Unit-01 (Principles of Entrepreneurship)

What Is an Entrepreneur?
An entrepreneur is an individual who creates a new business, bearing most
of the risks and enjoying most of the rewards. The process of setting up a
business is known as entrepreneurship. The entrepreneur is commonly
seen as an innovator, a source of new ideas, goods, services, and
business/or procedures.

Entrepreneurs play a key role in any economy, using the skills and initiative
necessary to anticipate needs and bringing good new ideas to market.
Entrepreneurship that proves to be successful in taking on the risks of
creating a startup is rewarded with profits, fame, and continued growth
opportunities. Entrepreneurship that fails results in losses and less
prevalence in the markets for those involved.

Importance of Entrepreneurship:
• Creation of Employment- Entrepreneurship generates employment. It provides an
entry-level job, required for gaining experience and training for unskilled workers.
• 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.
• 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.
• 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.
• 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
Definitions of entrepreneur

a person who organizes and manages any enterprise, especially a

business, usually with considerable initiative and risk.

Bernard Belidor applied it to the function of buying labour and material

and uncertain prices and selling the resultant product at contracted price.

Quesnay regarded the rich farmer as an entrepreneur who manages and

makes his business profitable by his intelligence, skill and wealth

In many countries, the entrepreneur is often associated with a person who

starts his own new and small business. Business encompasses
manufacturing, transport, trade and all other self-employed vocations in
the service sector. But not every new small business is entrepreneurial or
represents entrepreneurship.

Entrepreneurial Traits
Entrepreneurial traits are the typical characteristics, abilities and thought patterns
associated with successful entrepreneurs. While some entrepreneurs are born with
these traits, others can develop them. These include:

1. Being a good leader

2. Being optimistic
3. Being confident
4. Being passionate
5. Being disciplined
6. Being proactive
7. Keeping an open mind
8. Being competitive
9. Being kind
1. Being a good leader

An entrepreneur is expected to manage a business and most professionals in this

position are responsible for its start-up as well. Typically, entrepreneurship involves
finding and building relationships with investors, overseeing employees and
monitoring operations. To perform these activities well, you need to be an effective
leader.

Leadership is the ability to lead others. An effective leader mobilizes people to

achieve goals and is perceived as a leader by their followers. There are ways in
which you can cultivate this trait, such as:

Learning from your experiences

While it is normal to make mistakes when managing a team, you can identify the
pros and cons of your leadership style while you work and use your findings to
improve how you lead others.

Researching the different leadership styles

For example, the democratic style of leadership, which involves more collaboration
between leaders and followers in the process of decision making, can be effective
during the initial stage of setting up a business. It can give an employer better
insights for decision making when hiring a large staff of experts is not possible.

Learning about the leaders in your industry

You can learn how industry leaders manage their key stakeholders and use the
leadership tactics that work for your own business.

Developing an approach to leadership that works for you

By considering new styles of leadership and evaluating your leadership style, you
can find a leadership style that suits you and your business.

2. Being optimistic

Optimism can be described as focusing on the positives and being emotionally

resilient to the negatives. An entrepreneur who organizes, manages and operates a
business is likely to face many setbacks over time. For example, as you start your
business, you will need to complete a lot of paperwork concerning licenses, tax
forms, business plans and bank accounts. In the process of getting these
documents ready, there could be many issues that check your progress, such as
delays in getting a license or structural issues in your business plan.

Being optimistic can help you to overcome these problems quickly instead of
becoming demotivated by them. Like the other important entrepreneurial traits,
optimism is a quality that you will need to develop and maintain in your career.
There are ways in which you can cultivate optimism, such as:

• Surrounding yourself with optimism by hiring optimistic workers, including

inspirational quotes into your interior design or listening to upbeat music

• Developing an optimistic outlook that influences the way you do things in your
business and impacts your decision-making process

• Starting to look at everyday events as business opportunities

• Identifying the positives in a problematic situation and focusing on them while

you troubleshoot

• Finding a career coach who can help you to develop your optimism

• Catching yourself being negative and reframing your mindset. For example,
you can start looking at issues that check your progress as learning
experiences that can prepare you for greater success in the future.

3. Being confident

Confidence is a subjective belief that you have what is needed for something.
Entrepreneurs ask banks for loans, hire workers, motivate teams and build
relationships with clients and suppliers, so it is important for an entrepreneur to be
confident in their ability to do all these things well.

Being confident can help your business. Key stakeholders are more likely to respond
favorably to your proposals if you project your confidence. You can use several
tactics to become more confident, such as:

• Cultivate a belief in yourself and your abilities. Make a list of your successes
and remind yourself of them in times of doubt. For example, remind yourself
that you are producing something that people want to buy or remind yourself of
the things that you have already done to make your business more profitable.

• Plan and perform your daily activities with the mindset that you will
successfully complete them even if there are setbacks.
 • Research how confidence can be communicated through body language and
verbal communication and use these techniques to improve how you project
yourself.

