Entrepreneurship and New Venture Creation Semester 3 Notes Module 6 Project Preparation And Appraisal Bangalore University Entrepreneurship

and New Venture Creation Q. Define Project (2 marks) Meaning of Project A project is a group of unique, interrelated activities that are planned and executed in a certain sequence to create a unique product and/or service, within a specific time frame, budget and the client's specifications. The Project Management Institutes Publication, in 'A Guide to the Project Management Body of Knowledge defined, "Project is a temporary endeavor undertaken to create a unique product or Service". Broadly these objectives, which are usually defined as part of the business case dale out in the project brief, must meet three fundamental criteria: 1) The project must he completed on time; 2) The project must be accomplished within the budgeted cost; 3) The project must meet the prescribed quality requirements. Q. Explain the characteristics of Project (8 marks) Some characteristics of projects are as follows: 1) Focus: A. project has a fixed net of objectives/mission/goals. 2) Time Limit 3) Team Spirit: This team consists of different individuals from varied disciplines will give their knowledge, experience, and credence towards a total performance. 4) Lifecycle: Like any other product, a project is also reflected and influenced by the lifecycle phases and 'which the success or failure of the project can be ascribed. 5) Unique Activities: Every project has a set of activities that are unique, which means it is the first time that an organization handles that type of activity. These' twenties do not repeat in the project under similar circumstances, ix., there will be something different in every activity or even if the activity is repeated, the variables influencing it change every time For example, consider a ship building yard that builds ships for international clients. Even though the organization builds many ships, each time there will be a difference in some variable such as the vessel's design, time allowed for construction, etc.

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Entrepreneurship and New Venture Creation 6) Attainment of Specific Goal: Organizations take up projects to perform a particular task or attain a specific goal. These tasks differ from project to project. The projects in an organization could be constructing a new facility, computerizing the accounts department or studying the demand for a new product that the organization plans to launch in the market. All these projects have a specific goal or result to attain and hence it can be said that every project is goal-oriented. 7) Sequence of Activities: A project consists of various activities that are to be performed in a particular sequence to deliver the end-product. This sequence depends on the technical requirements and interdependency of each of the activities. "' 8) Specified Time: Every project has a specified start date and completion date. This time limit is either self-imposed or it is specified by the client the life span of a project can run from a few hours to a few years. A project comes to a close when it delivers the product and/or service as per the client's requirements or when it is confirmed that it is no longer possible for the project to deliver the final product and/or service as required by the client. 9) Interrelated Activities: Projects consist of various technically interrelated activities. These activities are considered interrelated as the deliverable (output) of one activity becomes the input for another activity of the project. For example, the project of building a multi-storied luxury hotel. This project consists of various activities such as making a building plan, landscaping, constructing the building, designing the interiors, furnishing the rooms, etc. All these activities are interrelated and are equally important for the completion of the project. 10) Transience Creates Urgency: To be worthwhile and to repay the investment, the development objectives must be achieved by a certain time. Sometimes those time constraints are very tight; there is a very narrow market window for the output from the project: If the market window the project has no value. There are time pressures in routine operations. However, because they are routine, it is how much can be done in a given time, and so there is less likelihood of committing to impossibly tight timescales. 11) Uniqueness Create Risk and Uncertainty: The project must have a plan. As the work is unique, it will only be done once; the planning effort will only be recovered once. It is essential to coordinate the input of resources and ensure that the product is delivered at such a time and cost as to make a profit. However, the plan needs to be more strategic, focusing on the coordination. The detail levels of the plan need to be almost flexibly defined as the project progresses. And necessarily, the uncertainty and the risk must be overtly managed as part of the complete project management process. The features of transience, uniqueness, and the stresses they create, urgency, integration and uncertainty, define projects and project management. Project and project management are not defined by the so called 'triple constraint' of time, cost and functionality; all managers have to manage those, from both projects and operations. 12) Subcontracting: This is not a frill in the life of a project. Subcontracting is a subset of every project and without which no project can be completed unless it is of proprietary form .or tiny in nature. Subcontracting is an inescapable fact of projects and is one of the healthy antidotes for fruitful KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation completion of the project, if dosage appropriately, well in time. For example, DDA, HUDA, etc., undertake to construct housing colonies for the general public. Q. How do you classify a Project (8 marks) 1) National and International Projects: Just as Indian companies invite collaboration from foreign companies to set up plants in India, in the same way, Indian entrepreneurs extend their skills outside the country to set up plants in other host countries. The projects set up by large industrial houses or government undertakings in other countries are known as international projects. In order to participate in international projects, much greater efforts by the entrepreneur are required to understand the conditions in that country and evaluate the project opportunities more carefully. The risks associated with these projects are much higher and of a different nature. 2) Non-Industrial and Industrial Projects: The projects can be classified into non-industrial and industrial projects. The examples of non-industrial projects are healthcare projects, educational projects, irrigation projects, agricultural development projects, soil conservation projects, etc. In case of non-industrial projects, the benefits are not easy to quantify as the main purpose of these projects is social service. The investments in non-industrial projects are made by the Central or State governments. Allocations are made in the annual budget and development plans are included in the Five Year Plans. On the other hand, projects with money-making mission belonging to business organizations are undertaken to ensure generation of wealth and are known as industrial projects. 3) Projects Based on Level of Technology: On the basis of technology, projects can be classified into high technology, conventional technology and low technology projects. High technology projects involve very huge amount of investments. The examples of high technology projects are; space projects, nuclear power projects and sophisticated electronic projects. The projects which use traditional or known technologies in the process industries such as steel, sugar, cement, chemicals, etc., are known as conventional technology projects. Most of the products which are - produced for use in other industries or the final products which are used directly by people come from these conventional technology projects. Investment in these projects is of a sizeable amount though not very huge. Projects which produces products of daily use, for example, soap, detergents, cosmetics, etc., belongs to lowtechnology projects. Several products which are reserved for the small scale sector belong to low technology type. Investment requirement of such projects is not high. 4) Projects Based on Size: Projects based on size of investment and plant capacity are classified as large medium and small projects. Projects with a capital outlay of less than 5 crore are regarded as small-scale projects, projects requiring an investment of more than 100 crore are treated as large-scale projects and projects those falling between these two limits are considered as medium-sized projects. While large and medium size projects are given financial assistance by All India Financial Institutions like IDBI, IFCI and ICICI and commercial banks, small size projects receive financial assistance from State Financial Corporations. Small size projects are also assisted by State Industrial Development Corporations in obtaining their raw materials, equipment, etc. KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation 5) Projects Based on Ownership: Projects based on ownership can be classified into three categories: i) Public Sector Projects: Projects which are owned by the government, Central or State or both are known as public sector projects. These projects may be controlled either directly by the administrative ministries/departments or through Public Sector Enterprises/Public Sector Undertakings (PSE or PSU) which are owned by the government. Railways, Airlines, State Transport Corporations, SBI and other Nationalized Banks, LIC, Steel Plants in Rourkela, Bhilai and Durgapur, etc., are some of the examples of public sector projects. ii) Private Sector Projects: Projects with complete ownership in the hands of promoters and investors are known as private sector projects. The owners of such projects are individuals, partnership firm or a company (private or public but not PSU). While the profit motive is not the primary consideration of public sector projects, it is an important consideration in private sector projects. No entrepreneur would like to invest in a project which does not give him adequate returns. iii) Joint Sector Projects: Projects where ownership belongs to a partnership between the State and private entrepreneurs are known as joint sector projects. In such projects, normally the management expertise is from the private sector and the partner representing the government helps in liaison with various government authorities including large scale funding. The main consideration for investment in joint sector projects is the desire on the part of the State to utilize managerial talents and marketing capabilities of the private entrepreneur. From the entrepreneur's point of view, joint sector is attractive because they do not have to make all the contribution for its investment. 6) Sectoral Projects: According to this classification, a project may fall in the following sectors: i) Agriculture and Allied Sector ii) Irrigation and Power Sector iii) Industry and Mining Sector iv) Transport and Communication Sector v) Social Services Sector vi) Construction Vii) Miscellaneous Sector The sector classification of projects is quite useful for resource allocation at macro levels. 7) Techno-Economic Projects: It can be categorized into following three groups: i) Factor Intensity Oriented Classification: The factor intensity is used as base for classification of .projects such as capital-intensive, land intensive or labor-intensive which depends upon the large scale investments in plant and machinery or human resources.

