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ESCAP- Regional Training Workshop on Entrepreneurship and e-business Development for women
Cooperatives 27-30 November ,2007 Bali Indonesia


SETTING UP AN ENTERPRISE

by Madhura Chatrapathy

There are three main stages in setting up an enterprise.

IDENTIFICATION OF OPPORTUNITY
CONSOLIDATION OF RESOURCES
IMPLEMENTATION OF PROJECT

Identification of Opportunities

When the entrepreneur scans the environment and looks for technology, market demand and then
selects the project idea.

Consolidation of Resources

The entrepreneur consolidates resources like finance, land, building, machineries, raw materials, skill,
and makes a business plan accordingly.

Implementation of the Project

The entrepreneur sets the business venture, manages the enterprise, involving manufacturing, finance
management, personnel management, etc. creates and looks for success and growth.

BUSINESS PLANNING

One of the important things in an enterprise is the Business Plan. Put simply, the business plan means
a detailed analysis of the business in which all factors needed for business success are considered.
Starting from selection of the product idea, finding how to make it, looking at the market and deciding
what part of the market will be focused on, down to managing the production, cash flow, employees
and quality are analysed and a plan of action is set down in a Business Plan. A Business Plan also plans
for the future, in terms of deciding how the business will function in the coming years, how it should
grow, and in what directions.

A Business Plan is not something that is prepared once and then followed. As the environment in
which the enterprise exists keep changing, the enterprise also has to respond to these changes. Some of
these may have been taken care of in preparing the Plan, but not others. As such, the Business Plan
must be reviewed regularly, to check if what actually happens agrees with what was planned. Periodic
changes to Business Plan are needed to keep abreast of the changes in the market and other
environment.

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ESCAP- Regional Training Workshop on Entrepreneurship and e-business Development for women
Cooperatives 27-30 November ,2007 Bali Indonesia
An enterprise starts with a business idea. The entrepreneur scans the environment, for a project idea
from among the various opportunities available, and select one project idea. The entrepreneur does an
initial market survey and checks if the project idea is worth taking up and also checks if appropriate
technology is available. In the first Business Plan therefore, the entrepreneur must think and put down
how she would do these things, and what action she plans to take in this regard.

The different aspects of an enterprise, which the entrepreneur must understand and know well, and
practice fully, are covered in the chapters following. These also are factors, which need to be covered
in the Business Plan. Therefore, it is suggested that in the following chapters, the entrepreneur must
start writing her Business Plan step by step, so that by the time she goes through all the stages of
learning about entrepreneurship, she also has a Business Plan ready, which may need only minor
modification later.

Key Elements of Business Planning

PRODUCT IDEA
TECHNOLOGY
MARKETING
MANUFACTURING
MONEY
EMPLOYEES
START UP /LAUNCH
SUCCESS AND GROWTH

The various elements which go into a business plan are :
Idea, entrepreneur, market match

An entrepreneur and enterprise / business idea as also the market need to match . A assessment of the
attitude and aptitude as also socio economic consideration of an entrepreneur matter most in creating
an enterprise. The fit needs to be assessed objectively.

For example an entrepreneur may not go into silk reeling activity, for she saw that the silk worms get
killed before the silk yarn is removed from the cocoons. The very idea was repulsive to her.

This match between the idea, entrepreneur and market has to be done after the initial market survey.
For instance, checking if there is a market for the product idea selected, what kind of market and will
the entrepreneur be able to penetrate such a market will help decision making. If it is challenge, is the
entrepreneur capable of taking such a challenge or is their an alternate option. If so entrepreneur can
go ahead, if not she has to start with a new idea.

The enterprise must also be within the resource reach of the entrepreneur.

_________________________________________________________________________________
ESCAP- Regional Training Workshop on Entrepreneurship and e-business Development for women
Cooperatives 27-30 November ,2007 Bali Indonesia
Initially, market survey, market segmentation and demand measurement needs to be carried
out and strategies to be adopted in penetrating the market niche needs to be carried out
subsequently.

Infrastructure requirements and planning, like land, building, water electricity etc., their costs
needs to be assessed and proper estimates have to prepared.

Determining the technology, machinery /equipments requirements and obtaining the details of
the their costs is one of the key steps.

