10 REASONS WHY STARTUP ENTREPRENEURS MUST HAVE BUSINESS PLAN

10 REASONS WHY STARTUP ENTREPRENEURS MUST HAVE BUSINESS PLAN

Interacting with a startup entrepreneur, I faced a question that “why he needs a business plan when he is initiating the venture with his own capital ?” . to get answer on why entrepreneurs must have business plan let’s dive in .

Entrepreneurs must have business plan. here is why ?

It seems to me he is thinking of a business plan as only a fund raising instrument to submit in bank or any other financial institution. But truly a business plan is a tool for understanding how to put together everything in your business. It is useful to monitoring progress and keeping the business accountable. It also helpful in making sales strategy, recruitment and overall financial planning. Business plan is a written document that describes the nature of business, sales and marketing strategy and a financial calculations with a projected profit and loss account. Here I accumulate 10 critical reasons to entrepreneurs must have business plan .

entrepreneurs must have business plan

To Define a New Business Venture

By creating a business plan you will be able to define the new business venture properly. Needs of consumers that are identified for a product or services and you will be going to proceed to develop that idea. in other words if your business plan is ready then you are awake about your upcoming difficulties . so to be prepare entrepreneurs must have business plan .

To Check Business Feasibility

entrepreneurs must have business plan with every detail you can determine the feasibility of your business. You can create a financial model to project the R.O.I from the every realistic aspects.

To Calculate Startup Investment

A business plan will help you to calculate and understand properly the required startup budget. Actually it will help you even to take decision whether you are having that fund or you need to go for securing investment from outside.

To Secure Investments and Loans

Investors and financial institutions need to see a business plan before they are going to invest. Your business plan can only describe that your business ideas is enough viable to get funding.

To create an Effective Marketing Strategy

By writing a business plan you will be able to create a effective marketing strategy. It involves to identifying promotional opportunities, evaluating the market opportunities, researching, analyzing and identifying the target audience

To Study about Competitors

By writing a business plan you will be able to research, analyze and understand the market competitor properly. By monitoring competitors you will be also able to know their activities and you can start to anticipate.

To monitor day-to-day Operations

A business plan serves the purpose to have an effective tool to monitor your day-today business operation. It will give you confidence by showing whether you are in right track or there is something you need to think about.

To Calculate Business Performance

The most important aspect of a business plan is it acts as a growth engine and shows you the reviews about your business performance.

To Create HR Manual

A business plan will help you to create an organization structure and HR manual which is immensely effective for manpower planning.

To Attract Top-Professionals to Come

A business plan will give an overview and clear vision to talented people. Also you will be able to set specific objectives for them. By keeping update your business plan regularly you will be able to take into account the economic climate of the industry.

You will be more ensured you always have a clear idea about the direction you are taking your business in . or in other words ” To be ahead of your difficulties entrepreneurs must have business plan “.

14 things to consider before selecting factory location

Choosing and selecting factory location rightfully is a difficult task for the entrepreneurs, especially for beginners. A right plant location is a ‘make or break’ decision from an owner’s point of view.

Location of the business is the most important factor influencing its success or failure. It is a long-term decision which should take into consideration not only the present requirements of the organisation but also its future expansion plans. Errors in location may be very difficult and expensive to rectify. Location of a plant has a bearing on the layout of machinery and equipment as well as on the process of production.

There is no ideal location for all firms or even for one firm at all times. The choice of location depends on several important factors. It is influenced by the kind of products being manufactured, costs of production and distribution. A sound business plan should be the foundation of your site-selection process, detailing facts including the goods the plant will produce, quantity of goods the plant will produce, five years of production planning, future growth expectations. The objective of a locational plan is to find out the optimum or best location for the particular plant. Such a location not only results in the lowest cost per unit but also facilitates orderly growth of the firm. In this article, we intend to explore 14 things to consider before selecting factory location.

14 things to consider before selecting factory location :

14 things to consider before selecting factory location

1. Availability of Raw Materials

Raw materials are the basic components of finished products. This is one of the most important considerations when selecting factory location. If your required raw materials are perishable items, then you must tend to locate the plant nearer to the
raw material source. Otherway, it also reduces the transportation cost which affects hugely the cost of the production.

2. Proximity to Market

Every finished product needs to go to the market for consumer consumption . Here also transportation overhead increase the cost of the finished product. In case you are initiating a fully export-oriented plant, availability of processing facilities gains importance in deciding the location of one’s industry. Export Promotion Zones ( E.P.Z ) are such examples.

3. Infrastructural Facilities

This is important in view of the fact that all supporting services required for the successful operation of the plant. Availability of communication facilities is also an important part of the infrastructure. An existing vibrant infrastructure in the vicinity is much preferred than the need based infrastructure getting developed after the plant commissioning.