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Entrepreneurship and New Venture Creation ii) Causation Oriented Classification: The causation-oriented project are determined based, on its causes namely demand based or raw material-based projects. The non-availability of certain goods or services and consequent demand for such goods or services or the availability of certain raw materials, skills or other inputs is the dominant reason for starting the project. iii) Magnitude Oriented Classification: The size of investments forms the basis for magnitude-oriented projects. Projects may thus be classified based on its investment such as large-scale, medium-scale and, small-scale projects. Techno-economic characteristics based classification is useful in facilitating the process of feasibility appraisal. United Nations and its specialized agencies use the International Standard Classification of all economic activities in collection and compilation of economic data. Financial Institutions/Growth Generative Classification: All India and State Financial Institutions classify the projects according to their age and experience and the purpose for which the project is being: taken up. They are as follows: i) New projects ii) Expansion projects iii) Modernization projects iv) Diversification projects The projects listed above are generally profit-oriented and the services oriented projects are classified as under: i) Welfare Projects ii) Service Projects iii) Research and Development Projects iv) Educational Projects Need Based Projects: Any project undertaken for implementation by an organization must have soma specific purpose or need. The recognition of such specific need is important for successful management of the project. A new industrial project which is implemented by a well-established organization may be: categorized in the following groups: i) Balancing Project: A project for augmenting or strengthening capacity of a particular area or areas within the chain of entire production plant, with the purpose to harmonize production capacity of KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation production centers within the plant, is known as a balancing project .Balancing projects are in order to harmonize capacities of different production shops within the plant, so that ultimately he plan production of the final product in increased. ii) Modernization Project: Due to continuous up gradation of technology and production processes, modernization becomes inevitable for any organization to take advantage of new technologies/processes, new input materials, new production methods, etc. To remain competitive produce at reasonable price, the company cannot afford to continue with obsolete technology. Modernization projects are undertaken with the objective of improvement in plants and processes by new machineries, new techniques and new processes and are not meant for changes in the line of activities/products of the organization. This type of projects results in higher output and also brings in economy in operations with ultimate effect in the form of increased profitability of the organization. iii) Expansion Project: Project undertaken by an organization with the goal for major increase in the volume of output of the existing products or services is known as an expansion project. A large organization manufacturing television sets with installed capacity of 1,00,000 unit sets per annum may have a project for increase its capacity to 1,50,000 unit sets per annum by installing another plant, such a project is called 'expansion project' of the organization. An important consideration for undertaking expansion projects is the intention of the firm to meet an anticipated growth in demand for the product or to increase its market share for the product. iv) Replacement Project: Replacement project is undertaken to replace certain part of the plant which is creating problems/breakdowns due to age and wear and tear. Such problems lead to increase in maintenance cost and reduction in plant output. With the help of a replacement project, the relevant part of the plant including the old machineries by new one is replaced which reduces the maintenance cost and increases the level of output of the organization. Replacement project is generally cost based and does not have enough scope to expect additional revenues from the projected investment. The appraisal is made with the estimated benefits from such investment in the shape of saving the maintenance cost and achieving the sales target by timely deliveries. v) Diversification Project: Project undertaken by an organization for activities completely different from its current activities is considered as diversification project. A company may seek profitable investment opportunities in altogether new areas. When a company undertakes a project to enter into a new area, it is called a diversification project. vi) Rehabilitation/Reconstruction Project: When a project is undertaken to revive a sick company, it is called a rehabilitation project. vii) Plant Relocation Project: When an organization feels the need to shift its existing plant from the present location to any other suitable place, a project for such shifting is undertaken known as plant relocation project. Similarly, when a company purchases an existing plant within the country or from outside and re-erect/re-install it at its place of business, the project undertaken for the re-erection/reinstallation is considered a plant relocation project KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation Q. What are the Parameters of Project? (8 marks) The primary aim of a project is to deliver a product and/or service to a client within the specified time, budget (resources and cost) and according to the quality and performance specifications. Usually, the clients ask for too much to be delivered within limited resources. Therefore, it is important for the project manager to make the clients aware of the limitations pertaining to time, budget, technicalities, etc., that they are working under. The success of a project depends on the project manager's ability to strike a balance between these interrelated variables or constraints. Some common constraints that influence a project are as follows: 1) Scope: Scope is a brief and accurate description of the end-products or deliverables to be expected from the project that meet the requirements. Scope describes all the activities that are to be performed, resources that will be consumed and the end-products from the successful completion of the project, including the quality standards. The scope also includes the target outcomes, prospective customers, outputs, work, financial and human resources required to complete the project. 2) Quality: Every project has to satisfy the quality requirements at two levels; products quality and process quality. The first quality requirement relates to products resulting from the project and the second relates to the management processes that have to be in place to implement the project. A comprehensive quality management system ensures effective utilization of scarce resources to achieve the project objective of delivering products and/or services to the client's satisfaction. 3) Time: Time is one of the important resources available to a project manager. At the same time, it is one of the major constraints within which a project has to be completed. Generally, the client or the sponsor of the project specifies the time limit for the completion of the project. The time required to complete a project is inversely related to the cost of the project. Therefore, the cost of a project increases as the time available for its completion decreases. Since time cannot be stored as an inventory, it is the duty of the project manager to manage time by carefully scheduling the various activities on time. 4) Cost: Cost plays a major role in the various stages of a project life cycle. Project costs include the monetary resources required to complete the activities mentioned in the scope of the project. Project costs are costs associated with all the activities in the planning and implementation phases. The client or the sponsor of the project prepares a budget based on the estimated costs of various project activities, within which the project manager has to deliver the product. 5) Resources: Resources includes the people, finances and the physical and information resources required to perform the project activities. Q. What are Factors Affecting Project? (8 marks) 1) General Factors i) Lock-outs/strikes/labor unrest, KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation ii) Power cuts, iii) Vagaries of weather conditions. 2) Government Related Factors i) Clearances for projects and for imports, ii) Availability of finances, iii) Statutory clearances, approvals, inspection, testing and other requirements. 3) Site Related Problems i) Land acquisitions and local problems, ii) Inadequate infrastructure facilities. 4) Drawings and Work-front Related Factors i) Delay in release of drawings or release of work-front, ii) Frequent changes and modifications. 5) Problems due to Shortages of Raw Material i) Construction materials such as cement, steel, bricks, etc. ii) Consumables, gas and welding electrodes, iii) Skilled/unskilled manpower. 6) Vendors/Materials Related Factors i) Delay in supply of vendor's information for engineering, ii) Delayed deliveries, iii) Lack of experience due to dependence on indigenous capabilities to reduce imports, iv) Abnormal transportation time/damages during transportation, v) Shortages/damages on receipt at site, vi) Defects in materials identified at site, such as cracks, laminations, leakages, etc. vii) Mismatching/failure/non-performance at site, viii) Spoilage of material during erection and/or storages.

