessary to time the induction of manpower in a planned manner. For example : The engineers and operatives must be available before the installation of the machinery. While planning for manpower following points should be kept in consideration :

• Make an estimate of number of personnel needed to operate each machine/equipment installed plus no. of unskilled workers required.
• Estimate the number of shifts planned.

Before finalising your manpower plan, try and study the manpower design in similar organisation.

Hiring the right employees can determine whether your business succeeds or fails. The hiring process should be systematic, and should include more than just classified ads and interviews.

• Be sure about what legal responsibilities will you be exposed to, you may become subject to certain employment-related laws when you add a third, tenth, or a fifteenth employee.
• Prepare a job descriptions.
• Once you've determined job description and what type of worker you want, find out how to advertise and write job ads, and learn other ways of attracting applicants here. Use your personal contacts.
• After you've publicized the opening, you should have some applicants expressing interest. Will you require that applicants complete applications, or will you accept resumes
• You've collected all the information, so now what? Plan what to ask, what not to ask, and how to plan for your interview.
• Check out an applicant's background in order to avoid negligent hiring claims and to protect your business, thoroughly check references and credentials.
• After making your decision and chosen someone to hire, make a job offer.
• Once someone has accepted your offer, get all the necessary paperwork done quickly, make the employee feel comfortable through orientation so that he or she can become a productive employee as soon as possible.
• Next design and install job analyses and job evaluation process you may also need to keep in mind the following:
• It may be possible for a worker to mean more than on machine/equipment
• Continuous source of labour force must be maintained in order to cope with both planned and unplanned leave of personnel employed. As discussed in an earlier chapter you may find it difficult to get skilled operators at short notice, and this could upset the production and delivery schedule
• Careful consideration is require regarding the number of workers that can be effectively supervised by a supervisor. However, this also depends upon the nature of a job. On the basis of this, you would be able to make an estimate of the supervisory staff you require for your organisation. You must prepare an organisation chart for the purpose.

When your unit becomes operational, the following steps must be taken to ensure availability of manpower for smooth functioning of your organisation.

• Examine the objectives of your organisation for the next few years. For example, If you plan to increase your sales, would it require additional manpower, or would you be able to manage with the existing manpower? If you need them then at what levels and when would you need them? Even when you plan to expand to newer geographical areas, you need to do a similar exercise. If you plan to introduce better technology in future, you need to examine whether it is possible to train the existing workers or whether you can consider a reduction in the number of employees etc. On the basis of these factors, you need to forecast future manpower requirements.
• To help you plan for human resources, you may make a table showing the existing manpower in different skills/grades, the estimated skill-wise manpower with an indication of when they are required. You also have to ensure that as you change your business from time to time, depending upon the market conditions, you need to incorporate these change in the manpower planning too.
• Benefits for Your Workers If you can, provide the general benefits, including time-off benefits such as vacation, sick leave, and personal time off. , worker's compensation, retirement plans.

• Health Insurance : Health insurance is a valuable benefit, but it can be expensive for small groups.
• Life Insurance : life insurance is a great benefit to provide because it offers employees with a family some security at a fairly low cost. Check here for information on the different types of life insurance you can purchase and how to handle day-to-day administration.
• Retirement Plans : retirement benefits are a valuable benefit to offer to your employees and to yourself. They can be costly and time-consuming to administer, but there are a wealth of options to choose from that can be financially advantageous for you, your business, and your employees.
• Miscellaneous Fringe Benefit : this category includes all the other types of fringe benefits you may choose to provide to your employees. In some cases, you can deduct the cost of providing the benefits, but your employees will not have to pay tax on them!

• Motivating Your Workers : Employee morale directly affects your bottom line. Dependable, productive employees are one of the keys to success. Many business owners rightly recognize that it is the people who work for them that make the difference, regardless of the product or service they sell. If an employee is not working up to the mark find out why it is so, try various methods like rewarding employees, recognizing their achievements and contributions to boost their morale.

Not every employee will work well with your organization, and chances are that you will eventually have to terminate an employee. For most business owners and managers, this is definitely not a job to look forward to. Before firing give them a warning or two if there are no noticeable improvements terminate him as per employment condition and explain to other employees the reason for firing particular employee.

Incentives:

Some of the state government offers incentives for training human resources and employing local people as well as set up centers for developing human resource.