• Role-play situations such as negotiations with key suppliers or discussions

with investors by practicing your message delivery, learning to answer typical
questions and handling feedback professionally.

• Hire a career coach who can help you to develop your confidence.

• Spend time with friends who have a positive impact on the way that you feel
about yourself. These social experiences can amp up your confidence.

• Learn new hard and soft skills to improve your work performance. This will
help you become more self-assured at work.

• Make changes that can improve your appearance such as dressing well,
exercising regularly and eating healthily to boost your confidence.

4. Being passionate

Being passionate about building and running your business can make it easier to put
in the effort needed for a successful enterprise. If you need to boost your
professional passion, consider these tips:

• Try to think of your job as more than just a livelihood and cultivate a genuine
love for what you do. You can remind yourself of why you decided to start your
own business or think of the positive impacts that your business has on
yourself, your employees, your clients or your community.

• Start each business day by reminding yourself of all the things that you look
forward to doing such as closing a deal or hiring a new employee.

• Learn how to communicate your passion when you engage with employees,
suppliers or investors. Your enthusiasm for what you do can make your major
stakeholders feel more enthusiastic too, which could help your business.
5. Being disciplined

Being disciplined can help you to achieve success as an entrepreneur.

Entrepreneurs are expected to work independently, set their own goals and
overcome setbacks. To do these things well, being disciplined is essential. You can
use the following advice to become more disciplined:

• Train yourself to be a self-starter who initiates and completes tasks without the
need for oversight.

• Give yourself a small reward each time you meet a goal. This will motivate you
to reach your targets without getting distracted.

• Develop a work ethic that fuels your determination to work hard to achieve
your professional goals. Keep in mind that many entrepreneurs who have built
successful startups have spent more time at work than most of their
employees.

6. Being proactive

A proactive person anticipates opportunities and threats and tries to address them
while a reactive person simply reacts to situations. As an entrepreneur, it is always
better to be proactive instead of being reactive. Here are some ways in which you
can become more proactive:

• Combine research with active listening to understand the needs of key

stakeholders (your customers, employers and business partners).

• Identify threats in events and develop solutions before these issues become
more severe.

• Analyze your business operations regularly. Identify the areas that can be
improved and improve these areas.

• Try to develop long-term solutions to address the main causes of issues

instead of developing short-term solutions that are ineffective.

• Use verbal and written communication to show employees that you welcome
their feedback. This will help you to identify areas that need to be improved or
policies that need to be explained more clearly to workers.
7. Keeping an open mind

Keeping an open mind involves the willingness to listen to the opinions and ideas of
others. Typically, entrepreneurs start businesses in competitive industries that have
already established market leaders. To succeed in this position, it is necessary to
see business opportunities in everyday events and look for ways to improve
business offerings. Consider the following tips to develop this trait:

• Be willing to listen to others instead of refusing to accept that someone else

could have a valuable opinion. This can increase your pool of ideas and
insights.

• Encourage coworkers or customers to provide feedback and consider their

opinions to make a product or service better.

• Use new ideas or insights about workflows, customer service or employee

engagement to improve a product or service offering.

8. Being competitive

Competitiveness is a key trait among successful entrepreneurs. With globalization

and virtualization, industries are growing more competitive. To maintain a lucrative
business, it is essential to develop a competitive attitude. Consider the following
advice to develop your competitiveness:

• Keep track of what your competitors are doing with market research and
market-monitoring services, and ensure that you do not fall behind in terms of
development.

• Identify the business tactics that work for your competitors as well as the ones
that do not work, and use these tactics to improve your business.

• Use product improvements, pricing, marketing and distribution to make your

products more competitive in the market. For example, you can price a new
product in a market with several established brands at a relatively low price
and invest in creative advertising to motivate customers to switch brands and
try your product.

• Develop customer analyses and use your findings to keep improving your
products or services by making them more adapted to customer needs.
 • Use employee analyses to develop incentives such as benefits, severance
packages and performance-based rewards to attract the best talent to your
team.

9. Being kind

While kindness is not usually considered an important trait in entrepreneurs, it can

help you in maintaining success. For example, while it is easy to focus on meeting
your KPIs on sales, failing to consider the well-being of your employees or
overlooking the impact that a production process has on your community could
cause you problems over time or allow your competitors to gain an advantage. You
can use the following tips to develop kindness:

• Assess the working conditions of your full-time employees regularly and

ensure that they have the basics they need to perform well.

• Reevaluate your employee benefits periodically to make sure that you are
providing a package that can actually help workers as well as attract the best
talent.

• Be proactive in improving your manufacturing or distribution processes to

make them less damaging to the environment and more sustainable.

• Foster a supportive, healthy company culture through strong policies that

discourage bullying, sexual harassment or gender-based discrimination.
 BASIS FOR
ENTREPRENEUR MANAGER
COMPARISON

Meaning Entrepreneur refers to a Manager is an individual

person who creates an who takes the
enterprise, by taking financial responsibility of
risk in order to get profit. controlling and
administering the
organization.