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Entrepreneurship and New Venture Creation 7) Contractors Related Factors i) Lack of previous experience, ii) Inadequate mobilization, supervision, construction tools/tackles, iii) Lack of financial capabilities, iv) Poor site organization, v) Substantial increase in quantities, changes and modifications. 8) Delay due to Interphasing Activities i) Obstructions/interferences, ii) Holds due to erection requirement not visualized during initial planning, iii) Dependence on other contractors works. 9) Problems due to Mid-Stream Changes i) Changes in process design, ii) Changes in project formulation, iii) Mid-stream requirements stipulated by the owner, licensor, etc. 10) Owners Related Factors i) Delay in approval of drawings documents, ii) Delay in release of orders, iii) Financial Problems, iv) Inadequate set-up, and lack of experience, v) Delay in fulfilling owner's obligations. Q. Explain Project Life Cycle (8 marks) The project life cycle is a collection of generally sequential project phases. The number of project phases is determined by the control needs of the project organization. The project life cycle represents the linear progression of a project, from defining the project, through developing a plan, implementing the plan and closing the project. A project life cycle usually specifies: 1) The technical work that must be carried out in various phases of the project. 2) The list of individuals and their roles in each phase of the project. There are four phases of project life cycle: KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation 1) Identification of a Need: This is the first phase of product life cycle. In this phase, project life cycle involves the identification of a need, problem or opportunity and can result in the customer's requesting proposals from individuals, a project team or organizations (contractors) to address the identified need or solve the problem. The need and requirements are usually written up by the customer in a document called a Request for Proposal (REP). Through the RFP, the customer asks individuals or contractors to submit proposals on how they might solve the problem, along with the associated cost and schedule. Not all situations involve a formal REP, however, needs often are defined informally during a meeting or discussion among a group of individuals. Some of the individuals may then volunteer or be asked to prepare a proposal to determine whether a project should be undertaken to address the need. It is important to define the right need. 2) Development of a Proposed Solution: The second phase of the project life cycle is the development of a proposed solution to the need or problem. This phase results in the submission of a proposal to the customer by one or more individuals or organizations (contractors) who would like to have the customer pay them to implement the proposed solution. In this phase, the contractor effort is dominant. Contractors interested in responding to the RFP may spend several weeks developing approaches to solving the problem, estimating the types and amounts of resources that would be needed as well as the time it would take to design and implement the proposed solution. In many situations, a request for proposal may not involve soliciting competitive proposals from external contractors. A company's own internal project team may develop a proposal in response to a management-defined need or request. In this case, the project would be performed by the company's own employees rather than by an external contractor. 3) Implementation of the Proposed Solution: The third phase of the project life cycle is the implementation/performs of the proposed solution. This phase begins after the customer decides which of the proposed solutions will best fulfill the need and an agreement is reached between the customer and the individual or contractor who submitted the proposal. This phase, referred to as performing the project, involves doing the detailed planning for the project and then implementing that plan to accomplish the project objective. 4) Termination of Project: The final phase of the project life cycle is terminating the project. When a project is completed, certain close-out activities need, to be performed, such as confirming that all deliverables have been provided to and accepted by the customer, that all payments have been collected and that all invoices have been paid. An important task during this phase is evaluating performance of the project in order to learn what could be improved, if a similar project were to be carried out in the future. This phase should include obtaining feedback from the customer to determine the level of the customer's satisfaction and whether the project met the customer's expectations. Also, feedback should be obtained from the project team in the form of recommendations for improving performance of projects in the future. Q. What is Project Preparation (2 marks)

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Entrepreneurship and New Venture Creation Project Preparation consists of the entire social, technical and financial work required to ensure that a project is feasible and can be successfully and appropriately implemented. The process ensures the identification and elimination of key risks at the earliest possible time and maximizes development opportunities. The project preparation process consist neg.* assessments, community and stakeholder consultations, identification of funding sources, development" of project concepts, land availability negotiations and agreements, assessments of site suitability (for example slope, geotechnical conditions, bulk service availability), preliminary design, estimates for capital and operational costs and applications to funders or implementation partners. Q. What do you mean by Feasibility Study/Analysis Feasibility literally means whether some idea will work or not. It knows beforehand whether there exists a sizeable market for the proposed product/service, what would be the investment requirements and where to get the funding from, whether and wherefrom the necessary technical know-how to convert the idea into a tangible product may be available, and so on. In other words, feasibility study involves an examination of the operations, financial, HR and marketing aspects of a business on ex ante (before the venture comes into existence) basis. Project feasibility analysis results in a reasonably adequate formulation of the project in terms of location, production technology, production capacity, material inputs, etc., and contains fairly specific estimates of project cost, means of financing, sales revenues, production costs, financial profitability and social benefits. Various dimensions of project feasibility study analyzed throughout different stages of feasibility study in varying degrees of detail, both separately and in relation to others. Thus, a multidimensional feasibility analysis is a vital exercise. If a project is seen to be feasible from the results of the study, the next logical step is to proceed with it. The research and information uncovered in the feasi8ility study will support the detailed planning and reduce the research time. Q, Explain the reasons for Project Evaluation (2 marks) The basic function of project evaluation is to engage in big picture stock-taking, where the most fundamental goals of a project are identified and the extent to which they are being achieved is determined. The implementation of effective evaluations on projects is important for at least three reasons: I) Evaluations force organizations to determine explicitly what it is that they are trying to achieve on their projects. That is, they require managers to identify the core objectives of projects. 2) Evaluations supply feedback on project performance, enabling project staff to determine the degree to which the project is on target. This feedback may show that performance is on track (or even "ahead") or that performance objectives are not being attained. Without such information, managers have little or no idea of whether their projects are doing well or are headed towards failure. When evaluations are carried-out this way, they are called summative evaluations. They summarize actual performance against established performance objectives.

