buUNIT I - INTRODUCTION TO ENTREPRENEURSHIP

Definition of Entrepreneur:

Entrepreneur refers to an individual who organizes, manages, and assumes the risks of a
business or enterprise.

Entrepreneurs are those people who have the ability to see and evaluate business
opportunities, together with the necessary resource to take advantage of them to initiate
appropriate action to ensure success. ----- ILO

Meaning of an Entrepreneur

The entrepreneur is defined as someone who has the ability and desire to establish, administer
and succeed in a startup venture along with risk entitled to it, to make profits.

Qualities of an Entrepreneur
n order to organise and run a
business successfully, an
entrepreneur must possess
certain traits important for
driving success. Some of
them are −
n order to organise and run a
business successfully, an
entrepreneur must possess
certain traits important for
driving success. Some of
them are −
n order to organise and run a
business successfully, an
entrepreneur must possess
certain traits important for
driving success. Some of
them are −
Importance of Entrepreneurship

1. Creation of Employment- Entrepreneurship generates employment. It provides an entry-

level job, required for gaining experience and training for unskilled workers.

2. Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increase the standard of living of people.
3. Impact on Society and Community Development- A society becomes greater if the
employment base is large and diversified. It brings about changes in society and promotes
facilities like higher expenditure on education, better sanitation, fewer slums, a higher level of
homeownership. Therefore, entrepreneurship assists the organisation towards a more stable
and high quality of community life.

4. Increase Standard of Living- Entrepreneurship helps to improve the standard of living of

a person by increasing the income. The standard of living means, increase in the consumption
of various goods and services by a household for a particular period.

5. Supports research and development- New products and services need to be researched
and tested before launching in the market. Therefore, an entrepreneur also dispenses finance
for research and development with research institutions and universities. This promotes
research, general construction, and development in the economy.

Entrepreneurial Traits and Characteristics:

1. Vision and Passion

An entrepreneur must have a very clear vision of his business. So he must have the ability to plan
out his long term and short term goals and objectives. He has to be able to map out his future
plans in an articulate and efficient manner.

Another very important trait necessary in an entrepreneur is that he must be passionate about his
work. Entrepreneurship is hard work and long hours, so he must be passionate about what he is
doing. Such passion can translate into hard work and success.

2. Innovative

One of the main characteristics of entrepreneurship is innovation. The entrepreneur looks for the
opportunity in the market and capitalizes on it.

He is the one who introduces new products and services in the market trying to fulfil customer
needs. The innovation can also be in a production process, new marketing strategy, innovative
advertising etc.
3. Risk Taker

A risk is an integral part of any new business. But it is an especially important factor in
entrepreneurship because here the entrepreneur bears the entire risk of the business. So it is
necessary that the entrepreneur has an adventurous and risk-taking personality.

4. Leader

One of the other important qualities of a successful entrepreneur is leadership. All good
entrepreneur are good leaders.

They have the ability to motivate and lead their employees to success. They also have the
tenacity, knowledge, and skill to pull their businesses from a tight corner like good leaders.

5. Persistent

A good entrepreneur is always persistent by nature. A business is never an overnight success. It

takes immense hard work and also a little bit of luck.

But a persistent entrepreneur makes his own luck. He can create opportunities if they are not
presented to him. So a persistent entrepreneur that works tirelessly always has a greater chance
of success.

6. Ethical

Ethics and integrity are the cornerstones of any successful business in the long term. A
sustainable business cannot be run by someone with compromised morals.

So any credible business must have at its head an ethical entrepreneur who upholds the letter of
the law and the integrity of the business.

7. Competitive Spirit

The business world is a very cut-throat space. Thousands of new businesses born and die every
day. So the competition is always going to be fierce and intense.
Such an environment is better suited to someone who is already competitive by nature and
thrives in such situations of pressure.

8. Resilient

And finally one of the most important traits in a successful entrepreneur is resilience. There is no
smooth straightforward path to success.

There will always be some failures and roadblocks in the way. So the entrepreneur has to be
resilient and steadfast in his pursuit of success.