4. Government Policy

The Government offers several incentives, concessions, tax holidays for few years, cheaper power supply, factory shed, etc., to attract the entrepreneurs to set up industries in less developed and backward areas. In this scenario, you must prioritize this factor in selecting factory location.

5. Neighbors Neighbors

play sometimes vital role in getting licenses permissions from different Govt. authority. If you are establishing the plant nearby a domestic area, then authorities may ask you to get a ‘No Objection’ from your neighbors.

6. Availability of Manpower

Local availability of skilled and semi-skilled manpower will add to the efficient running of the plant. Besides, you must study labor relations through turnover rates, absenteeism, and liveliness of trade unionism in the particular area.

7. Availability Of Utilities

Utilities like electricity, water resources etc. play an important role in almost every factory operations. A stable and uninterrupted power is required magnitude, without fluctuations in voltage and frequency is important for the successful operation of the plant.

8. Local Laws, Regulations, and Taxation

You must check prior the laws related to pollution control board. In food products, you must check the FPO regulations. In the case of wood industry, you must maintain the distance from forestry. Taxation is also an important factor as well as State Subject. In some highly competitive consumer products, its high quantum may turn out to be the negative factor while its relief may become the final deciding factor for some other industry.

9. Ecology & Pollution

Nowadays, there is a great deal of awareness towards the maintenance of natural ecological balance. Regarding the effect of pollution from the specific type of plants, social obligations are to be met. The nature of the site selected should preferably have some advantages to meet these requirements. You must be careful about effluent disposal, in the cases it needed.

10. Distance from Your Residence

Yes, it’s important. In a small scale factory operation, an entrepreneur self plays a vital role. You should not select a place that has adequate distance from your own residence.

11. Competition

If you are dealing with an innovative product and your plant is in an industrial zone, then you might face competition in manufacturing automation from other companies.

12. Incentives, Land costs.

Subsidies for Backward Areas In some cases, Government offers several incentives, concessions, tax holidays, cheaper lands, assured and cheaper power supply, price concessions for departmental (state) purchases, etc. to make the backward areas also conducive for setting up industries. You must take into consideration these issues in selecting factory location.

13. Climatic Conditions

Climatic conditions affect both people and manufacturing activity. Certain industries require the specific type of climatic conditions to produce their goods. For example, jute and textiles manufacturing industries require high humidity.

14. Political conditions

The stability of political environment is essential for industrial growth. It builds confidence and political instability causes lack of confidence among the prospective and present entrepreneurs to venture into the industry which is filled with risks. Hence, the most advantageous location is that at which the cost of gathering material and fabricating it plus the cost of distributing the finished product to the customers will be at a minimum. The choice of an optimum location requires a judicious balancing of all these factors. This list of

14 things to consider before selecting factory location definitely helps you to get almost right plant location for your manufacturing operation.

Loan against property | How to apply | Basic guide

WHAT IS A LOAN AGAINST PROPERTY?

Loan Against Property is a type of loan that uses your commercial or residential property as collateral. Loans Against Property are customarily used as a quick means of financing by an SME to expand its business.

Loan against property | How to apply | Basic guide
Loan against property | How to apply | Basic guide

| FEATURES

● The loan amount is derived as a percentage of the market value of the property being offered as collateral. For loan against property in India, this percentage ranges from 50%-60%, depending on the bank and the nature and condition of the collateral. For example, if your property is worth Rs. 10 lakh in the market, then a bank may issue a loan against commercial property at an amount between Rs. 5 and 7 lakh depending on factors associated with repayment ability.

● Loan against Property is often taken in the form of a term loan (repaid through EMIs) or through an overdraft line of credit.

● A loan against property generally has the potential to be of a larger ticket size relative to other SME loans. Up to Rs. 25 crore can be disbursed for a loan against property, depending on the bank, location and value of the property being mortgaged.

● Under RBI regulation, banks are required to dedicate a percentage of all business funding to the priority sector, which is mainly composed of rural businesses involved in agriculture. For SMEs that are categorized under the priority sector, loans against property can be taken as loans against agricultural land.

| BENEFITS

Loan against property | How to apply | Basic guide

● Lower interest rates compared to personal loans

● Longer tenor of loan, making the repayment process easier for businesses

● Easy documentation

● Quick approval and processing

LOAN AGAINST PROPERTY INTEREST RATES AND TENOR

● The interest rates for loan against property commonly range from 12%-15%.

● A loan against property usually has a maximum tenor of 15 years.