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Entrepreneurship and New Venture Creation 3) Evaluations enable organizations to learn what works and what does not. Based on insights gained through evaluations, managers can adjust the organization's processes to improve organizational performance. Thus, evaluations are a core element of organizational learning. Evaluations that are carried out with a view of providing guidance on future behavior are called formative evaluations. Q. Explain the Basic Principles Governing Project Evaluation (8 marks) Effective mid-project and post-project evaluations strive to follow three basic principles. Each one will be discussed briefly: 1) Objectivity: Evaluation must strive to he as objective as possible. Traditionally, the need for objectivity has been addressed by having evaluators come from outside the group being evaluated. The theory is that by using outsiders, one can avoid conflicts of interest that might arise when they have team members evaluate their own efforts. In other words, strive to avoid having foxes to guard the chicken coop. While the rationale for objectivity may be solid, experience shows that in practice, relying on outsiders to conduct evaluations can lead to problems. Teams being evaluated under such circumstances often express serious concerns about the process, and their concerns have merit. Commonly encountered problems include the following: i) The outside evaluators are unfamiliar with the circumstances the project team is addressing in its work. ii) The project team may be suspicious about who selected the evaluators and what instructions the evaluators have received. iii) The outside evaluators feel compelled to find problems. iv) The outside evaluators are not competent. 2) Internal Consistency: Effective evaluations are conducted in a systematic, logical way. Procedures must be established and followed. Conclusions must map closely to the facts. Without the employment of internally consistent evaluation procedures, the results of the evaluative effort can be viewed to be arbitrary. This is the predictable result of evaluations, where evaluation team members make-up the rules as they go along. 3)Replicability: Ultimately, employment of a consistent, systematic evaluation procedure contributes to the replicability of results. A fundamental principle of good science is that results that are achieved through scientific inquiry must be replicable. If a scientist makes a seemingly great breakthrough, yet no one can replicate the findings, then the scientific community rejects them. Results are held to be reliable only after they can be replicated by others. Q. Explain different types of Project Evaluation (2 marks) There are four major types of project evaluation:

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Entrepreneurship and New Venture Creation I) Pre-Process Evaluation: Pre-process evaluation for the selection of a project to determine if it shows promise to the objectives and overall strategy of the organization or enterprise. 2)Ongoing Project Evaluation: Ongoing project evaluation for measuring the status of a project during its lifecycle. 3)Project Completion Evaluation: Project completion evaluation for an immediate assessment of success upon project completion. 4) Post-Project Evaluation: Post-project evaluation for a down-the-road assessment of project success after the dust and confusion has settled. Q. Explain the Project Evaluation Criteria It is difficult to lay-down any specific criterion to judge a project, whether it has been a success or a failure. It is as under: depends upon the view taken by top management. However, some items that may be considered in this respect 1) Customer Satisfaction: Customer is the target user of project results. A project therefore, may be considered a success if it meets the customers' requirements and passes-on satisfaction this is less tangible and difficult to measure to them. 2) Efficiency: Efficiency in meeting the schedule and the budget, i.e., whether they have been achieved, improved or breached. 3) Commercial Success: A project may be considered a commercial success if it increases yield, reduces throughput time, or adds to the market share of the firm. 4) Future Potential: A project is conceived and implemented to meet certain requirements in future. So, in this respect, the potential of the project like new product, new market, new technology, etc., are important aspects that make it valuable. 5) Alignment with Firm's Objectives: A project should be in harmony with the objectives of the firm. Q. Explain the Methodology of Project Evaluation (8 marks) Evaluation of a project may follow the following steps in sequence: I) Realization of Need: As the first requirement, the planning and execution agency of the project should be convinced about the need and usefulness of evaluation. In its absence, the evaluation is not expected to receive the consideration and emphasis that it requires. 2) Setting-Up Agency: For conducting evaluation the agency may be a permanent body or an ad hoc arrangement. It may consist of internal persons or it may be an independent external agency. Its personnel may be selected from within the organization or they may be from outside. However, the

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Entrepreneurship and New Venture Creation agency should consist of competent persons, capable of conducting an objective evaluation of the project. 3) Selection of Programs: Depending upon the requirement, specific programs and activities of the project should be selected. As the work on a project tends to be less standardized and less amenable to measurement than work in a factory, evaluation tends to be subjective. To avoid such a limitation the following criteria may be used for selecting projects for evaluation: i) The project should be important enough to warrant consideration, in view of expenditure involved in a formal evaluation. ii) The results usually should be quantifiable. iii) The effect of the anticipated variables should be known, at least approximately and they should not significantly affect the results. iv) Results of evaluation should have a good chance of leading to action or guide in decision-making about future projects. 4) Description of Evaluation Programs: The detailed procedure to be followed for evaluation should be specified. In this process, first of all, various programs and activities of the project should be specified in consultation with the technical specialists in the planning and implementation departments of the project. In the second step, measurable and quantifiable aspects should be identified and data to be collected determined. The criteria, norms and yardsticks should be formulated, looking to the programs and activities and the objectives. In the third step, a design of the study/survey should be prepared. The survey may require questionnaires and schedules, selection of sample, beneficiaries', etc., for qualitative and quantitative assessment of the programs, problems, bottlenecks, etc. A framework should be developed for this exercise. 5) Evaluation: For evaluation, essential information should be collected both from primary and secondary sources. The information should be then analyzed and conclusions drawn. The results should be presented in the form of a report. The report may be submitted to the project authority. 6) Follow-Up: Evaluation provides not only an assessment of the work done, but also .useful guidance for the future. The design and scope of evaluation should be considered in this light. Q. What is the Business Plan? (2 marks) A business plan/project plan- is a written document that describes all the steps necessary in opening and operating a successful business. The project is initiated with the preparation of a formal, written master plan. The purpose of this plan is to guide the project manager and team throughout the project life cycle. In simple words, a business plan is a basic document which gives an explicit but precise account of what one has in mind to achieve and, in that context, it defines: What will have to be done? When will be KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation done? How will be done? Who will do? How much will it cost? A business plan/project plan spells-out the principal features and the future prospects of a proposed business. Besides, it provides analyses of and insights into vital issues that are to be attended to and sorted-out with an eye to achieving the ultimate goal. A business plan is a well-defined written argument, based on relevant facts, figures, and estimates. It portrays an overall picture of a business proposal, attempts to justify its technical feasibility as well as commercial success and clear suggested course of actions in distinguished sections. Common sources of project failure such as scheduling and cost overruns could often be avoided if more thought were given to planning. The process of preparing a plan should be thorough and begun early, even before the project is authorized. In most cases, this means that project planning begins during formulation of the project proposal. When management approves the plan it gives the project manager tacit authority to conduct the project in accordance with the plan. Q .Who should write the Plan? (2 marks) The owner of the business should write the plan. It does not matter if the .mission, or provide guidance for running the business. While input for the plan comes from many sources, one individual should be assigned to write the plan. In man agencies, that task is given to the Executive Director. Larger agencies may have a staff member with specific background and skills in the planning area. In some agencies, a volunteer drafts the plan; in others, an outside consultant is hired to perform this task. It is essential for the individual assigned to draft the-plan to be in attendance at each meeting of the Flannin Committee. The drafter submits a draft of each chapter of the plan to the committee. The committee discusses the draft of that chapter at the next committee meeting. There are a number of software packages in addition to this article that can Business Plan Pro, Palo Alto Software are only two of many available. Consultants can be hired to assist in the process of formulating a business plan, a majority of the work. Only the owner can come-up with the financial data, the employees, and management styles etc. Q. Explain Scope of Business Plan (12 marks) 1) Entrepreneur: The entrepreneur is the first individual needing a business plan primarily for the self and the team. The entrepreneur needs a plan to advise; what is aimed to be achieved; who are the individuals constituting the team, sharing the same visions, thought, commitment and belief, what are their strengths, weaknesses and contributions; how large or small is the market now and trajectory and velocity of its movement on a time line of three to ten years; how the product will be introduced and what will be the supply chain model, how will that be managed; how the product, process, or service will be brought into existence, the inputs required; how the competitors will react and how they will be managed; what will be the organizational structure and what are the financial requirements and demands, how they will be fulfilled and what are the financial projections. KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation 2) Investor: Investors represent only one group of audiences of many that have lasting, substantial interest in a business plan. The nature of the investors will be dealt in detail in the relevant section with appropriate nomenclature. For present contextual reference, the term "investor" has been taken loosely to imply the individual investors and institutions providing finances in the form of debt or equity. In present context, these refer to, family, friends, acquaintances, angel investors, venture capital firms, banking and banking institutions, and state and central financing institutions. All these entities have their specific reasons and methodology for assessment of a business plan. 3) Suppliers: The suppliers need a business plan as they shall form one constituency on their own strength which the entrepreneur will be required to satisfy. The suppliers also need the business plan for assessment The objective of their assessment is to determine aspects, other than the one that represents interests and concerns of the investors. The suppliers will be a stakeholder by extending supplies of the raw material or capital goods. In the case or capital goods, the payments may be extended over a period of time. The plan will inform about the possibilities and duration of payments and determination of its amount. 