Creating and Starting the venture:

Sources of new Ideas

Sources of idea generation are the people and places from where you get your ideas. Several
internal and external sources help to generate ideas. Employees and the research &
development department of the company are great internal sources.

Whereas, external sources are also very helpful. These are customers, suppliers, competitors,
distribution channels, government, educational institutions, and focus groups.

1. Customers
Prospective customers know best what they want and the habits/tastes that will be popular
shortly. New product or service ideas may come from customers’ reactions to the present
product and the expected product idea.

Contacts with prospective consumers can also reveal the features that should be built into a
product or service. The attention to the customers can take the form of informally monitoring
potential ideas and needs or formally arranging surveys among prospective customers.

Care needs to be taken to ensure that the idea or need represents a large enough market to
support a new venture.

2. Products & Services of Existing Organizations

Competing products and services of existing organizations and evaluation thereof is a

successful source of new ideas.

Frequently, this analysis uncovers ways to improve on these offerings, resulting in a new
product that has more market appeal.

The analysis of profitability and break-even level of various industries or organizations

indicate promising investment opportunities which are profitable and relatively risk-free.

An examination of the capacity utilization of various industries provides information about the
potential for further investment.

3. Distribution channels

Member of the distribution channels; intermediaries, transient customer preference, and

possible expectations may be a good business idea.

Not only do channel members frequently have suggestions for completely new products, but
they can also help in marketing the entrepreneur’s newly developed products.

4. Government

The government can be a source of new product ideas in many ways.

First, the files of the Patent Office contain numerous new product possibilities. They can
suggest other more marketable new product ideas.

Secondly, new product ideas can respond to government regulations, industrial policy,
investment guidelines, annual plan, Five-year plan, etc.

Thirdly, several government agencies nowadays assist entrepreneurs in discovering evaluating

business ideas.

Fourthly, government publications on trade and industry can also help set new venture ideas.

5. Research and Development

The entrepreneur’s own “research and development” is the largest source of new ideas. It may
be a more formal endeavor connected with one’s current employment or an informal
laboratory in the private premises.

Formal institutional research and development are often better equipped, enabling the
entrepreneur to conceptualize and develop successful new product ideas.

But many amazing product ideas have come from informal research endeavors at the private
level.

6. Trade Shows, Fairs aid Exhibitions

These sources display new products and innovations in processes and services.

An innovative entrepreneur can get product ideas to adapt or modify and produce with
indigenous materials and technology.

7. Perceptual changes
8. Process needs

Idea Generation Techniques/Methods

1. Mind Mapping
It is a technique of presenting information. Here we show the links between the different
elements or the pieces of information. The links or connection is usually shown with the help
of lines and arrows. It’s a visual way of presenting the information.

For example, let’s suppose you want a name for your new application. You will start by
writing the main topic in the center of a paper, which here is the name for your new
application.

From the center point, you will have arrows pointing out. These arrows will point to the main
things to be kept in mind while thinking of a name like guidelines, visualization, productivity,
etc.

Now from every key aspect, there will be more arrows pointing out. These arrows will
describe the key aspect in detail. Like ‘guidelines’ will talk about the name being able to
express what the application does, following the naming scheme, etc.

2. Reverse Thinking

As is very clear from the name itself this technique asks us to think oppositely. Instead of
working on the problem in front of us, we work on the exact opposite of it.

For example, let us assume you want to know ‘how to increase your followers on social media
platforms. According to this technique, you will instead think of ‘how will I not increase my
followers on social media platform’.

To this question, you will get answers like, by not posting regularly, or posting low-quality
content, etc. Now you just have to reverse your answers.

So, to increase followers on a social media platform you should post high-quality content
regularly. This idea generation technique works on the concept that it’s easier to come up with
negative suggestions.

3. Brainstorming
This technique is quantitative meaning that you come up with a large number of ideas. Here a
group comes up with a different probable solution to the problem.

For example, if you along with some of your colleagues are trying to come up with a tagline
for your product. And each one of you gives your ideas, then that is called brainstorming.