While preparing the manpower plan, you need to consider the following points:

• Promotion: the personnel likely to be promoted to a higher grade and in case of such promotion, would it create a vacancy at the lower level?
• Succession Planning : the number of personnel likely to leave the organisation in the initial years. When a crucial employees leaves the organisation, it might put the organisation into serious trouble, especially if the organisation is small. Do everything possible to retain them. Prepare others to take the role of the crucial employees by training them. Some of the organisations have tried to keep crucial employees by offering them a small percentage of the profits. This may motivate them to stay.
• Absenteeism : what is the rate of absenteeism in your organisation? Again, if it is on the higher side you need to take remedial action.
• Man-days lost: because of leave due to sickness. Is it comparable to other organisation? If not, what could be the reason? Probable Rate of Accidents on the shop floor and how many man days could be/ are lost due to such accident? Are they comparable with those taking place in other organisation?

Today's competitive market, it is difficult to maintain stable relationships with suppliers, customers, brokers, distributors, and even your own company personnel. Competitors are stealing your best customers. To maintain the edge entrepreneurs need to sychronise their production process, capacity, and delivery schedule.

Plan out your work area keeping in mind the requirement of your business. More often than not the area available to small businesses is limited and within that area all the work needs to be carried out, right from storing the raw materials to the final product. The space for each of these should be clearly chalked out. The distance between one facility and another or one machine and another should be fixed. Design the work place so that there is least amount of repetitive movements, the place is safe for workers and area is properly allotted for each process. You (or your technical adviser) should work out where exactly each facility like raw material storage, individual machines, packaging, finished goods storage and quality control unit will be located. The flow of the production process and the space requirement for material handling as well as manpower requirement determine the layout.

The total capacity of business needs to be planned beforehand keeping in consideration the market demand and future supply and demand condition. While purchasing machinery the capacity should be such that there should be provision for future expansion.

In the initial phase of setting up an enterprise to establish the credibility in the market make it a point to deliver in scheduled fashion. There should be no or least amount of damage to the product, if the product is fragile package and mark it accordingly. Ensure that it reaches its destination in time.

In present environment commitment to quality is essential for a small business to compete against its competitors.

A new company or a small business has limited financial, personnel, and capital plant/equipment resources and is especially vulnerable to instability brought on by rapid changes in customer behavior. One way to ensure business success is to make quality number one priority for all employees in your company.

• Quality work and customer satisfaction must be a commitment of all employees.
• Improving quality and customer satisfaction must also be a commitment of all employees.
• Every company activity must incorporate quality and customer satisfaction, including all communications with customers and suppliers.
• It doesn't have to cost more to make quality and customer satisfaction your priority.
• Significant changes may be required to make quality and customer satisfaction improvements.
• Small advantages in all company functions can set your quality and customer satisfaction apart from the competition.

Government of India encourages and offers incentives to small scale industries to get ISO 9000 certificate. Govt. of India also helps them to set up their own R & D centre.

In India, price is often affected by excise duty, sales tax and local taxes like octroi, thereby making it difficult to maintain a uniform price throughout the country. You may opt for any of the following policies or modify and combine them depending upon your objective or you can have your own pricing policy :

The price is fixed after taking into consideration the financial aspect. 'Amount spent and return expected' is the key factor in deciding the price. This has relation with the sales forecast too.

This involves selecting the lowest yet profitable price per unit so that you can sell a maximum number of units. Once your product is in demand or is accepted in the market, you can increase the price of your product.

When a product is innovative and competition is low or non existent, this policy can be applied. You can make optimum profit. When you face competition later, you can lower the price.

Price is fixed keeping the welfare of the society in mind. For many life saving drugs, this particular policy is used. The product is sold at the lowest possible price with either a very reasonable margin or no profit at all. Profit may be earned from other products.

If you are selling a range of particular product for example pickles, then you price the product in a particular range, this way you may earn more profit in one flavour and less on the other. But, you cannot sell only the one that gives you maximum profit, or else a customer may switch over to another brand where he would be able to exercise an option for other flavours.