4) Buyers: A buyer's requirement of assessing a business plan is similar to that of a vendor. By agreeing to use a product or a service, especially in case of B2B transactions where these procurements form critical inputs for customers' product, they are putting their success at stake. They need to be assured that the venture which is going to be the supplier of the critical input is worthy of such trust. This is possible to be assessed only by evaluating the business plan. It informs the buyer that the product will be of the quality standard required, has been produced by using the processes inputs required, will be available in quantities required and at the time required. In cases where the buyers extend advances or agree to bear certain project costs, they need to be doubly assured of the venture and the entrepreneur's future intentions. This insight is possible only through the business plan. . 5) Other Stakeholders: Other set of audience that requires a business plan to be available consists of employees, consultants, and regulatory bodies. The employees are concerned mainly-with the future of the venture as their own future is tied to the success or failure of the venture. The consultants have similar concerns. In cases where outside consultancy appointment is an either or situation a business plan determines the decision. In case of a financial advisor it may represent a situation that is in conflict with entrepreneur's goal. The consultant will be privy to financial information and competitive intelligence that is not available outside the venture. The regulatory bodies need a business plan to know the motive and implications of the venture on a number of issues. Q. What are types of Business Plans? (12 marks) I) Start-Up Plan: A start-up plan defines the steps for a new business. It covers standard topics including the company, product or service, market, forecasts, strategy, implementation milestones, management team, and financial analysis. The financial analysis includes projected sales, profit and loss, balance sheet, cash flow, and probably a few other tables. The plan starts with an executive summary and ends with appendices showing monthly projections for the first year.

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Entrepreneurship and New Venture Creation 2) Internal Plans: Internal plans are not intended for outside investors, banks, or other third parties. They might not include detailed description of company or management team. They may or may not include detailed financial projections that become forecasts and budgets. They may cover main points as bullet points in slides (such as PowerPoint slides) rather than detailed texts. 3) Operations Plan: An operations plan is normally an internal plan, and it might also be called an internal plan or an annual plan. It would normally be more detailed on specific implementation milestones, dates, deadlines, and responsibilities of teams and managers. 4) Strategic Plan: A strategic plan is usually also an internal plan, but it focuses more on high-level options and setting main priorities than on the detailed dates and specific responsibilities. Like most internal plans, it would not include descriptions of the company or the management team. It might also leave-out some of the detailed financial projections. It might be more bullet points and slides than text. 5) Growth Plan or Expansion Plan or New Product Plant These plans will sometimes focus on a specific area of business, or a subset of the business. These plans could be internal plans or not, depending on whether or not they are being linked to loan applications or new investment. For example, an expansion plan requiring new investment would include full company descriptions and background on the management team, as much as a start-up plan for investors. Loan applications will require this much detail as well. However, an internal plan, used to set the steps for growth or expansion funded internally, might skip these descriptions. It might not include detailed financial projections for the whole company, but it should at least include detailed forecasts of sales and expenses for the new venture. 6) Feasibility Plan: A feasibility plan is a very simple start-up plan that includes a summary, mission statement, keys to success, basic market analysis, and preliminary analysis of costs, pricing, and probable expenses. This kind of plan is good for deciding whether or not to proceed with a plan, to tell if there is a business-worth pursuing. Q. Explain the Objectives of a Business Plan (8 marks) The objectives of a business plan are as follows: 1) To give directions to the vision formulated by entrepreneur. 2) To objectively evaluate the prospects of business. 3) To monitor the progress after implementing the plan. 4) To persuade others to join the business. 5) To seek loans from financial institutions. 6) To visualize the concept in terms of market availability, organizational, operational and financial feasibility. 7) To guide the entrepreneur in the actual implementation of the plan. KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation 8) To identify the strengths and weakness of the plan. 9) To identify challenges in terms of opportunities and threats from the external markets. 10) To clarify ideas and identify gaps in management information about their business, competitors and the market. 11) To identify the resource that would be required to implement the plan. 12) To document ownership arrangements, future prospects and projected growths of the business venture. Q. How is Business Plan an Entrepreneurial Tool for Success (2 marks) In every business needs a prewritten business plan .Every successful entrepreneur devotes a sufficient' time in preparing a business plan as it acts as entrepreneurial tool. A well-planned and properly designed business is like a ladder to go up. A solid plan must contain all the components which may enable it to be used as a loan seeking package, detailing the financing ideas and pay back possibilities of the venture. For a big venture, the complete plan must be written separately with the specified objectives. For example, separate plan must be prepared for taking loan from the bank, whereas a separate plan should be prepared for stock-exchange. A business plan must take into account the various governmental (state/central) norms which may vary from offices to offices. Sometimes, non-anticipated rules become the main hindrance in the path of progress. On must be very careful in investigating the rules and regulations for obtaining permission for transactions and/or legal advice before soliciting the investors to invest in the venture. It is always better to plan for worst conditions. All the strategies must be planned for the worst conditions before proceeding in a wrong direction. To correct at the beginning stage is easy. However, it become:, impossible at later stage. One must be very careful while drafting the investment proposals. All the implied rules and regulations must be examined before putting a plan form. It is better to take the help of legal expert at the formative stage than approaching them when it is realized that some mistakes have been committed. Q. Explain the benefits of Business Plan (8 marks) Benefits The following are the benefits of a business plan: 1) Analysis of Ideas on a Piece of Paper: Before landing to entrepreneurship one must devote sufficient time to find out the feasibility of the project, market survey, quality of product in demand and short coming. All these things must be recorded in paper only. This will help in correcting the mistakes if committed. An identification of a lack of profit by working out the sales for cost and expenses is far better than realizing it after starting the business. It may help in convincing others. 2) Help in Convincing Others: A well-prepared business plan is an impressive and valuable document for a business. It projects the complete picture of the present and future status of the business. It also

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Entrepreneurship and New Venture Creation provides information about economic analysis, break-even point and productivity. It may work as a catalyst to get confidence. 3) Reduction in Emotional Bias: The systematic planning for completing a business may force one to think properly about the pros and cons of the business, it may help in taking a final decision about starting the business or scraping the 'ideas'. 4) Provide SWOT Analysis: In case the strength (S) and opportunities (0) are fixed, it automatically determines the weaknesses (W) and the threat (T). Once these are done carefully it is very easy to arrive at the conclusion to venture for plan or not. 5) Justify One's Ideas/Plans: A systematic approach may help to turn the exciting ideas into a reality. Good reasoning for the ideas and plans can justify the viability of the project. It can also project idea about the source of support from other parties. 6) Develop Consistent Strategy: The performance of a business depends on the customers' image one wishes, to portray and the futuristic approach. Putting the plan on paper helps to recognize the related component, and make sure their compatibility. All the strategy must be properly thought over, discussed with others., checked and cross checked before putting into action. 7) Achieve One's Commitment: Commitment is very vital for a successful business venture. lt helps as a tool for measuring involvement in the business. It also helps in measuring commitments of one's and others (Those who wish to become the sleeping/working partners) before actually landing for business. A well-planned business reflects the amount of dedication/initiative involved in the proposed plan. Many good ideas remain as ideas only due to lack of commitment. Q. What are the Elements of a Business Plan (8 marks) Almost every business plans differ, but they should include basic information regarding the following areas: I) History and Background: Something must have sparked the idea for business. Describing how entrepreneur. came up with idea can help lenders, investors, and others to understand how business will operate. 2) Goals and Objectives: Business plan should outline short-term, medium-term, and long-term goals. It will describe entrepreneur vision of where they want their company to be in the future. Some entrepreneurs are very clear about what they want to do with their businesses. Others know their shortterm goals, but have not thought further ahead. 3) Products or Services: This part of business plan should describe the products or services the company plans to produce and sell. Entrepreneur should explain how these products or services differ from those already on the market. Highlight any unique feature of the products or services, and explain the benefits customers will receive by purchasing from the company.