ELIGIBILITY CRITERIA

To be eligible for applicants must be ,

● Indian Residents

● Salaried, Self-Employed or Government Employed individuals

● At least 25 years of age but not more than 65 years

● Earning at least Rs. 3,00,000 – 5,00,000 of net income The type of property accepted as collateral in a loan against property varies from one bank to another. Banks accept at least one of the following:

● Self-occupied commercial property

● Rented commercial property

● Vacant commercial property

● Self-occupied residential property

● Rented residential property

● Vacant residential property

Licensing and Clearance to start small business in india

Licensing and Clearance to start small business in india : 

Licensing :

Licensing in the Industries sector is governed by the licensing exemption notification issued by Govt. of India on July 25, 1991, under the Industries (Development and Regulation) Act, 1951. In SSI, there are virtually no licensing restrictions. No industrial license is required except in the case of 6 product groups included in compulsory licensing (these products groups mainly cover products that can only be made in the large sector). Licensing and Clearance to start small business in India contains many facts like this.

But if a small-scale unit employs less than 50/100 workers with/without power then it would not require a license from the Govt. of India even for the 6 product groups covered in licensing under Schedule II of the notification. Subject to this, an entrepreneur can set up an S.S.I unit anywhere in the country without any restriction. The units are, of course, subject to the location /land use and zoning restrictions in force under the local laws.

Licensing and Clearance to start small business in india :

Clearance for small business manufacturing :

In initiating a small business manufacturing in India, according to the product entrepreneurs need to obtain several different clearance from different Government Authorities.

Regulatory or Taxation Clearances :

1. Registration under Sales Tax Act – Commercial Tax officer of area concerned

2. Registration under Central Excise Act – Collector of Central Excise or his nominee for area

3. Payment of Income Tax – ITO of the area concerned

4. Registration of Partnership deed – Inspector General of area concerned

5. Calibration of weights & measures – Weights and Measures Inspector of State

6. Power Connection – Designated Officer of State Electricity Board

7. Employee strength exceeding 10 with power connection or 20 without power.

Licensing and Clearance to start small business in india :

Chief Inspector of Factories Environment & Pollution Related Clearances :

Licensing and Clearance to start small business in india
Licensing and Clearance to start small business in india

The method of granting consent under water and air pollution to S.S.I units has been simplified. Except for 17 critically polluting sectors given below, in all other cases S.S.I units will merely have to file an application and obtain an acknowledgement which will serve the purpose of consent :

1. Fertilizer (Nitrogen/Phosphate)

2. Sugar

3. Cement

4. Fermentation & Distillery

5. Aluminium

6. Petrochemicals

7. Thermal Power

8. Oil refinery

9. Sulphuric Acid

10. Tanneries

11. Copper smelter

12. Zinc smelter

13. Iron & Steel

14. Pulp & Paper

15. Dye and Dye intermediates

16. Pesticides manufacturing and formulation

17. Basic Drugs and Pharmaceuticals.

Product Specific Clearances :

1. Establishing a Printing Press – District Magistrate

2. License for Cold Storage Construction – Designated Official in State

3. Pesticides – Central/State Agricultural Department – Ministry of Agriculture

4. Drugs and Pharmaceuticals – Drug license from State Drug Controller

5. Safety Matches/ Fireworks – License under Explosives Act from Directorate of Explosives, Nagpur

6. Household Electrical Appliances – License from Bureau of Indian Standards

7. Wood Working Industry within 8 km from forest – District Forest Officer

8. Milk Processing & Milk products manufacturing units – Approval under Milk and Milk Products Order from State Agricultural/ Food Processing Industries Department above a designated capacity.

3M business principles for small business manufacturing in India

3M business principles for small business manufacturing in India : 

1. Manpower Projections for manpower and staffing are made in the project report. However, it is necessary to time the induction of manpower in a planned manner. The engineers and operatives must be available before the installation of the machinery. 3M business principles rely on things like this.

2. Machinery Choosing and ordering of right machinery are also of paramount importance. In many cases technology or process provides us with specifications which are not provided, then an extensive techno-economic survey of machinery and equipment available must be carried out. The entrepreneur must also consult experts prior to making a selection of equipment and machinery.

3. Material Materials procurement and planning are critical to success, of a start-up with a small scale manufacturing unit. Inventory management can lead to manageable cash flow situations; the otherwise if too much is ordered too soon the 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. For essential imported raw material whose lead-time is large proper planning is all the more essential.

ENTREPRENEURS MEMORANDUM FOR SMALL BUSINESS MANUFACTURING ( Along with 3M business principles this things are also very important to keep in mind ) :

Registering the company with R.O.C is the must. As per your desired ownership pattern you can register your manufacturing business by following ways:

1. One Person Company

2. Private Limited Company

3. Limited Liability Partnership

4. Public Limited Company

Section 8 of the Micro, Small and Medium Enterprises Development (M.S.M.E.D) Act, 2006 provides for the filing of a memorandum by a Micro, Small or Medium Enterprise.