In this case, you follow the leader for fixing the price. "Rasna" is the leader in the area of synthetic sherbets. Pricing of a similar product will have to be decided based on the price of "Rasna".
Before fixing the price of product, ask yourself is the price reasonable, would you buy the product at the price you have decided upon if you were a customer.
You must also ascertain:

• the retail prices of competing brands
• the commission offered to traders/distributors/stockists by competitors
• the ex-factory price (including taxes) of the competing brands
• the pricing strategy you want to adopt
• the special features of your product that would not hinder the customers from buying your products
• if you are charging higher price than that of your competitor.

Marketing is an important tool to be used while setting up your business. Study, but don't necessarily copy your competitor's moves. Visit their businesses, watch their ads, figure out their strategies, and keep your eyes open. You may not be able to keep up with your competitor's strategy move by move. You should, however, be ready and able to blunt or block the impact of their moves through effective marketing. Then, later, you can make your own offensive move at your own pace.

A good marketing plan summarizes the who, what, where, when, and how much questions of company marketing and sales activities for the planning year:

• Who are target buyers?
• What sources of uniqueness or positioning in the market will/ does your product have?
• Where will you implement your marketing spending plans?
• When will marketing spending plans occur?
• How much sales, spending, and profits will you achieve?

The financial projections contained in your business plan are based on the assumptions contained in your marketing plan. It is the marketing plan that details when expenditures will be made, what level of sales will be achieved, and how and when advertising and promotional expenditures will be made.

• The situation analysis describes the total marketing environment in which the company competes and the status of company products and distribution channels.
• The opportunity and issue analysis analyses the major external opportunities and threats to the company and the internal strengths and weaknesses of the company, along with a discussion of key issues facing the company.
• The goals and objectives section outlines major company goals and the marketing and financial objectives.
• The marketing strategy section provides the company's marketing strategy statement, summarizing the key target buyer description, competitive market segments the company will compete in, the unique positioning of the company and its products compared to the competition, the reasons why it is unique or compelling to buyers, price strategy versus the competition, marketing spending strategy with advertising and promotion, and possible R&D and market research expenditure strategies.
• The sales and marketing plan outlines each specific marketing event or action plan to increase sales. For example, it may contain a summary of quarterly promotion and advertising plans, with spending, timing, and share or shipment goals for each program.

Some of the ways to market your product or service are

• Write letters (on issues and news items that have SOME relation to your business) to the editors of local papers.
• Have give-away's (e.g. bookmarks or pens) that are useful and give details of your business. Distribute, with the aid of friends and family, everywhere.
• Send news releases about your products and your business to local papers, radio and TV shows.
• Take out an ad in a publication of a local group, school anniversary bulletin.
• Offer to make presentations, on a topic related to your product or service, at schools.
• Keep your eyes open for "specialized" newsletters, newspapers, or other publications which might welcome an article written by you.
• Get on the Internet and connect to the world with your own home page.

Remember marketing is the face you show to public, highlighting uniqueness and quality of the product. Check the content and layout before releasing an advertisement or distributing pamphlet. Marketing is becoming an ever important tool is present competitive scenario, tell what your product or services can do, but don't promise what you can not deliver.

Manage your cash Flow to pay back your loans, debts or credits. A healthy cash flow is an essential part of any successful business. If you fail to have enough cash to pay your suppliers, creditors, or your employees, chances are you will be out of business very soon. You should pay back the loans so that when you need loans in future, you get one. You can pay the loans or debts as per terms and conditions initially agreed upon, if you can't pay in time inform the creditor, ask for an extension stating the reasons. Proper management of your cash flow will ensure the same and is a very important step in making business successful. To handle your business properly learn the basics of accounting, inflow and outflow of cash. You can take help of your accountant, get help from a friend or family member in the initial stages. There is nothing in finance that can not be understood by a common person. To manage finance properly

• Understand Cash Flow. It is the first step in effectively managing your cash flow. There's more to it than just a the movement of money into, and out of, your business checking account. It is an essential ingredient for running a business successfully, the better you understand it less are the chances that you will be in financial mess or worse have a case of money swindling
• Analysing Your Cash Flow will help you spot some of the problem areas in the cash flow cycle of your business. As in any good analysis, you need to look individually at each of the important components that make up the cash flow cycle, to determine if it's a problem area or not.
• Have A Cash Flow Budget is good way of predicting your business's cash flow for the next month, six months, or even the next year.
• Improving Your Cash Flow will, without a doubt, make your business more successful. Accelerating your cash inflows and delaying your cash outflows are key factors for improving and managing your cash flow. The cash flow budget is also a handy tool to use in the improvement and management of your cash flow. A good cash flow will ensure a healthy profit.
• Fill Your Cash Flow Gaps: from time to time, almost every business experiences the need for more cash than it has. If you find yourself in this position, you may have to borrow money to fill the gap.
• Handling Any Cash Surplus Or Profit is just as important as the management of money into and out of your cash flow cycle. With the proper management of your cash flow, you might find yourself with a little extra cash, on which you can earn investment income or utilise it during lean times.

