inessIDENTIFICATION OF BUSINESS OPPORTUNITIES

A good entrepreneur has the quality and skill to select feasible and rewarding opportunity for the
establishment of a new venture. His foresight, vision and attitude help him to choose best business
opportunity from the available opportunities. Before setting up a new venture an entrepreneUr must
collect information through various channels like Internet, financial institutions, commercial
organisations, friends etc.
Business opportunities must be identified very carefully, through different steps. The following
are the major steps involved in identification of a business opportunities :
1. Conception of an idea : When a person or group of persons think about establishing a
business. there are several sources to get the product idea. Supply and demand ratio of a
product and demands for new product should be analysed. Export-Import (EXIM) Policy of
government, Trade Fairs and Trade Journals also suggests the business ideas. Social and
economic status of people and changes in consumption pattem nationally and internationally
also require the attention of entrepreneurs.
2. Identifying a Business Opportunity : Opportunity of business may be defined as an attractive
and profitable project idea which an entrepreneur is seeking for and accepts such idea as a
basis for his investment decision. Two major characteristics of a business opportunity must
be highlighted.
(a) Gap between demand and supply i.e., good market scope.
(b) An attractive, acceptable and reliable return on Investment.
3. Steps of Identification of Opportunity : Identification ofappropriate business opportunity
involves following steps :
(a) Preliminary Evaluation : The entrepreneur must evaluate the opportunities against set
of specific criteria, which are :
Is opportunity compatible with the pron10ter ?
 Does it satisfy the government regulations and rules ?
What is the availability of raw materials ?
What is the size of potential market ?
What would be the cost of product and risk factor ?
All of these criterion should be studied carefully by an entrepreneur before identifying the
business opportunity.
(b) Selection of Product or Service : The product to be manufactured or service should be
selected through following points —
 Potential demand for product or services.
Assess potential of existing competitor and estimate about probable competitors.
Study the infrastructural facilities available as power, transport etc.
Government policies, incentives. subsidies, legislation etc.
Locational Advantages.
Environmental Factors.
(c) Conduct a Market Survey : An entrepreneur must conduct a market survey with reference to
the availability of raw material, equipments, demand of product, distribution, and consumer
behaviour etc. This can be done on following lines :
Search for leading suppliers of raw material.
Through analysis of credit facilities, advance payments, terms and conditions for
suppliers.
Technical and skilled staff requirement.
Selection of best channel of distribution.
Marketing of outstanding features of product or services.
Business terms, commission, stocks, warehouse facilities.
Motivate buyers to buy new product.
Analyse the behaviour pattern of consumer regarding product or service.
(d) Study of Contractual Programmes : Government provides support and facilities to
entrepreneurs for establishing the new units and to organise units in proper manner. The
information about it can be collected through State Government Agencies.
Industrial Finance Corporation of India (IFCI) in collaboration with Industrial Development Bank
of India (IDBI), Industrial Credit and Investment Corporation of India (ICICI), State Organisation and
Banks, have setup a network to provide consultancy services for stimulation of industrial growth.
Entrepreneurial development programmes help to impart following informations :
How to develop entrepreneurial efficiency ?
Identify viable projects.
Impan managerial skills.
Help and secure necessary financial and infrastructural assistance.
This step-by-step analysis helps the individual in selection of good business opportunity from
available possibilities.

STEPS FOR STARTING SMALL INDUSTRY

Any person having strong orientation towards entrepreneurship and possessing keen aptitudes for
setting up a small scale enterprise should formulate a business plan and carefully follow the plan step-
by-step to convert his thoughts into reality. The steps are given as :
 (I) Project Identification
(2) Product Selection
(3) Selection of Form of Ownership
(4) Selection of Location
(5) Source of Finance
(6) Project Formulation
(7) Registration and License of Industry

We shall discuss these in detail later on, a brief discussion is as follows :

1. Project Identification and Selection of Product

When an individual possesses the keen attitude for starting a small industry, he has to take several
steps to convert his ideas into fruitful reality. Project selection is the first corner stone to be in starting
an enterprise. Before this we should understand the meaning of 'project'
Meaning of Project : The dictionary meaning of word project is that it is a scheme, design, a proposal
of something intended or devised to be achieved.
According to Encyclopaedia of Management, "a project is pn organised unit dedicated
to the attainment of a goal—the successful completion of a development project on time,
within budget in conformance with pre-determined programme specifications."
Project Identification : Each and every entrepreneur wants to select the most lucrative, profitable and
attainable project for his enterprise. This starts with selection of product. An entrepreneur may select a
product or may design a new one. But the identification is based on following points :
(l) Potential demand for the product or service.
(2) Volume ofexisting demand in export market.
(3) Study the scope for future demand.
(4) Going through certain professional magazines, visiting trade fairs, exhibitions showing new
products.
(5) Ideas given by government agencies, knowledgeable persons.
(6) New products launched in market.
All these points taken under consideration open new avenues to identify the project.
2. Product Selection
Product can be selected through these specific considerations :
Volume of existing demand.
2. Assess potential of existing competitor and estimation about probable competitors.
3. Scope for future demand.
4. Infrastructural facilities availability.
5. Technological and managerial assistance.
6. Availability of raw material and labour.
7. Government policies, legislation, controls.
8. Incentives and concessions given by Government.
9. Environmental factors.
 10. Regional benefits.
I l . social, economic. cultural, educational conditions and population of area of consumption of
product.
12. Personal choice/interest and motivation of entrepreneur.
Thus identification and selection of project is an important dimension of entrepreneurship. One has
to analyse all the external and internal criteria before selection of product. A tool generally use for
such analysis is known as SWOT analysis. SWOT stands for :
S — strengths of the organisation
W — weakness
O — opportunities of the environment
T Threats

