How to Set-Up an Enterprise
Decision to be an Entrepreneur
The overriding reason for anyone to think of establishing a SSI unit can be summarised in one word - opportunity. An opportunity to be your own boss, to provide a product or service, to implement your ideas, which can generate sufficient surplus, is reason to think of starting up a SSI unit.
Starting a small business takes a lot of courage. To be successful - to stay in business - you need a combination of hard work, skill and perseverance.
Choosing your form of Business Organisation
Many first time entrepreneurs do not have a clear perspective of the issues, legal or otherwise, involved in choosing one or the other form of a business. This often results in avoidable mistakes, which later cost time and money to rectify. The options of the form of business with their pros and cons have been explained below. In India setting up a private limited company was the most popular choice among our sample of entrepreneurs.
Franchising is also emerging as a major business format. An extensive overview of its features is provided since it is believed that it will grow the same way in India as it has abroad.
Making a Product Choice
Make a careful analysis of the product or service you are choosing, sometimes in short run, there is a shortage of a particular commodity in the market, you may even come to know you will get almost two weeks in advance to supply fresh stock. Does that mean you can jump into that business. First thing in such a condition is to analyse the situation. Keep in mind that shortages may occur due to a number of reasons and a good entrepreneur always examine the pros and cons before setting up a business. It may tempt you to think that perhaps you have found a good businesses idea. But do not be easily influenced by these temporary shortages. Carefully analyse the future demand-supply position of the product, say for the next 3 to 5 years. Only when you are certain that the shortage will remain there for considerable period of time and you would be able to generate enough profits in the very first or second year of operation and that you can produce quality item within an acceptable pricing, then only you should venture into such a business.
Location of Industry
After deciding the issues of product, the next important question is, where to set up the unit ? For many tiny units and service-based units, the home is perhaps the best starting point. But not all type of SSI can be set up in home either due to size or due to nature of the industry. Then the entrepreneurs may like to locate their business in industrial estates, areas, parks, complexes developed by concerned state government organisation or private bodies or in a privately leased land subject to approvals by various state and municipal bodies.
State level Government agencies like DSIDC, HPSIDC, GIDC, TIDCO, UPSIDC assist entrepreneurs in identifying suitable locations/sites for the project, besides helping in the process of getting all the necessary clearances for the project.
Preparation of Business Plan
A Business Plan is an document where you plan your Business to have an organized and effective response to a situation which may arise in future. Business plan is not just for a start up company but also for those, which are growing. It can be used it to establish realistic goals or targets to achieve and to determine the current position.
Start a business plan with describing your business and product or services. Tell about the market you are targeting and the stage of development your company.
Sourcing Process, Raw Materials, Machineries and Equipments
Choices of process technology emerge once the product is finalised. For some complex products, process know-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 Defence Research Labs and some of these technologies can now be bought. There are some intermediaries like APCTT, TBSE, which can help you to locate the relevant technologies. Besides there are some In-house R & D centres of companies, which develop technologies and sell them to interested parties. Indigenously developed process know-how has intrinsic benefits such as appropriateness, relative inexpensiveness and possibility to work with technology developer.
Infrastructure - Land & Building, Water and Power Supply
Once an industrial plot for the unit is secured, then the next job is that of finding a suitable architect to design the outlay of area and factory. Design of factory building has to be in consonance with the type of industry. Have an appropriate plant layout. If you are setting business in home, plan the area, which is to be used as your production centre or office judiciously. You may like to take help of a professional to ensure that the area is utilised optimally.
An architect's estimate of building construction is essential for loan applications. Further, architect's certificate for money spent on building is needed for disbursement of loan.
Few simple steps to take care of legal aspects of setting business are to Register your unit with relevant organisation, check out the labour laws that would be applicable to you, pay your commercial taxes and taking care of environmental aspects. Each of these aspects is discussed in details.
Finance and Working Capital to Start Business
To start and set up their business all SSI units need monetary support. Before seeking fund estimate the cost including that of working capital required for a minimum of 6-8 months and always keep a provision for buffer. you can take help of an CA or concerned officials in Entrepreneurship Development Institutes to work out the total financial cost of your project. Decide the form in which you are going to raise the capital i.e. should it be equity finance, debt finance, loans or a combination of these.
Human Resource is an important element to be kept in consideration while setting up an business. Though, 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. For example: The engineers and operatives must be available before the installation of the machinery. While planning for manpower following points should be kept in consideration.
Today's competitive market, it is difficult to maintain stable relationships with suppliers, customers, brokers, distributors, and even your own company personnel. Competitors are stealing your best customers. To maintain the edge entrepreneurs need to synchronies their production process, capacity, and delivery schedule.
Plan out your work area keeping in mind the requirement of your business. More often than not the area available to small businesses is limited and within that area all the work needs to be carried out, right from storing the raw materials to the final product. The space for each of these should be clearly chalked out.
In India, price is often affected by excise duty, sales tax and local taxes like octroi, thereby making it difficult to maintain a uniform price throughout the country. You may opt for any of the following policies or modify and combine them depending upon your objective or you can have your own pricing policy.
Marketing is an important tool to be used while setting up your business. Study, but don't necessarily copy your competitor's moves. Visit their businesses, watch their ads, figure out their strategies, and keep your eyes open. You may not be able to keep up with your competitor's strategy move by move. You should, however, be ready and able to blunt or block the impact of their moves through effective marketing. Then, later, you can make your own offensive move at your own pace.
Paying Back Loans and Profit Generation
Manage your cash Flow to pay back your loans, debts or credits. A healthy cash flow is an essential part of any successful business. If you fail to have enough cash to pay your suppliers, creditors, or your employees, chances are you will be out of business very soon. You should pay back the loans so that when you need loans in future, you get one. You can pay the loans or debts as per terms and conditions initially agreed upon, if you can't pay in time inform the creditor, ask for an extension stating the reasons. Proper management of your cash flow will ensure the same and is a very important step in making business successful.
Modenisation and Protection from Sickness
Once you have started the production most important aim for long run should be to remain at the forefront of business and avoid being obsolete in terms of products, services or management aspect. Listen and gauge the market, anticipate the future demands. There are many market survey document or market reports published by individual agencies and government departments on this aspect. An entrepreneur can use these as indicative guide to project the future conditions.
In face of competitive environment entrepreneur should keep abreast of process and technological changes that are taking place and wherever possible incorporate the changes which could increase the productivity, efficiency and /or reduce the cost of production.
Feedback and Reporting
Have a suitable feedback mechanism in place to learn from experiences, to gain an insight into what is actually happening in your business, if you don't have one develop a suitable mechanism, which suits your necessities. Think of your experiences, when you wanted to know from others how you were performing your jobs or chores or tried to find out how you performed in your a particular assignment.
There are 28 SISI's and 30 Branch SISI's set up in State capitals and other industrial cities all over the country.