4. SCAMPER

The word SCAMPER is an acronym.

S -Substitute

C – Combine

A – Adapt

M – Modify

P – Put to another use

E – Eliminate

R – Reverse

Bob Eberle developed this technique. Each part of the acronym helps us think and ask
questions, which results in generating ideas. For example, if you are a clothes manufacturing
company you can think of ‘substitute’ your current material with a sustainable, eco-friendly
option. You could also ‘put it to other uses’ by recycling the waste material.

5. Synectic

George M. Prince and Willian J. J. Gordon developed this technique. In this technique, we
take apart a thing and then put it back together. This helps us get a better understanding of
how things work.

6. Role-Playing
In this technique, the participants take up roles to play. These roles are different from the ones
they usually play. It adds an element of fun and helps get innovative ideas.

For example, you could take up the roles of customers and discuss your expectations and what
you want from products. This could lead you to stumble upon some good ideas.

7. Storyboarding

This technique refers to the process of making storyboards to generate ideas. Storyboards use
pictures, illustrations, and other information to better present the ideas.

For example, suppose you are working on an idea for an advertisement. You can portray the
different scenes in the form of a storyboard. This helps you in better visualization and you can
make changes accordingly.

8. Brainwriting

In this technique, a group of people writes their ideas on a piece of paper. After the designated
time for writing is over the paper is given to a different person.

Now this person reads the ideas on the paper they got and adds their ideas on the paper. This
continues until everyone has put their ideas on all the papers. And following this, there is a
discussion on each idea.

9. Forced Relationship

This technique helps to come up with unique ideas. Here you take two unrelated things and
imagine putting them together to see what new thing you can come up with.

For example, take a calculator and a pencil, these are unrelated to each other. Now try putting
them together. You might get some interesting ideas like a calculator with a touch screen and
a pencil to write on it and a lot more.

10 Collaboration
This technique is self-explanatory. Here you collaborate with others to come up with ideas. If
you collaborate with a diverse group of people your ideas will be more unique.

This happens because every person brings a different perspective. For example, if you want to
increase the sale of a particular product you might want to collaborate with industry experts,
specialists, or people working in domains other than sales.

[Link] 5 W’s

Who, What, Where, When, and Why are the five W’s. Answering these five W’s helps us
achieve a very holistic view of the topic under discussion. And it is an efficient way to come
up with solutions and ideas.

For example, suppose you want to create a new product or a service. You can do so by asking
questions like, who would use the product, why would people buy it, what would it do, etc.

[Link]

People prove to be a very good resource when you are trying to generate ideas. Even those
who aren’t your employees and customers can be very resourceful.

So, you must always go beyond your immediate circle and invest in listening. Socializing with
people in your immediate social circle and even those beyond it can be very effective.

Creative Problem Solving

One of the biggest hindrances to innovation is complacency—it can be more comfortable to

do what you know than venture into the unknown. Business leaders can overcome this barrier
by mobilizing creative team members and providing space to innovate.

There are several tools you can use to encourage creativity in the workplace. Creative
problem-solving is one of them, which facilitates the development of innovative solutions to
difficult problems.

Here’s an overview of creative problem-solving and why it’s important in business.

WHAT IS CREATIVE PROBLEM-SOLVING?

Research is necessary when solving a problem. But there are situations where a problem’s
specific cause is difficult to pinpoint. This can occur when there’s not enough time to narrow
down the problem’s source or there are differing opinions about its root cause.

In such cases, you can use creative problem-solving, which allows you to explore potential
solutions regardless of whether a problem has been defined.

Creative problem-solving is less structured than other innovation processes and encourages
exploring open-ended solutions. It also focuses on developing new perspectives and
fostering creativity in the workplace.

Its benefits include:

Finding creative solutions to complex problems: User research can insufficiently illustrate a
situation’s complexity. While other innovation processes rely on this information, creative
problem-solving can yield solutions without it.

Adapting to change: Business is constantly changing, and business leaders need to adapt.
Creative problem-solving helps overcome unforeseen challenges and find solutions to
unconventional problems.