Focus Business startup Ongoing operations

Primary Achievement Power

motivation

Approach to task Informal Formal

Status Owner Employee

Reward Profit Salary

Decision making Intuitive Calculative

Driving force Creativity and Innovation Preserving status quo

Risk orientation Risk taker Risk averse

CREATING AND STARTING THE VENTURE

PLANNING AS PART OF THE BUSINESS OPERATION

Planning is a process that never ends. In the early stages, the entrepreneur should prepare a preliminary
plan. The plan will be finalized as the enterprise develops. Many different types of plans may be part of any
business operation-financial, marketing, production, and sales plans. Plans may be short term or long term,
or they may be strategic or operational. All of these plans have one purpose: to provide guidance and
structure to management in a rapidly changing market environment.

WHAT IS THE BUSINESS PLAN

A business plan is a writtendocument prepared by the
entrepreneur that describes all the relevant external
and internal elements involved in starting a new venture. It addresses both short- and long-term decision
making. The business plan is like a road map for the business' development. The Internet also provides
outlines for business planning. Entrepreneurs can also hire or offer equity to another person to provide
expertise in preparing the business plan. In developing the business plan the entrepreneur can determine
how much money will be needed from new and existing sources

WHO SHOULD WRITE THE PLAN

The business plan should be prepared by the entrepreneur; however, he or she may consult many sources.
Lawyers, accountants, marketing consultants, and engineers are useful supplemental sources. Other
resources are the Small Business Administration, Service Core of Retired Executives, Small Business
Development Centers, universities, friends, and relatives. To help determine whether to hire a consultant,
the entrepreneur needs to make an objective assessment of his or her own skills.
SCOPE AND VALUE OF THE BUSINESS PLANCWHO READS THE PLAN
The business plan must be comprehensive enough to address the concerns of employees, investors,
bankers, venture capitalists, suppliers, and customers.
Three perspectives need to be considered:
The entrepreneur understands the new venture better than anyone. The marketing perspective considers the
venture through the eyes of the customer. The investor looks for sound financial projections. The depth of
the business plan depends on the size and scope of the proposed venture.
The business plan is valuable to the entrepreneur and investors because:
1. It helps determine the viability of the venture in a designated market.
2. It gives guidance in organizing planning activities.
3. It serves as an important tool in obtaining financing

METHODS OF GENERATING NEW IDEAS

Even with the wide variety of sources available, coming up with an idea to serve as the basis for the new
venture can still be a difficult problem. The entrepreneur can use several methods to help generate and test
new ideas, including focus groups, brain storming and problem inventory analysis.
Focus groups
Group of individuals providing information in a structured format is called a focus group. The group of 8
to 14 participants is simulated by comments form other group members in creatively conceptualizing and
developing new product idea to fulfill a market need.
Brainstorming
A group method of obtaining new ideas and solutions is called brainstorming. The brainstorming method
for generating new ideas is based on the fact that people can be stimulated to greater creativity by meeting
with others an d participating with organized group experiences. Although most of the ideas generated
from the group have no basis for further development, often a good idea emerges.
Problem inventory analysis
Problem inventory analysis uses individuals in a manner that is analogous to focus groups to generate new
product ideas. However instead of generating new ideas themselves, consumers are provided with a list of
problems in a general product category. They are then asked to identify and discuss products in this
category that have the particular problem. This method is often effective since it is easier to relate known
products to suggested problems and arrive at a new product idea then to generate an entirely new idea by
itself

CREATIVE PROBLEM SOLVING

Creative problem solving is a method for obtaining new ideas focusing on the parameters.
Brainstorming
The first technique, brainstorming, is probably the most well known and widely used for both creative
problem solving and idea generation. It is an unstructured process for generating all possible ideas about a
problem within a limited time frame through the spontaneous contribution of participants. All ideas, no
matter how illogical, must be recorded, with participants prohibited from criticizing or evaluating during
the brainstorming session.

Reverse brainstorming
Similar to brainstorming, but criticism is allowed and encouraged as a way to bring out possible problems
with the ideas.

Synectics
Synectics is a creative process that forces individuals to solve problems through one of four analogy
mechanisms: personal, direct, symbolic and fantasy. This forces participants to consciously apply
preconscious mechanisms through the use of analogies in order to solve problems.

Gordon method
Gordon method is a method of developing new ideas when the individuals are unaware of the problem. In
this method the entrepreneur starts by mentioning a general concept associated with the problem. The
group responds with expressing a number of ideas.

Checklist method
Developing a new idea through a list of related issues is checklist method of problem solving

Evolution of Business Plans

Launching Formalities
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.
read more

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.
read more

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.
read more

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.
read more

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.
read more

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.
read more

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.
read more

Legal Aspects
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.
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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.
read more

Human Resource
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.
read more

Production
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.
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Pricing
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.
read more
Marketing
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.
read more

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.