There are a few (and only a few) things you need to understand in order to make setting up your accounting system easier. They're basic (trust me), and they will probably clear up any confusion you may have had in the past when talking with your CPA or other technical accounting types.

These are the backbone of any accounting system. Understand how debits and credits work and you'll understand the whole system. Every accounting entry in the general ledger contains both a debit a/c and a credit a/c. All debits must equal all credits. If they don't, the entry is out of balance. Out-of-balance entries throw your balance sheet out of balance and shows something is amiss somewhere. so start from beginning. Depending on what type of account you are dealing with, a debit or credit will either increase or decrease the account balance. Figure 1 illustrates the entries that increase or decrease each type of account.

Figure 1

Debits and Credits vs. Account Types

In above figure for every increase in one account, there is an opposite (and equal) decrease in another, this keeps entry in balance. Also to be noted is the fact that debits always go on the left and credits on the right.
Let's take a look at two sample entries and try out these debits and credits:
In the first stage of the example we'll record a credit sale:

If you looked at the general ledger right now, you would see that receivable had a balance of Rs. 15,000 and income also had a balance of Rs. 15,000.
Now we'll record the collection of the receivable:

See how both parts of each entry balance, how in the end, the receivables balance is back to zero? That's as it should be once the balance is paid. The net result is the same as if we conducted the whole transaction in cash:

Of course, there would probably be a period of time between the recording of the receivable and its collection.

Balance sheet accounts are the assets and liabilities. When we set up your chart of accounts, there will be separate sections and numbering schemes for the assets and liabilities that make up the balance sheet. Assets increase with a debit and decrease with a credit. Liabilities increase with a credit and decrease them with a debit.

Simply stated, assets are those things of value that your company owns. The cash in your bank account is an asset. So is the company car you drive. Assets are the objects, rights and claims owned by and having value for the firm. Since your company has a right to the future collection of money, accounts receivable are an asset-probably a major asset. The machinery on your production floor is also an asset. If your firm owns real estate or other tangible property, those are considered assets as well. If you were a bank, the loans you make would be considered assets since they represent a right of future collection. There may also be intangible assets owned by your company. Patents, the exclusive right to use a trademark, and goodwill from the acquisition of another company are such intangible assets. Their value can be somewhat hazy. Generally, the value of intangible assets is whatever both parties agree to when the assets are created. In the case of a patent, the value is often linked to its development costs. Goodwill is often the difference between the purchase price of a company and the value of the assets acquired (net of accumulated depreciation).

Liabilities as the opposite of assets. These are the obligations of one company to another. Accounts payable are liabilities, since they represent your company's future duty to pay a vendor. So is the loan you took from your bank. If you were a bank, your customer's deposits would be a liability, since they represent future claims against the bank. We segregate liabilities into short-term and long-term categories on the balance sheet. This division is nothing more than separating those liabilities scheduled for payment within the next accounting period (usually the next twelve months) from those not to be paid until later. We often separate debt like this. It gives readers a clearer picture of how much the company owes and when.

After the liability section in both the chart of accounts and the balance sheet comes owners' equity. This is the difference between assets and liabilities. Hopefully, it's positive-assets exceed liabilities and we have a positive owners' equity. In this section we'll put in things like

• Partners' capital accounts
• Stock
• Retained earnings

Another quick reminder:

• Owners' equity is increased and decreased just like a liability
• Debits decrease
• Credits increase

Retained earnings are the accumulated profits from prior years. At the end of one accounting year, all the income and expense accounts are netted against one another, and a single number (profit or loss for the year) is moved into the retained earnings account. This is what belongs to the company's owners-that's why it's in the owners' equity section. The income and expense accounts go to zero. That's how the new year with a clean slate against which to track income and expense.
The balance sheet, on the other hand, does not get zeroed out at year-end. The balance in each asset, liability, and owners' equity account rolls into the next year. So the ending balance of one year becomes the beginning balance of the next.
Think of the balance sheet as today's snapshot of the assets and liabilities the company has acquired since the first day of business. The income statement, in contrast, is a summation of the income and expenses from the first day of this accounting period (probably from the beginning of this fiscal year).