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Entrepreneurship and New Venture Creation i) Industry: This section of the business plan should describe the industry entrepreneur will operate in. Things entrepreneur should include in this section are: a) External factors affecting the business, such as high competition or a lack of certain suppliers. b) Growth potential of the industry. c) Economic trends of the industry d) Technology trends that may affect the industry. e) Forecasts for industry growth. ii) Location: The product or service section of the business plan should also describe the location of business. Lenders want to know exactly where business will be because the location of a business is often a critical factor in its success. 4) Form of Ownership: In business, entrepreneur should have a section detailing form of ownership, will provide information relevant to his form of business, such as who are the partners and how many shareholders he have. This section of the business plan is important because each legal form of business has an effect on how the business works and makes profits. If entrepreneur use his business plan to obtain financing, the lender will be interested in this information. i) Management and Staffing: The people who manage the company are critical to its success. The best business plan would not make the company succeed if it is carried out by people who are not capable. The management and staffing section of the business plan should show that entrepreneur and the people who will be working for him have the experience, maturity, and common sense to manage the business well. 6) Marketing: In business plan, entrepreneur will also include information on marketing of business. Entrepreneur will explain who the prospective customers are, how large the market is for the product or service, and how to enter that market. It should also explain how they deal with competition. Entrepreneur should list the company's advantages over the competition. These advantages can include: i) Performance, ii) Price, iii) Quality, iv) Promotion, v) Reliability, vi) Public image or reputation, and vii) Distribution. KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation 7) Current and Projected Financial Statements: The financial section of the plan consists of three elements: 1) Identification of Risks: i) Prospective lenders and investors will want to know what risks the business faces and how entrepreneur plan to deal with them. ii) Financial Statements: A new business must include projected financial statements in its business plan. An existing business must include current as well as projected statements. iii) Funding Request and Return on Investment: Entrepreneur also must indicate how much they need to borrow and how they plan to use the money. Entrepreneur should give investors an idea of how much money they could expect to earn on their investment in the business. Q. What are Format/Outlines of Business Plan (12 marks) In writing a business plan several points must be considered. It should be outlined into several heads: 1) Introductory Page: This is the title or cover page that provides a brief summary of the business plan. The introductory page should contain the following: i) The name and address of the company. ii) The name of the entrepreneur(s), telephone number, fax number, e-mail address, and website address if available. iii) A paragraph-describing the company and the nature of the business. iv) The amount of financing needed. The entrepreneur may offer a package, i.e., stock, debt, and so on. However, many venture capitalists prefer to structure this package in their own way. v) A statement of the confidentiality of the report. This is for security purposes and is important for the entrepreneur. This title page sets out the basic concept that the entrepreneur is attempting to develop. Investors consider it important because they can determine the amount of investment needed without having to read through the entire plan. 2) Executive Summary: This section of the business plan is prepared after the total plan is written. About two to three pages in length, the executive summary should stimulate the interest of the potential investor. This is a very important section of the business plan and should not be taken lightly by the entrepreneur since the investor uses the summary to determine if the entire business plan is worth reading. Thus, it would highlight in a concise and convincing manner, the key points in the business plan. Generally the executive summary should address a number of issues or questions that anyone, pickingup the written plan for the first time, would want to know. KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation i) What is the business concept or model? ii) How is this business concept or model unique? iii) Who are the individuals starting this business? iv) How will they make money and how much? If the new venture has a strong growth plan and in five years expects to be positioned for an Initial Public Offering (IPO) then the executive summary should also include an exit strategy. If the venture is not initially expecting this kind of growth, the entrepreneurs should avoid any discussion of an exit strategy in the executive summary. Any supportive evidence, such as data points from marketing research or legal documents or contracts that might strengthen the case on the above issues, should be included. Under no circumstances should the entrepreneur try to summarize every section of the plan, especially since the emphasis paled on the above issues depends on who is reading the plan. It should be remembered that this section is only meant to highlight key factors and provide a strong motivation to the person holding the plan to read it in its entirety. Key factors for some plans might be the people involved. For example, if one of the entrepreneurs has been very successful in other start-ups, then this person and their background need to be emphasized. If the venture has a contract in hand with a large customer, then this would be highlighted in the executive summary. It is similar to the opening statement a lawyer might make in an important court trial or the introductory statements made by a salesperson in a sales call. 3) Market Analysis/Environmental and Industry Analysis: It proper context by first conducting an environmental analysis to national and international level that may impact the new venture. i) Economy: The entrepreneur should consider trends in the disposable income, and so on. ii) Culture: An evaluation of cultural changes may consider shifts in the population by demographics, for example, the impact of the baby boomers or the growing elderly population. Shifts in attitudes, such as "Buy American", or trends in safety, health and nutrition, as well as concern for the environment, may all have an impact on the entrepreneur's business plan. iii) Technology: Advances in technology are difficult to predict. However, the entrepreneur should consider potential technological developments determined from resources committed_ by major industries or the government. Being in a market that is rapidly changing due to technological development will require the entrepreneur to make careful short-term marketing decisions as well as to be prepared with contingency plans given any new technological developments that may affect the product or service. iv) Legal Concerns: There are many important legal issues in starting a new venture. The entrepreneur should be prepared for any future legislation that may affect the product or service, channel of distribution, price, or promotion strategy. The deregulation of prices, restrictions on media advertising (for example, ban on cigarette ads or requirements for advertising to children), and safety regulations affecting the product or packaging are examples of legal restrictions that can affect any marketing program. All the above external factors are generally uncontrollable. However, as indicated, an awareness and assessment of these factors using KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation some of the sources identified can provide strong support for the opportunity and can be invaluable in developing the appropriate marketing strategy. The process can be visualized as an upside-down pyramid leading to a specific market strategy and objectives. Once an assessment of the environment is complete, the entrepreneur should conduct an industry analysis that will focus on specific industry trends. i) Industry Demand : Demand as it relates to the industry is often available from published sources. Knowledge of whether the market is growing or declining, the number of new competitions and possible Changes in consumer needs are all important issues in trying to ascertain the potential business that might be achieved by the new venture. The demand for the entrepreneur's product or service will require some additional marketing research. ii) Competition: Most