3. Selection of Form of Ownership

The entrepreneur has to select the organisational fonn of ownership. Ownership of an enterprise
may be one of these four forms :
Sole Proprietorship,
Partnership,
Joint Stock Company, and Cooperatives.
The most commonly chosen forms of ownership, in small scale sector are proprietorship, family
ownership and the partnership. Selection of ownership form depends on several factors. This is
discussed in detail later on.

4. Selection of Location or Site

Selection of a proper location or site for industry is a major decision taken by an entrepreneur. The
general objective is selection of site is to minimize the cost of production and distribution. Regardless
of the type of business, in selecting a site an entrepreneur should consider the following points :
(l) Geographic conditions of site.
(2) It would be beneficial if situated in one's native place.
(3) Infrastrustural facilities enjoyed by site.
(4) Special government schemes attached to area such as export promoting zone, special
economic zone or backward declared area etc.
 (5) Availability of raw material and required labour.
(6) Location of target market.
(7) Area must be declared as industrial area.
Pondering over these factors, carefully, an entrepreneur can select a site for industry.
5. Source of Finance
Every organisation needs finance for smooth operation. It is one of the most important
prerequisites of an entrepreneur. Financial planning is a long term planning involving the future
requirements of funds. The success and development of an enterprise depends on it very much. There
are two ways of classifying one's financial needs.
 1. On the basis of extent of performance

Fixed Capital Working Capital

2. On the basis of period

Long-term Capital Short-term Capital

An entrepreneur may use his personal funds or equity capital. Government has also provided
assistance in this regard. To support small scale sector many financial institutes provide loans with
special schemes for SSI. Small Industries Development Bank of India (SIDBI) has been established
as an apex institution for financing the SSI. Various financial institutions such as IFCI, ICICI, IDBI.
LIC, UTl, NSIC etc. are there to support SSI financially.
While raising loan from such financial institutions they should file necessary registration
certificate. partnership deed. organisation's documents, project report etc.
6. Project Formulation
Project formulation is primarily concerned with the development of a project idea to arrive at an
investment decision. This development process involves the expertise and combined efforts of project
team members who should be familiar with the objectives, strategies and other aspects of the project.
Project Report : A project report is a written document about the project containing relevant data.
The entrepreneur presents this report to flnancial institutions to fetch financial assistance. This works
like a guideline for entrepreneur so as to avoid deviation from the predetermined set of objectives.
A project report is prepared by an expert after detailed study and analysis of various aspect of the
project.
Preparation of a Project Report : A Project report should contain the information on economic,
technical. financial, managerial and production aspect.
 aspects

An entrepreneur has to consult the Planning Commission, to get the project sanctioned. Planning
Commission has suggested certain guidelines to prepare a project report.
7. Registration and License of Industries
After submitting the project report an entrepreneur would be issued initially, a provisional small
scale Industrial Registration Certificate. This certificate is usually provided for a period of one year
which can be renewed for one more year.
 provisional Registration entitles the new entrepreneur to :

1. Apply for a shed in an industrial estate or a developed plot in an industrial area.

2. Apply corporation/municipalities for other licences.
3. Apply for power connections.
4. Apply for financial assistance from banks and other institutions.

Permanent Registration Certificate : An industrial unit which has commenced production or is found to be in readiness to go into production is eligible to get the permanent registration
certificate. This step is usually taken only after the unit has gone into stream.
Obtaining Statutory License : The next step would be to acquire municipal license from the concerned municipal authorities for which fees is charged. Registration with central and state sales
tax department is necessary. An entrepreneur should study the procedure for accounting and returns have to be submitted regularly to these departments. If the unit comes within the purview of the
factories Act, 1948, all rules and regulations should be followed. Clear mention about power load requirement is a must. All the provisions of industrial development and regulation Act, 1951, and
new industrial policy 1991, shall apply wherever needed.
Here after the entrepreneur can commence the activities of business/industry.