Further down in the chart of accounts (usually after the owners' equity section) come the income and expense accounts. Most companies want to keep track of just where they get income and where it goes, and these accounts tell you. For income accounts, use credits to increase them and debits to decrease them. For expense accounts, use debits to increase them and credits to decrease them.

If you have several lines of business, you'll probably want to establish an income account for each. In that way, you can identify exactly where your income is coming from. Adding them together yields total revenue.

• Sales revenue from product A
• Sales revenue from product B (and so on for each product you want to track)
• Interest income
• Income from sale of assets
• Consulting income

Most companies have only a few income accounts. That's really the way you want it. Too many accounts are a burden for the accounting department and probably don't tell management what it wants to know. Nevertheless, if there's a source of income you want to track, create an account for it in the chart of accounts and use it.

Most companies have a separate account for each type of expense they incur. Your company probably incurs pretty much the same expenses month after month, so once they are established, the expense accounts won't vary much from month to month. Typical expense accounts include

• Salaries and wages
• Telephone
• Electric utilities
• Repairs
• Maintenance
• Depreciation
• Amortization
• Interest
• Rent

Once you have started the production most important aim for long run should be to remain at the forefront of business and avoid being obsolete in terms of products, services or management aspect. Listen and gauge the market, anticipate the future demands. There are many market survey document or market reports published by individual agencies and government departments on this aspect. An entrepreneur can use these as indicative guide to project the future conditions. In face of competitive environment entrepreneur should keep abreast of process and technological changes that are taking place and wherever possible incorporate the changes which could increase the productivity, efficiency and /or reduce the cost of production.

A Technology Management Division has been set up in Small Industries Development Organisation (SIDO) to bring all the promotional schemes/activities of the Ministry of SSI & ARI relating to technology upgradation and modernization of the small scale sector under one umbrella.
The areas covered under this division are :

• Integrated Technology Upgradation and Management Programme (UPTECH)
• Incentive Scheme for Acquiring ISO- 9000 Certification
• Awareness & Motivational Programme on ISO - 9000
• Energy Conservation
• Technology Trust Fund.

UPTECH has been devised to cater to the technological needs of small scale industries on cluster basis. The first steering committee meeting was held in the month of Sept., 1998. 12 clusters in small scale sector have been identified for taking up modernisation and technology upgradation programme during the 9th Five Year Plan.

ISO-9000 has become synonymous with quality for export of goods to other countries. The incentive scheme provides reimbursement of the charge for acquiring ISO-9000 certification to the extent of 75% of the cost subject to a maximum of Rs.75,000 in each case. The number of units assisted during 1997-98 was 88. An amount of Rs. 21 lakhs has already been approved out of the budget provision of Rs. 65 lakhs made during 1997-98 for reimbursement to 40 cases decided in the first meeting. It is estimated that 80 more cases will be reimbursed during the remaining part of the year.

During 1998-99, 10 number of 5 days Awareness cum Educational Programme on ISO-9000 and 25 number of one day Awareness cum motivational programme have been allocated to different organisations under SIDO. FICCI Quality Forum, New Delhi has been entrusted to prepare video cassette on ISO-9000 Quality System, for SSI Sector.

The specific consumption of energy in small scale sector is generally high in sectors like foundry, forging, re-rolling mills, glass and ceramics industries etc. The purpose of taking up the energy conservation is to create awareness about the advantages of new techniques of energy conservation. An amount of Rs. 20 lakhs has been made for B.E. 1998-99 for conducting programme viz. awareness programme/ preparation of video films/ energy audit etc. Energy conservation amount of Rs. 1.5 lakhs has been allocated to organise 25 workshops on quality conservation during 1998-99 by various Small Industries Service Institutes (SISI's) and Regional Testing Centres (RTCs). Tata Energy Research Institute (TERI) has been assigned preparation of an energy conservation plan for small scale industries located in NOIDA, UP.