entrepreneurs generally face potential threats from larger corporations. The entrepreneur must be prepared for these threats and should be aware of who the competitors are and what their strengths and weaknesses are so that an effective marketing plan can be implemented. Most competitors can be easily identified from experience, trade journal articles, advertisements, websites, or even the yellow pages. The last part of this section should focus on the specific market, which would include such information as who the customer is and what the business environment is like in the specific market and geographic area where the venture will compete. Thus, any differences in any of the above variables that reflect the specific market area in which the new venture will operate must be considered. This information is particularly significant to the preparations of the marketing plan section of the business plan. 4) Description of Venture: The description of the venture should be detailed in this section of the business plan. This will enable the investor to ascertain the size and scope of the business. This section should begin with the mission "Statement or company mission of the new venture. This statement basically describes the nature of the business and what the entrepreneur hopes to accomplish with that business. This mission statement or business definition will guide the firm through long-term decisionmaking. After the mission statement a number of important factors that provide a clear description and understanding of the business venture should be discussed. Key elements are the product(s) or service(s), the location and size of the business, the personnel and office equipment that will be needed, the background of the entrepreneur(s), and the history of the venture. Location of any business may be vital to its success, particularly if the business is retail or involves a service. 5) Production Plan: If the new venture is a manufacturing operation, :a 'production plan is necessary. This plan should describe the complete manufacturing process If some or all, of the manufacturing process is to be subcontracted, the plan should describe the subcontractor(s), including location, reasons for selection, costs, and any contracts that have been completed 6) Operations Plan: All businesses i.e. manufacturing or non-manufacturing should include an operations plan as part of the business plan. This section goes beyond the manufacturing process (when the new venture involves manufacturing) and describes the 'flow of goods and services from production to the customer. It might include inventory or storage of manufactured products, shipping, inventory KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation control procedures, and customer support services. A non-manufacturer such as a retailer or service provider would also need this section in the business plan in order to explain the chronological steps in completing a business transaction. For example, an Internet retail sports clothing operation would need to describe how and where the products offered would be purchased, how they would be stored, how the inventory would be managed, how products would be shipped and, importantly, how a customer would log on and complete a transaction 7) Marketing Plan: The marketing plan is an important part of the business plan since it describes how the product(s) or service(s) will be distributed, priced, and promoted Marketing research evidence to support any of the critical marketing decision strategies as well as for forecasting sales should be described in this section. Specific forecasts for product(s) or service(s) are indicated in order to project profitability of the venture. Potential investors regard the marketing plan as critical to the success of the new venture. Thus, the entrepreneur should make every effort to prepare as comprehensive and detailed a plan as possible so that investors can be clear as to what the goals of the venture are and what strategies are to be implemented to effectively achieve these goals. Marketing planning will be an annual requirement (with careful monitoring and changes made on a weekly or monthly basis) for the entrepreneur and should be regarded as the roadmap for short-term decision-making. 8) Organizational Plan: The organizational plan is important part of the business plan that describes the venture's form of ownership i.e., proprietorship, partnership, or Corporation. the venture is a partnership, the terms of the partnership should be included. If the venture is a corporation, important to detail the shares of stock authorized, share options, as well as names, addresses, and resumes of the directors and officers of the corporation. It is also helpful to provide an organization' chart indicating the line of authority and the responsibilities of the members of the organization. This information provides the potential investor with a clear understanding of who controls the organization and how other members will interact in performing their management functions 9) Assessment of Risk: Every new venture will be faced with some potential hazards, given the particular industry and competitive environment. It is important that the entrepreneur make an assessment of risk in the following manner: i) The entrepreneur should indicate the potential risks to the new venture. ii) The entrepreneur should be a discussion of what might happen if these risks become reality. iii) The entrepreneur should discuss the strategy that will be employed to prevent, minimize, or respond to the risks should they occur. Major risks for a new venture could result from a competitor's reaction; weaknesses in the marketing, production, or management team; and new advances in technology that might render the new product obsolete. Even if these factors present no risks to the new venture, the business plan should discuss why that is the case. 10) Financial Plan: Like the marketing, production, and organization plans, this is an important part of the business plan. It determines the potential investment commitment needed for the new venture and KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation indicates whether the business plan is economically feasible. Generally, three financial areas are discussed in this section of the business plan. First, the entrepreneur should summarize the forecasted sales and the appropriate expenses for at least the first three years, with the first year's projections provided monthly. It includes the forecasted sales, cost of goods sold, and the general and administrative expenses. Net profit after taxes can then be projected by estimating income taxes. 11) Appendix: The appendix of the business plan generally contains any backup material that is not necessary in the text of the document. Reference to any of the documents in the appendix should be made in the plan itself. Letters from customers, distributors, or sub-contractors are examples of information that should be included in the appendix. Any documentation of information i.e., secondary data or primary research data used to support plan decisions, should also be included. Leases, contracts, or any other types of agreements that have been initiated may also be included in the appendix. Finally, price lists from suppliers and competitors may be added. Q How should you Present the Business Plan (8 marks) To ensure that the business plan is actually read through to the end, it should be kept short, without being vague, hiding any information and essential facts. The plan should be arranged sequentially. It should have proper binding and attractive cover, without being flashy. There should be a content page and each section should be numbered. It will enable the reader of the plan to reach any section or refer back to any part of the plan easily. The appendices and annexure should be catalogued with title and the page number. Once it is prepared, it should be edited and at least two readings must be done by individuals other than the plan writer, entrepreneur and entrepreneurial team. In a business plan, abbreviations and jargons should not be used the language must reflect the seriousness of the entrepreneur in the venture. The detailed information such as findings of the market research, balance sheets, and other financial statements should form part of the appendix rather than of the main body. Business Plan Presentation is the way entrepreneur want to present their Business Plan to the perspective investors or to companies with that they plan on doing business with in the future. Tips on Presenting the Business Plan 1) Determine who will be attending ahead of time. 2) Determine how long will have for the presentation. 3) Be sure you have a copy for each attendee. 4) Decide upon whether to use audio visual aids: i) LCD projector and power point slides ii) Flip chart and markers iii) Other methods 5) Practice the presentation in advance . 6) Leave time for questions and for discussion.

