ENTREPRENEURSHIP AND NEW VENTURE CREATION

FORMALITIES FOR
SETTING UP OF A
SMALL BUSINESS ENTERPRISE
Entrepreneurship Development And Small Business Enterprise
- Dr. Poornima M Charantimath

Nidhi Gupta (29)

Nihal Singh (30)
Rajesh Sharma (39)

MBA III Semester

ALLIANCE BUSINESS ACADEMY Section B
Batch: 2009-2011
5. Arrange for Land/ Shed 6. Arrange for Plant and Machinery 7. Arrange for Infrastructure

8. Prepare Project Report

9. Apply and obtain finance

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10. a. Proceed to Implement

b. Obtain final clearances
1 . SELECTION OF A PROJECT
A ) PRODUCT OR SERVICE SELECTION
a.
b.
(i) Analyze the Future Demand-Supply position of the Product
a.
(ii) Contact Organizations which posses information on business opportunities
•Small Industry Service Institutes
•Centers for Entrepreneurship Development
•Leading Banks
•SIDBI-Lucknow
a.
(iii) Making a Product choice
•Easy Availability of Raw-Materials
•Market Information
•Packaging
•Branding
•After Sales Service

(iv) Number of Players eg. Footwear, Audio-Cassettees, Disposable Gloves Etc.

a.
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B ) LOCATION SELECTION

One of the major decisions an Entrepreneur has to make is about the

Location of the
project- where to set, the unit
•
•Proximity to market
•
•Availability of Raw-Materials
•
•Transportation and Communication Facilities
•
•Incentives/ concessions
•
•Government Policy

(1)General Consideration
•
•Location(City/Town/Village)
•
•Nearest Large City(Name and Distance)
•
•Availability of Man-power and Raw-materials
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(2) Industrial Infrastructure Position
•
•Land: availability and price
•
•Existence of an Organized Industrial Estate
•
•Power supply and Water Supply

(3) Financial Incentive Position

•Income Tax Concession

•
•Sales tax exemption/interest free sales tax loan
•
•Octroi exemption, electricity duty exemption, local tax
exemption and other exemptions

(4) Social Infrastructure Position

•
•Housing

•Education
•
•Health 5
C ) Project - Feasibility Study

(1)Market Analysis
•
•Consumption trends in the past and the present
consumption level
•
•Past and present supply position
•
•Production possibilities and constraints
•
•Cost structure

(2) Technical Analysis

•
•Have the preliminary tests and studies been done or
provided for?
•
•Has the availability of power, raw-materials, and other
inputs been established?
•
•Have work schedules been drawn up realistically?
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•Is the technology appropriate form the social point of
view?
( 3 ) Financial Analysis
•
•In ve stm e n t O u tla y a n d co st o f th e p ro je ct
•
•Pro je ct p ro fita b ility
•
•B re a k e ve n p o in t
•
•Le ve l o f risk

( 4 ) Economic Analysis
•
•R e fe rre d to a s so cia l co st-b e n e fit a n a lysis, co n ce rn e d
w ith ju d g in g a p ro je ct fro m th e la rg e r, so cia lp o in t o f
vie w ( i. e . so cia l co st a n d b e n e fit)

( 5 ) Ecological Analysis ( bulk drugs , chemicals , leather

p ro ce ssin g , e tc .)
•
•W h a t d a m a g e ca n b e ca u se d to th e e n viro n m e n t ?
• 7
•W h a t is th e co st o f re sto ra tio n ?
Preliminary Work Generation of Ideas

Initial Screening

Is the idea prima facie promising

Yes No
Terminate
Plan feasibility analysis
Analysis

Conduct Market Analysis Conduct Technical Analysis

Conduct Financial Analysis

Evaluation

Conduct Economic and Ecological Analysis

Yes No
Terminate
Is the Project worthwhile ?
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Yes
Prepare Funding Proposal
D ) Business Plan Preparation

•Determines where the company needs to go

•
•Forewarns of possible roadblocks along the way
•
•Formulates responses to contingencies
•
•Keeps the business on track to reach its planned goals

1)Keep target audience in view e.g. debt financing

2)
3)
4)Strategy – Core of a Business Plan
5)
6)

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REGISTRATION

isional Registration Certificate (PRC)

•
•enables initiation of necessary steps to bring unit into existence e.g.
applying for infrastructure facilities (land, shed, etc.).

Registration Formalities
•
•Prescribed court fee stamp
•
•Copy of the project file
•
•Partnership Deed
•
•Affidavit
•

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iPermanent Registration Certificate

•To a p p ly fo r sca rce a n d im p o rte d ra w m a te ria ls.

•
•To g e t w o rkin g ca p ita l fro m b a n ks/ fin a n cia l in stitu tio n s.
•
•To o b ta in C e n tra l excise d u ty co n ce ssio n s.
•
•To a p p ly fo r in ce n tive s in clu d in g sa le s ta x exe m p tio n , w h e re ve r a p p lica b le

-re g istra tio n

•
•C ro sse s th e in ve stm e n t lim it
•
•S ta rts m a n u fa ctu rin g n e w ite m / ite m s th a t re q u ire lice n se
•
•D o e s n o t sa tisfy co n d itio n s o f b e in g o w n e d , co n tro lle d , e tc .