A Technology Trust Fund to meet the technological needs of small scale industries has been created with a corpus fund of Rs. 150 lakhs contributed by the Government of India, Karnataka State Government and Karnataka Association. Some of NG0s have also been involved in this project. Government of India has already released a sum of Rs. 50 lakhs out of its share of contribution of Rs. 75 lakhs.

Here are some tips to to avoid sickness.

Some entrepreneur view company policies as a sign of encroaching bureaucracy and avoid issuing or observing them like the plague. However, having some sort of company policies helps in taking decision over various issues and small problems that are part of running a business. Policies makes it clear to employees what kind of behaviour is expected in the workplace. They can set clear guidelines on what is and isn't appropriate. Policies ensure that decisions will be uniform across the organisation thereby avoiding variance in decision for same type of problem. And policies can help you avoid many troubles.

No matter how talented you are in business, you're going to make mistakes, so learn from mistakes. Don't take it to heart, analyse the mistakes, think of possible solution so that should a similar situation arises in the future you are able to deal with it effectively.

It's so easy to make blunders handling money in a business. Every day in business you are bombarded with what seems like great reasons to spend money on something you didn't budget. Taken in isolation, so many unplanned expenses seem like a great idea, but question should be how much it is going to contribute actually in developing the business.

You never know what is going to work in marketing, so don't be afraid of making mistakes-as long as they are small mistakes and does not hurt you financially in a big way.

• Never, ever, spend lots of money on any marketing program until you see that it is bringing in money.
• Never assume that someone else's marketing program will work for you.
• Never assume that an ad agency or marketing expert can guarantee you results-no one can.
• Make small test promotions and put in that extra effort to carefully measure results.
• Ask every customer how they heard about your business, and track the response to every promotional effort.
• There are some marketing avenues out there that will work for your business-but it could take you a long time to find the right mix of the right media, the right offer, the right ad copy, and the right ad design.

You can't just drive people to work 100 percent flat out all day long and well into the night-well, at least not every day! So even if people are doing a reasonably good job-loosen up and show them how much you appreciate their work!

Even if you're a relatively small vendor, meet executives of a large company you're doing business with they will be happy to know you are not just meeting with them to simply get more orders, but to try to serve their needs better. You are so much better off if you have developed a close relationship with key decision-makers, and not just the buyers at businesses with which you are dealing. Sooner or later if there are some kind of problem-such as over discount, payment terms, faulty products, or whatever-then you will not going to end up dealing with the key decision makers for the first time under negative circumstances.

Have a suitable feedback mechanism in place to learn from experiences, to gain an insight into what is actually happening in your business, if you don't have one develop a suitable mechanism which suits your necessities. Think of your experiences, when you wanted to know from others how you were performing your jobs or chores or tried to find out how you performed in your a particular assignment. Entrepreneurs should seek immediate feedback on their performance, product and people. They want prompt, accurate data on the results they are getting. It does not make any difference whether the information they get is pleasant or unpleasant. By remaining unaffected by the results or feedback, they are stimulated to pour more energy into further accomplishing the task. Positive or a negative feedback is a response for them based on which they charter their future course of action. They are neither disheartened by negative feedback nor do they remain jubilant in light of glowing feed back. Entrepreneurs strive for higher goal, better performance and above all learning from their own and experiences of others.

Udyog Bhawan,
New Delhi -110 011
Email: jpsingh@nb.nic.in
Small Industries Service Institutes (SISI)
There are 29 SISI's and 30 Branch SISI's set up in State capitals and other industrial cities all over the country.

All District Industries Centre are located at the District headquarters.

Asian and Pacific Centre for Transfer of Technology(APCTT)

APCTT Building,
C-2 Qutab Institutional Area,
P.O.Box - 4575
New Delhi - 110 016
India
Tel: 91-11-26966509, 91-11-26856276, 91-11- 26966619, 91-11- 26966629
Fax: 91-11-26856274,
E-mail: postmaster@apctt.org

Technology Development Board

Department of Science and Technology
Technology Bhavan, New Mehaurli Road,
New Delhi - 110 016
Tel: 26535049, 26516037, 26516077
Fax: 26522231, 26857643, 26524898
Email: info@tdbindia.com

Technology Bureau for Small Enterprises

APCTT Building, Qutub Institutional Area
P.O. Box – 4575
New Delhi – 110016, India
Tel: 91—26864501, 26856276, 2696619/521
Fax : 91-11-26856274
E-mail : tbse@apctt.org