Fueling innovation and growth: In addition to solutions, creative problem-solving can spark
innovative ideas that drive company growth. These ideas can lead to new product lines,
services, or a modified operations structure that improves efficiency.

CREATIVE PROBLEM-SOLVING AND DESIGN THINKING

Whereas creative problem-solving facilitates developing innovative ideas through a less

structured workflow, design thinking takes a far more organized approach.

Design thinking is a human-centered, solutions-based process that fosters the ideation and
development of solutions. In the online course Design Thinking and Innovation, Harvard
Business School Dean Srikant Datar leverages a four-phase framework to explain design
thinking.

The four stages are:

Clarify: The clarification stage allows you to empathize with the user and identify problems.
Observations and insights are informed by thorough research. Findings are then reframed as
problem statements or questions.

Ideate: Ideation is the process of coming up with innovative ideas. The divergence of ideas
involved with creative problem-solving is a major focus.

Develop: In the development stage, ideas evolve into experiments and tests. Ideas converge
and are explored through prototyping and open critique.

Implement: Implementation involves continuing to test and experiment to refine the solution
and encourage its adoption.

Creative problem-solving primarily operates in the ideate phase of design thinking but can be
applied to others. This is because design thinking is an iterative process that moves between
the stages as ideas are generated and pursued. This is normal and encouraged, as innovation
requires exploring multiple ideas.

Business Plan:

A business plan is a document that defines in detail a company's objectives and how it
plans to achieve its goals. A business plan lays out a written road map for the firm from
marketing, financial, and operational standpoints.
Evaluating the Business Plan
1. Read and Understand the Executive Summary
2. Analyze Opportunity in the Market
3. Evaluate the Company's Business Strategy
4. Examine the Business Environment
5. Evaluate the Leadership Team
6. Crunch the Numbers and Understand the Finances
7. View the Business Plan as a Living Document.

1. READ AND UNDERSTAND THE EXECUTIVE SUMMARY

The first step in a business plan assessment is reading the business' executive summary. This
should be a concise "elevator pitch", not a summary of the business plan. In one or two pages,
it should convey the market opportunity and the uniquely compelling features of the business
that will help it meet that opportunity. The executive summary should excite you and make
you want to turn to the next page. If it doesn't, the entrepreneur might lack marketing or
writing skills, or it may indicate that the idea itself is not going to fly.
2. ANALYZE OPPORTUNITY IN THE MARKET

Evaluate the market opportunity. Ideally, the market should be growing at least 10% per year
and have a substantial potential relative to the size of the business and investment. For
example, a small company seeking an investment of $50,000 should see a potential market of
$5 million.
The larger the potential market and the faster it is growing, the greater the opportunity in the
market. Look to the exhibits and appendices to ensure that the business actually has done the
necessary market research and can back up any claims.
3. EVALUATE THE COMPANY'S BUSINESS STRATEGY

Examine the company strategy for capturing its market. The plan must clearly describe the
problem the company is solving or need it is meeting for customers, and then propose a
solution. This is the crux of a business plan assessment.
 Closely examine the alignment between problem and solution. Will the company actually
address that need? This evaluation must take into account the product or service being offered,
the operational capacity and efficiency with which the business actually can produce its
product, and the quality of the proposed marketing efforts.
4. EXAMINE THE BUSINESS ENVIRONMENT

The business plan should describe the competitive landscape in which the company operates,
preferably by referencing Porter's 5 Forces or another well-established tool. Look for detailed
breakdowns and analyses of each of it competitors, and of how the company is different and
better than the competition in a particular niche. This section should include the regulatory
environment and mention any costs or necessary delays associated with regulations.
Porter's 5 Forces is an evaluation model that looks closely at the five competitive forces at
play in the business landscape. These forces are present in every industry and by evaluating
how they manifest in an individual industry, one can gauge that industry's strengths and
weaknesses. Porter's 5 Forces are:
1. Competition in the industry
2. Potential of new entrants in the industry
3. Power of suppliers
4. Power of customers
5. Threat of substitutes
5. EVALUATE THE LEADERSHIP TEAM