List of all costs involved in running the enterprise and its projection

Profit projection consists of Cash flow statement, repayment of loan, means of finance, equity
or owner's contribution etc. Break even point, the point where there is no profit or no loss.
Return on investment and other ratios

By equity or owner's contribution it is meant that the entrepreneur brings in some own
resources into the enterprise which is entrepreneurs contribution. There are special schemes of
the Governments for various disadvantaged people and regions or areas which provides for
special funds or 100% loan, grant plus loan. Depending on the size of enterprise it is called
micro and small enterprise. This is need to be explored.

MICRO AND SMALL ENTERPRISE ( MSE)

The definitions of small or micro enterprises vary from country to country. In most countries, there is
some form of assistance or benefits provided to enterprises that are defined as micro and small
enterprises. Most developing countries take into account investment or project cost as the basis for
such a definition. The project cost, as defined by United Nations Development Program (UNDP), is
fixed capital + net Initial capital.

This could be taken as a basis for all the countries in calculating their project cost. Based on the
individual Government policy, it could be classified whether it is in micro An entrepreneur is a person
with a dream, originality and daring, who acts as the boss, who decides as to how the commercial
organization shall run, who co-ordinates all activities or other factors of production, who anticipates
the future trend of demand and prices of products.

An entrepreneur is one of the important segments of economic growth. Basically he is a person
responsible for setting up a business or an enterprise. In fact, he is one who has the initiative, skill for
innovation and who looks for high achievements. He is a catalytic agent of change and works for the
good of people. He puts up new green-field projects that create wealth, open up many employment
opportunities and leads to the growth of other sectors. The entrepreneur displays courage to take risk
of putting his money into an idea, courage to face the competition and courage to take a leap into
unknown future and create new enterprises/ business. This creative process is the life blood of the
strong enterprise that leads to the growth and contributes to the national development.

The entrepreneur will always work towards the creation and enhancement of entrepreneurial society

_________________________________________________________________________________
ESCAP- Regional Training Workshop on Entrepreneurship and e-business Development for women
Cooperatives 27-30 November ,2007 Bali Indonesia


TYPES OF ORGANISATION

The following are the various types of enterprises, which could be formed, to provide a legal status.

Proprietorship (individual owner)
Partnership (more than one owner)
Private Limited (more than one owner, it is different from partnership in legal make up and
constitution)
Public Limited (wherein the public are called for subscription, and there is a large number of
owners)
Co-operative Societies : Individual share holding and formal a organisation

Difference Between Entrepreneurship, Self-Employment and Income Generation Activities

Development sector focus is on income generation for the marginalized and low income groups and
they tend to work with women on income generation activities, for economic advancement. When
entrepreneurship is mentioned , it is possible that this may be taken to refer to such activities as well.
Entrepreneurship however goes much beyond Income generation activity, and even self-employment.
It is important for the facilitators understand difference between these three common terms used in
any economic development activity. Although there are a lot of commonalities among these concepts,
the differences need to be fully appreciated.

Income generating activities are often part time and is practiced for raising additional income. They
are usually supported by funding various sources, and do not tend to be self-sufficient.

Self-employment refers to full time involvement in one's occupation, in which one may or may not
have take any risk, to mobilise inputs and other resources to organise total production or to market the
product services.

Entrepreneurship involves strong use of business skills, and is mainly market oriented. It also
involves employment of at least one other person, and managing personnel is an important factor in
entrepreneurship.

ENTREPRENEURSHIP = ENTERPRISE + ENTREPRENEUR

All entrepreneurs are self employed and income generating persons, but all self
employed and income generating persons are not entrepreneurs. So also all self
employed persons are income generating persons, but all income generating persons are
not self employed persons. Though there is no clear definitions these. Based on the
current practices and what implies the major differences in the three terms are evolved.

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ESCAP- Regional Training Workshop on Entrepreneurship and e-business Development for women
Cooperatives 27-30 November ,2007 Bali Indonesia


Income generating Self employment Entrepreneurship
Supplementary income
Income from one's own in-
put
Profit
Partial employment Full time employment
Usually collective Full time employment
Individual, partners, private
limited, group.
Managed by NGO's or
Self Help groups.
Usually not collective

Sometimes part of Self help
group.
Managed by the owners, partners
etc.
Most common development
activity.
Fairly common develop-
ment activity
Uncommon development
activity
Programs stop at skill training. Mainly artisan skills used Needs more complex skills.
Programme generally Schematic
Programme generally sche-
matic
Few programmes
Target (number oriented) Target (number) oriented
Programmes focused on
economic viability
Group employment Employment for self only Employs more than one person
Seldom result in real income
generation. Last as long as the
grant.
Not growth oriented
Economic growth oriented
through value addition
Low investment Low investment Investment may be low or high