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4 . CLEARANCES FROM SPECIFIC DEPARTMENTS

Several clearances are required from different authorities

depending on the
type of the industry and the location of the unit

The specific clearances usually required depending on the type

of unit

a.Agricultural land conversion

b.
c.Factories act
d.
e.Trade license
f.
g.Pollution control board clearances
h.
i. Sales tax registration
j.
k. Drugs and cosmetics license
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5 . ARRANGE FOR LAND / SHED
For any industrial project, a suitable industrial site or a ready
industrial shed is
required

a . Industrial land :

Once the location of the unit is decided , the land for the project
could be
conveniently be taken from the state industrial areas development
board.

b . Industrial shed :

For setting up an SSI unit , the promoters could consider using a

ready industrial
shed. This could be on rent or ownership basis

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Application formalities

The following documents have to be submitted along with the

application form

a.Copy of Provisional Registration Certificate

b.
c.Detailed project Report
d.
e.Certified copies in support of educational qualification ,
experience , and other categories as may be applicable
f.
g.Applicable Earnest money *deposits
h.
i.
* Earnest money:
the rate of earnest money is equal to 5% or 10% of the
value of machinery
purchased

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6 . ARRANGE FOR PLANT AND MACHINERY

1Direct Purchase

•from recognized and approved manufacturers or dealers.

•
•Banks and State Financial Corporation (SFC) maintains a
list of approved machinery suppliers.
•
2NSIC Hire Purchase Scheme

•National Small Industries Corporation leases the required

plant and machinery to the promoters of the industrial
unit.

•Once the required lease installment is paid , the asset

becomes the property of the industrial unit.

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 ARRANGE FOR INFRASTRUCTURE

in infrastructure facilities required include Land/Shed, Power connection, Water

supply and Telephone facility.

ngle Window Agencies (SWAs) provide clearances for various infrastructure and
other facilities which include :-

vGrant of land and allotment of shed.

v
vGrant of power up to a limit specified by the State Government.
v
vTo review and recommend of term loans and working capital loans.
v
vGrant and disbursement of all incentives and concessions.

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 And Construction of Building

e important factors are to be kept in mind before purchasing/leasing the land :-

ailability of basic amenities like power, water.

Connectivity to nearest rail, road or port.

Price of land.

architects certificate for money spent on the building is needed for

disbursement of loan.

ing the Utility Connections

r Supply

•Source of water supply – river, canal, tube well, etc. and how far is it ?
•
•Quality of water
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Po w e r S u p p ly

•N e a re st S u b sta tio n
•
•Po w e r Ta riff R a te
•
•D u ra tio n ( Po w e r C u ts)
•
A p p lica tio n n e e d s to b e m a d e in a sp e cific fo rm to th e S ta te E le ctricity B o a rd . A n
in sp e cto r e va lu a te s th e fa cto ry fo r lo a d e va lu a tio n .

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8 . PREPARE PROJECT REPORT
General points to be kept in mind while preparing the report
v
vExpected use of the project report.
v
vElaborate details but retain the confidential data.
v
vProper validation of the data and information based on reliable sources.
v
vEffective presentation by use of charts, graphs and pictorial forms.

The report must imbibe the following characteristics :-

v
vStandard Format

vProper definitions of assumptions

v
vEmphasis on main objectives of the project
v
vCost effectiveness
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project report is generally prepared the following seven broad segme

ecutive Summary

isting company details (if any)

erational details of the existing company (if existing)

oject details

lated Industry

nclusion

nexure

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( a ). PROCEED TO IMPLEMENTATION
ng trial run period necessary adjustments and changes in production and
ess have to be made to obtain desired quality products.

( b ). OBTAIN FINAL CLEARANCES

1)Regulatory or Tax Clearances
v
vRegistration under Sales Tax Act
vRegistration under Central Excise Act
vPayment of Income Tax
vPower Connection

2) Product Specification Clearances

vDrugs and Pharmaceuticals – license from State Drug Controller

vHousehold Electrical appliances – license from Bureau if Indian Standards

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E n viro n m e n t Po llu tio n re la te d cle a ra n ce s

1 . Po llu tio n C o n tro l

A N o O b je ctio n C e rtifica te ( N O C ) o b ta in e d fro m S ta te Po llu tio n co n tro lB o a rd

b e fo re co m m e n ce m e n t o f co n stru ctio n a ctivity.

2 . In d u strie s re q u irin g w a te r a n d a ffe ctin g e fflu e n t d isp o sa l

3 . Fo r u n its fu n ctio n in g o u tsid e th e in d u stria l a re a

4 . R e g istra tio n a n d lice n sin g o f a b o ile r

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THANK YOU