Sub-section (2) of section 8 stipulates that the form of the Memorandum, the procedure of its filing and other matters incidental thereto shall be such as notified by the Central Government. The memorandum may be filed by all three categories of enterprises with the District Industries Centre in the jurisdiction of which the enterprise is (or, is proposed to be) located. Every S.S.I unit has to comply with various regulations in force. These include regulatory, taxation, environmental and certain product specific clearances. This section looks into the methodology of obtaining these approvals and clearances.

UNIT SETUP FOR SMALL BUSINESS MANUFACTURING

UNIT SETUP FOR SMALL BUSINESS MANUFACTURING

Setting up a manufacturing unit requires negotiating a favorable plot or shed purchase, organizing for proper construction of the building, design of interiors and finding good deals on equipment and machinery. unit setup for small business manufacturing is very first thing which leads your all arrangement from electricity to transportation management.

 

UNIT SETUP FOR SMALL BUSINESS MANUFACTURING
UNIT SETUP FOR SMALL BUSINESS MANUFACTURING

The design of factory ( UNIT SETUP FOR SMALL BUSINESS MANUFACTURING )  building has to be in consonance with the type of industry and must have an appropriate plant layout. An architect’s estimate of building construction is essential for loan applications. Further, the architect’s the certificate for money spent on the building is needed for disbursement of that loan. Among the utilities of prime importance are power and water. In many cases getting power connection causes delay in setting up of the 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. You also need to obtain water connection. The water supply can be augmented by the installation of the tube-well or submersible pump.

Summary :

  • Proper design for unit setup for small business manufacturing is needed.
  • design must include electricity and water supply.
  • transportation is also must for unit setup for small business manufacturing .

SMALL BUSINESS MANUFACTURING | THINGS TO CONSIDER BEFORE STARTING

SMALL BUSINESS MANUFACTURING | THINGS TO CONSIDER BEFORE STARTING

Initiating a small business manufacturing in India is generally considered as an opportunity. Manufacturing opportunity produces a product that can generate sufficient surplus. The product plays an important role in the small business manufacturing operation. Setup and financing of a manufacturing business require in-depth planning and plentiful resources. The manufacturing industry is also heavily regulated by different Government Authorities. Here we articulate important things to consider in starting a small business manufacturing in India.

IDENTIFY WHAT IT TAKES IN STARTING A SMALL BUSINESS MANUFACTURING

Starting a manufacturing business involves a lot of commitments. Often manufacturing business calls for a up-front financial investment for specialized facilities, equipment and raw material. Identifying the proper human resource requirement and recruiting skilled personnel is also important. Manufacturing processes come in different shape and size, such as a manual, semi-automatic and fully-automatic operation.

MAKING A PRODUCT CHOICE IN SMALL BUSINESS MANUFACTURING

Selecting a right product is the most primary issue in getting success form manufacturing business. In a project conceptualization stage while making a product choice following factors are related to product need to be considered:

● Product Line – Depth, Width

● Packaging

● Branding
● Warranties

● After Sales Service

● Ease of availability of raw-material

● Process Technology

● Accessibility to the market

● Incentive and support from Government If you are looking for a product that has export potential.

the following additional factors need to be considered:

● Contents of export-product portfolio

● special requirements for packaging to export the products

● What product adaptations are needed to be made for exporting a product to a specific country.

● WTO conditions involved e.g. “child labour free”, ISO 9000 certified, GMP followed etc.

TECHNOLOGY & MACHINERY FOR SMALL BUSINESS MANUFACTURING

Choice of technology and process involves the selecting right machinery . Only a customized detailed project report can give you the solution about the machinery and process with project cost. For some complex products, a process knows 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 Defense Research Labs and some of this technology can now be bought. Indigenously developed process know-how has intrinsic benefits such as appropriateness and relative inexpensiveness.

ARRANGING FINANCE FOR SMALL BUSINESS MANUFACTURING IN INDIA

No manufacturing business can take off without monetary support. This need for finance can be classified into following types:

● Term Loan (long & medium term)

● Working Capital Loan

● Seed Capital

● Hire Purchase Leasing For Machinery

● Angel Investment

● Loan Against Property

● Unsecured Business Loan In arranging finance you must consider the several Government schemes and grant specially designed for SME.

Regardless to the bank or types of loan, you are applying for, these documents are generally required for a loan application :

● Documentation for Loan Application

● Balance Sheet and Profit Loss Statement for last three consecutive years of firms owned by promoters

● Income Tax Assessment Certificates of Partners/Directors

● Proof of Possession of Land/Building

● An architectural estimate for construction cost.

● Partnership deed/Memorandum and Articles of Associations of Company

● Project Report