CONVERTING

BUSINESS OPPORTUNITIES
INTO REALITY
Process
of
setting
up a
Small-
Scale
Industry
 Different Phases
1. Selection of a small industry and preparation
of feasibility and project reports;
2. Accommodation, power and other
infrastructural facilities;
3. Machinery;
4. Finance;
5. Marketing; and
6. Securing various incentives offered for the
development of small- scale industry.
 Selection of a Small-scale Industry

The objectives of the promotional regulation are to

provide an impetus to the growth of small-scale industry
and regulate the supply of machinery, electricity, water,
premises, finance, raw materials and markets. The
process of production and marketing is governed by set
rules and regulations. In a way these regulations are a
boon to the small entrepreneur,
 Starting a Small-scale Industry
i. The entrepreneur should be fully conversant with the product
line. It is not enough that he knows the method of manufacture;
he has to know how to operate the machines, etc.
ii. He should have adequate shop floor experience to guide the
machine operators in tool-setting techniques or the die-marker on
the specific needs of his press tools.
iii. He should be familiar with the raw materials he requires, their
specifications, how to ensure their quality and where to get them
at reasonable prices.
iv. He should know how to keep accounts, how to maintain stores,
how to prepare the balance sheet. etc.
v. He should have knowledge of marketing channels, distribution
network, agency practices, transport intricacies, and the
economics of packaging
i. He should know how to ensure the stipulated quality of his
product.
ii. He should be well versed in taxation and other laws
governing small-scale industries.
iii. He should be willing to put up with polluted environments
and small inconveniences.
iv. He should be will to put up with bureaucratic regulations
and insults, and move with the wind.
v. He should know how to avail himself of the various benefits
available for the small-scale industry.
vi. He should prossess the following qualities—expertise,
shrewdness, resourcefulness and most important,
preseverance. There is no substitute for hard work.
vii. He should have the guts to withstand the polluted climate in
which he has to build his unit.
 Feasibility Analysis
i. A brief description of the market, including the market area,
methods of transportation, existing rates of transportation.
Channels of distribution, and general trade practices.
ii. An analysis of past and present demand, including the
determination of quantity and the value of consumption, and
identification of the major consumers of the product.
iii. An analysis of past and present supply, broken down as to
source (whether imported or domestic), as well as
information which will assist in determining the competitive
position of the product, such as the selling prices, quality and
marketing practices of the competitors.
 Technical Analysis
i. A description of the product, including specifications relating
to its physical, mechanical, and chemical properties, as well as
the uses of the product.
ii. A description of the selected manufacturing process, showing
detailed flow charts and presenting the alternative process
which may have been considered and the justification for the
adoption of the selected process.
iii. A determination of the plant size and production schedule,
which includes the expected volume for a given time period
on the basis of start-up technical factors.
i. Selection of machinery and equipment, including specifications,
equipment to be purchased and its origin, quotations from suppliers,
delivery dates, terms of payment, and a comparative analysis of
alternatives in terms of cost, reliability, performance, and spare parts
availability.
ii. An identification of plant’s location and an assessment of its
desirability in terms of its distance from raw material sources and
markets. For a new project, this part may include a comparative
study of different sites, indicating the advantages and disadvantages
of each
iii. A design of the plant layout and an estimate of the cost of the
erection of the proposed buildings and land improvements.
iv. A study of the availability of raw materials and liabilities and
utilities, including a description of physical and chemical properties,
quantities needed, current and prospective costs, terms of payment,
locations of sources of supply, and continuity of supply.
i. An estimate of labour requirements, including a detailed
breakdown of direct and indirect labour requirements, and
the supervision required for the manufacture of the product.
ii. A determination of the type and quantity of waste to be
disposed of, together with a description of the waste
disposal method, its costs, and the necessary clearance from
proper authorities.
iii. An estimate of the production cost of the product.
 Financial Analysis
i. For projects that involve new companies, statements of total
project cost, initial capital requirements, and cash flows
relative to the project time-table.
ii. For all projects, supporting schedules for financial projection,
stating the assumption made as to the collection period of
sales, inventory levels, payment period of purchases and
expenses, and the element of production cost, selling,
administrative, and financial expenses.
iii. For all projects, a financial analysis showing returns on
investments, returns on equity, break-even volume, and price
analysis.
iv. For all projects, if necessary, a sensitivity analysis to identify
items which have a substantial impact on profitability or
possibly a risk analysis.
 Investment Proposal Normally
i. General information on the product, company history, the
nature of the industry and the reputation and qualifications of
the existing or proposed management.
ii. A description of the period, which usually consists of extracts
from economic feasibility studies and includes information on
such items as market, production, selected manufacturing
methods (with detailed indication of the cost of equipment
and operational expenses), and a financial statement.
iii. Miscellaneous information, such as the steps taken for the
implementation of the project and the qualifications of the
technical partners envisaged or selected.
 Licences
i. An impressions seems to have gained ground among some people
that there are some restrictions on the setting up of small-scale
industrial units and that licences from either the Central or State
Government have to be taken out before an entrepreneur can take
steps to start a small-scale industrial unit. This impression is not
correct.
ii. It is open to any entrepreneur to set up an industrial unit in small-
scale sector; no formal permission from the State or Central
Government is necessary for this purpose.
iii. Small-scale units have, however, to conform to the rules and
regulations prescribed by State or local authorities under the
Factories Act, the Commercial Establishments Act, the Town
Planning Rules, and made for the issue of quotas of raw materials,
etc.
1. Registration of Small-scale
Industries
 2. Infrastructure
i. Apply to the Industries Commissioner, Industries and Labour
Department, Government of Maharashtra, and obtain a
“NoObjection Certificate.”
ii. With a copy of the above NOC, apply in Factory Form “A”, to the
Ward Engineer of B.M.C.
iii. Clarifications and submission of further details on the information
supplied in Form “A” may follow.
iv. The Sub-Engineer will inspect the premises and submit Form No.
‘2’ to his Assistant Engineer.
v. The Assistant engineer will scrutinise and confirm if the
applicant’s activity conforms to the zone and will intimate to the
application in Form No. ‘3’ if there is no objection or in Form
No.’4’ if there is any objection.
i. Form ‘B’ will be received by the applicant if Form No. ‘3’
is issued to him. This form should be filled in and
submitted.
ii. Within 21 days after the submission of Forms ‘A’ , ‘B’
and the factory plans in triplicate, the Assistant Engineer
will issue Form Nos. ‘5’ and ‘6’ in which he will specify:

d. The electric power sanctioned (thereafter, the BEST

provides current);
e. Adequate water facilities provided:
f. The various requirements, requisitions and conditions for
operating the factory, including those required by the
Chief Inspector of Factories.
 Machinery
i. The scheme for the supply of indigenous and imported
machines on hire-purchase basis was lunched in March
1956 to enable small entrepreneurs without substantial
means to avail themselves of assistance.
ii. The scheme is different from the credit operations
scheme for entrepreneurs. The NSIC has acquired the
necessary experience and expertise in the procurement
of machines from the right sauces. It also takes care of
the problems up to the stage of delivery of machineries
to the entrepreneurs.
 Raw Materials
i. Raw material components and spares, both
indigenous and imports;
ii. Non-ferrous materials-both indigenous and
imported;
iii. Iron and steel- both indigenous and imported; and
iv. Chemicals- indigenous and imported
 Finance

i. Purchase and installation of machinery;

ii. Procurement of raw materials and components and
the manufacture of products.
iii. Wording funds;
iv. Availability of funds until the realization of sales.
 Marketing
• The small scale units, desiring to avail themselves of assistance, have to
enlist themselves with the NSIC.
• Instead of purchasing tender sets from the DGS & D, the small units
enlisted with the NSIC automatically gets them from it and its branches
fee of cost.
• It their prices are acceptable to the DGS & D, they are not required to
pay a security deposit on the issue of a competency certificate by NSIC;
• Price preference up to 15 per cent over the quotations of large-scale
units is considered by the Purchasing Agency, depending on the merits
of each case;
• Wherever they feel that injustice has been done to them, the NSIC takes
up their cases with the DGS & D and other Government Departments
such as defense, the Railways and the P & T Department in order to find
out the reasons for non-placement of the contract with the units, and
tries to redress their grievances.
 MARKETING OF PRODUCTS OF SMALL-
SCALE INDUSTRIES

GOVERNMENT LARGE WHOLESALE CONSUMER

INDUSTRIES TRADE

RETAIL TRADE

SIDE NSIC DEFENCE P&T

STORES

EXPORTS
 The Winning Edge
i. The most important aspect of successful business is leadership. It
calls for clear vision, goals and objectives, well defined mission,
dash and employees participation.
ii. Adequate but well-orchestrated control. Constant feedback of
results as well as setting and adherence of high standards gives an
organization a cutting edge over others. Planning, foresight and
analysis are also important qualities.
iii. To able to extract the best from its employees through total
involvement, the organizations put a lot of emphasis on proper
internal communication and on training employees.
iv. The successful organization is one which is very close to the
market place. The process of systematic market research is used
to develop products or process and to provide value for money to
the customers. This helps to gain the market share.
i. The next most important characteristic of a winning business
organization is “Zero Basing” or sticking to the last – knowing
what business the company is in the swiftly recognizing when it
has diverted into an unsuitable path.
ii. Another important characteristics for success is a commitment to
innovation which is vital in keeping ahead of the competition and
perhaps the most difficult one to achieve. Yet, most of the
organizations just pay lip service to creativity and innovation.
They ask for new ideas and then quickly reject them and even
when a new idea is accepted, the employee rarely gets a reward
proportionate to the idea’s worth.
 Incentives
i. The small Industries Development Organization (SIDO), Ministry
of Industry, Nirman Bhavan, New Delhi, co-ordinates policies and
programmes at the national level and provides a comprehensive
range of extension services through its net work of sixteen small
Industries Dervice Institutes, nineteen Branch Institute and forty-
five Extension Centres.
ii. At the State level, organizations like State Directorates of
Industries, Small Industries Development Corporations and Finance
Corporations, cater to the need of small industries; these needs
include land, sheds, credit, power, raw materials, etc.
iii. The National Small Industries corporation (NSIC), Okhla, New
Delhi, provides machines and equipment of hire purchase basis to
entrepreneurs, assist units to participate is stores purchase
programmes and provides training and prototype development
facilities.
i. The small entrepreneur should enlist himself as a
member with the NSIC. His application form should
be accompanied with the Registration Certificate and
report of the Director of Industries.

iii.The application form for hire-purchase machinery calls

for information regarding the organizational set-up of a
unit, its programme of production, and the
marketability and profitability of the enterprise