Look for experience, integrity and passion in the executive team. Read bios and brief
highlights of each executive's strengths and expertise should accompany standard business
information such as headquarters and corporate structure. The company should have
experienced advisers, either formally or informally.
It is paramount that the principals involved in the business convey their passion and drive
toward success with this project. If the founders haven't invested their own capital into the
business, or plan on keeping their “day jobs” while running the business, they might lack faith
in the project.
 6. CRUNCH THE NUMBERS AND UNDERSTAND THE FINANCES

Ensure that the financial projections are both promising and realistic. Most entrepreneurs
vastly overstate their company's potential, starting with the market size and market share.
Financial figures should be based on historical data if available, or very conservative
projections if the company is not yet profitable. Entrepreneurs that project capturing 20%
market share in the first two years probably have unrealistic expectations.
Investigate the returns provided by the investment. Good business plans include exit strategies
for pulling the initial investment back out of the company, and have a realistic valuation of
their shares.
7. VIEW THE BUSINESS PLAN AS A LIVING DOCUMENT

Evaluate the business plan as a whole document, and as a reflection of a real-world company.
Determine whether the market need is adequate, the company's offerings are compelling, the
management team experienced and committed, and the financial statements realistic. Does this
company as a whole have a chance of success?
Launching Formalities

The different stages from which a business enterprise has to undergo during its development
phase. 10 formalities for setting up a business enterprise are stated below:
 1) Product Selection :

Deciding the type of business, selecting the product or product range for manufacturing along
with its quantity is the most vital step. The size and the type of business ownership will be
decided on the basis of level of business activities. With the help of environment scanning and
short listing, a number of project ideas can be developed by any entrepreneur. Every
alternative can be evaluated closely with the help of opportunity analysis and then final
products can be decided.
Thus, the first decision which an entrepreneur has to make is project selection. The following
things will be included in the project selection and preliminary activities :
 Selecting the product/service,
 Selecting the location,
 Conducting Project feasibility study,
 Preparing the business plan,
 Preparing a project profile.
2) Decide the Constitution :

Most of the new entrepreneurs do not have a clear vision related to various legal issues and
other government-related factors associated with the selection of a certain business, which
could result in mistakes costing time and money. In India, most of the entrepreneurs tend to
start a private limited firm.
The constitution of the business unit has to be decided by its promoters before starting any
industry, which are mainly of following types:
 Sole proprietorship.
 Partnership,
 Corporation/Limited Company,
 Cooperative,
 Franchising.
All these alternatives will be decided on the basis of the objective, size and type of the
business. Depending upon the available resources or the type of investment, the form of
ownership is also decided. During the initial stages, it is important to decide the constitution of
the unit and before applying for the Provisional Registration Certificate, all the necessary
formalities must be finished.

3) Registration :
Registration of a new venture is very important. Though not mandatory, but registration is
very advantageous for a business unit as it provides a legal identification and status to the
business so that it can execute all its legal rights. A registered business unit is, provided with
government assistance, incentives and licenses to import raw materials. Briefly, a business can
ensure all its legal rights by registering itself.

Benefits of Registering:

 Credit prescription (priority sector lending). differential interest rates, etc.,

 Scheme of excise exemption,
 Exemption under direct tax laws,
 Statutory support such as reservation and Interest on Delayed Payments Act,
 Applying for a shed or plot in an industrial estate or a developed area,
 Applying for Corporation/Municipality for other licenses,
 Applying for power/water connection,
 Applying for financial assistance from banks and other institutions,
 Applying to the National Small Industries Corporation/State Small-Scale Industries basis,
 Obtaining sales tax, excise registration, etc., wherever required,
4) Clearances from Specific Departments :
 On the basis of nature of the industry and the location of units, various types of approvals are
required from different authorities.

Specific Clearances are usually required depending on the Type of Unit :

 Agricultural land conversion,
 Urban land ceiling clearance,
 Building plan approval,
 Factories Act,
 Trade license,
 Pollution Control Board clearances,
 Sales tax registration,
 Central excise registration,

5) Location:
Deciding the location for constructing the business unit is the next step. The entrepreneur also
has to decide whether to buy or rent the business location. It also important to decide the size
of plot, covered and open areas, etc. This is quite important to have an appropriate industrial
site or a ready industrial shed for any industrial project. According to the business requirement,
an industrial site can be taken and a shed can be constructed, or an already constructed shed
can be owned or leased.

The land for the project can be taken from the State Industrial Areas Development Board when
the decision about the business location is made. The entrepreneur can also buy private lands
by fulfilling all the legal formalities related with the conversion of land use to industrial
purpose.
6) Machinery and Equipment:
 Depending upon the selected product, different machines and equipment's required for
production are selected. Also, the different suppliers and their costs are evaluated and
selected. The scheme of National Small Industries Corporation (NSIC) can be used, in
which different machines and equipment's can be acquired on the basis of hire-purchase
system. It is advisable to have a proper plan for machines and equipment's in advance,
particularly in cases when they are to be obtained from other city, state or nation.
 It is quite important to select and order most suitable machineries. Technology and
process specifications can also be provided in most of the buying incidents; however, in
absence of such specifications, it is required to conduct an extensive techno-economic
survey for the required machinery and equipment. An entrepreneur can also look for
such machineries in the International trade fairs and engineering fetes. Before taking the
decisions related to machines and equipment's, entrepreneurs should take advice's from
experts, dealers and suppliers.

 Second hand equipment's and machineries are quite popular among the entrepreneurs of
SSI. This is one of the major factors that influence the growth of small scale industries:
Out-dated machineries result in low and inefficient production which ultimately hinders
the growth of SSI. This is mainly due to the unavailability of funds for new machines
and equipment's. However, SSI entrepreneurs are often benefited from government
agencies like National Small Industries Corporation which provide machines and
equipment's to small scale units at longer repayment time and lower interest rates.

7) Project Report Preparation:

Once the nature of ownership, machines, equipment's and location are decided, the
entrepreneur must prepare the feasibility study or project report. A project report provides a
detailed understanding about the project and reveals its techno-economic feasibility. With the
help of project reports, economic viability and the technical feasibility of the selected. Product
can be ensured. This report will help in deciding the production, marketing, financial, and
management plans. The project report also aids in procuring finance, shed, power connection,
water connection, raw material quotas, etc.
8) Project Appraisal:
In simple terms, evaluation of a project is called project appraisal. This mainly includes the
method of conducting ex-ante analysis of any project or scheme, It is quite important to
evaluate the project from the viewpoint of economic, financial, technical, market, managerial
and social aspects, while initiating any enterprise so that the feasibility of the project can be
checked.
The entrepreneur should make detailed appraisal reports including the techno-economic
feasibility: study in order to receive monetary support from financial institutions and banks.
9) Finance:
Finance can be considered as the backbone of an organisation. Every entrepreneur needs
finance to setup a new venture. One can seek capital assistance and venture capital for starting
an enterprise from various financial agencies. Some specific steps and norms have to be
followed by the entrepreneurs to receive financial support from financial institutions and
banks. However, these types of financial assistance's can also be obtained on concessional
rates from various other firms. Entrepreneurs who want to initiate their own business units can
also seek financial help under PMRY (Prime Minister's Rozgar Yojana) and REFP (Rural
Employment Generation Programme) schemes.
10) Implement the Project and Obtain Final Clearances:
After obtaining different clearances, licenses, infrastructure facilities, etc., from the concerned
departments, the entrepreneurs are required to implement the project. For this purpose, the
activities required to be performed by the entrepreneurs include ordering machineries,
recruiting manpower, procuring raw materials, marketing, erection and commissions, and
obtaining final clearance. Once the unit is ready for the production, different types of
clearances are required to be taken. Similarly there are a number of preliminary clearances
which entrepreneurs have to take from various departments/organisations for obtaining final
approval.