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Entrepreneurship and New Venture Creation Q. Explain the Guidelines for Successful Business Plan Implementation (8 marks) For implementing the business plan successfully following point must be considered: 1) Objectives: The objectives should be crystal clear and specifically spelled out, since it is used as are building block for the rest of the implementation plan. For example, let's assume the startup is a small consulting firm. The objective should be tough but reachable, and could read something like this: i) Secure office space and be open for business in three months. ii) Sign three clients within first three months of operations. iii) Sign 10 clients within first year. 2)Tasks: This part details what must be accomplished to achieve the objectives. Include a task manager for each step, so that roles are clearly defined and there is accountability. Enumerate tasks and assignments, these descriptions should be plainly and generally stated; do not get into a step-by-step, micromanaged explanation of how the tasks will be carried-out. Emphasize the expected results associated with these tasks. Continuing with the above example, the tasks section might read like this: i) Secure office space i.e. real estate agent, ii) Obtain licenses and permits, iii) Set-up office phones and computers i.e. Office Manager, iv) Begin recruiting clients i.e. Sales Manager, v) Create marketing collateral i.e. Marketing Manager, vi) Solicit referrals from clients i.e. Relationship Manager. This list is obviously very, specific to this particular firm and is a brief example. Planner may wish to go into more details, assigning tasks to themselves such as obtaining financing, networking with prospective clients, etc. 3) Time Allocation: Each task should be paired with an appropriate timeframe for completion. It should be aggressive but reasonable with the time allocation in order to ensure not just completion but competent work. For assistance in framing this timescale, use a program such as Microsoft Project, or just create the Gantt chart; a helpful tool that shows how long it will take to complete different tasks and in what order the tasks should be finished. 4) Progress: It is necessary to monitoring each task's progress and the completion percentage of each objective. When delays occur, try to get to the root of the problem. Did the person responsible drop the ball? Did they have too many responsibilities to handle? Did a third party, such as a supplier or the bank, KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation fail to hold-up its end of a deal? Adjust the Gantt chart appropriately to account for the delay, and make a note of the previous deadline and the reason it was missed Q How would you Measure Progress of the Business Plan (8 marks) Measuring the plan progress of any business, it is necessary at the first stage that the entrepreneur sets milestones in the business plans. The milestone set should be measurable and be within the overall goal i and objectives of the entrepreneur. Generally, the 'business plans are projected on month to month basis and yearly schedules are drawn on that basis. In some countries, the weekly plans are followed. The progress of the business plan is reviewed at regular intervals say once in a month. The entrepreneur checks the key elements of the business plan along with the important members of the organization. The members of the organization come prepared with current information in time and also additional information of major deviations from the goals outlined in the business plan document. The control elements are: 1) Production Control: The production volumes on day-to-day basis, the production cost are compared. In addition, special issues like process time, downtime and productivity are discussed. 2) Market Control: Information regarding price of sales, matching delivery schedules, credit terms, new customers, market trends and bad debts are discussed. 3) Finance Control: The fund disbursements, pending bills and incomes are discussed. 4) Inventory Control: The actual holding of the inventory in various forms such as raw-materials, spares, in-process inventory and finished goods inventory are discussed and compared with the norms set in the business plan. By controlling inventory the organization can give maximum service to the customers at optimal cost. 5) Quality Control: Depending on the product and requirements of the customers the quality issued are compared to find-out the achievement orientation. 6) Sales Control: Information on units, dollars, specific products sold, price of sales, meeting of delivery dates, and credit terms is useful to get a good perspective of the sales of the new venture. In addition, an effective-collection system for accounts receivable should be set-up to avoid aging of accounts and bad debts. 7) Disbursements: The new venture should also control the amount of money paid-out. All bills should be reviewed to determine how much is being disbursed and for what purpose. Q Why Some Business Plan Fail? (8 marks) 1)Making Financial Projections too aggressive: Many investors skip straight to the financial section of the business plan. It is critical that the assumptions and projections in this section be realistic. Plans that show penetration, operating margin, and revenues per employee figures that are poorly reasoned; internally inconsistent or simply unrealistic greatly damage the credibility of the entire business plan. In KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation contrast, well-reasoned financial assumptions and projections communicate operational maturity and credibility. By accessing and basing projections on the financial performance of public companies in their marketplace, ventures can prove that their assumptions and projections are attainable. 2) Stressing First-Mover Advantage: A business plan must include strategies that demonstrate the venture can and will build long-term barriers around its customers. Simply claiming a first advantage is not compelling in today's funding environment. The methods through which the venture will retain customers should be detailed in the business plan. Such methods could include implementing Customer Relationship Management (CRM) tools, building network externalities (for example, the more people that use the product or service the harder it is for a competitor to penetrate the market), ongoing valueadded services, etc. 3) Presenting Large, Generic Market Sizes: Defining the market size for a venture too broadly provides little to no value for the investor. For example, mentioning the billion dollar markets are generally extraneous since no venture could reap as much in sales in either market. Rather, a more meaningful metric is the relevant market size, which equals the venture's sales if it were to capture 100% of its specific niche of the market. Defining and communicating a credible relevant market size and a plan to capture a significant share within this market is far more powerful and believable to investors. 4) Focusing Too Much on the Venture's Proprietary Technology: While proprietary technology is a significant factor in investment decisions, it is much more important to show how this technology satisfies a large, unfulfilled customer need. Many unsuccessful ventures fail because they do not understand the needs of their customers. Understanding true customer wants and needs, identifying which target markets most exemplify these needs, and outlining a plan to penetrate these markets are critical to fund and execution success. 5) Excluding Successful Companies in the Competitive Analysis: Too many business plans want to show how unique their venture is and, as such, list no or few competitors. However, this often has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough customers need to support the venture's products and/or services. In fact, when positioned properly, including successful and/or public companies in a competitive space can be a positive sign since it implies that the market size is big. It also gives investors the assurance that if management executes well, the venture has substantial profit and liquidity potential. 6)Over Emphasizing Partnerships with Well-Known Companies: Forging partnerships to improve market penetration and/or operations has become commonplace, particularly for "new economy" businesses. The fact is that, regardless of whom the partnership is with, partnerships by themselves have limited value. Rather, what are meaningful are the partnership terms. For example, while it sounds great to have a partnership with Microsoft, Cisco or Yahoo, it is the details of these partnerships that investors find important. The business plan must explain the partnership's equitable terms, the extent to which each partner will improve operations and/or sales, and the structure of the partnership. 7)Focusing too Much on the Future: Investments and valuations for growth companies are based on a firm's projected future performance. However, the best indicator of future performance is past KSOM Notes by Dr. Sneha

Entrepreneurship and New Venture Creation performance, or a venture's past track record. Business plans must show what milestones/accomplishments a venture has achieved. Past success in achieving goals gives investors the confidence that the team will execute in the future. 8)Management Team Inefficiency: The management team section should include biographies of key team members and detail their responsibilities. These biographies should be tailored to the venture's growth stage since different skill sets are needed to launch, grow and/or maintain a venture. A start-up venture should emphasize its management's success launching and growing ventures. On the other hand, a more mature venture should emphasize how team members have successfully operated within the framework of larger enterprises. 9) Asking Investors to Sign an NDA: Most investors will not sign NDAs (Non-Disclosure Agreements). This is because a business strategy and/or concept are typically not confidential. It is possible that a key partnership is confidential, but for the most part the execution of the strategy and concept is what will make the company successful. If the concept and/or strategy must remain confidential, this often implies that there are no barriers to competitive entry. If a competitor or host of competitors can quickly copy the concept, then the business model is probably not sustainable. On the other hand, proprietary technology is confidential. 10) Indiscriminately Incorporating Investor Feedback into the Business Plan: Investors have different tastes. One investor may love a concept and/or business plan while the next may hate both. It is important to understand this as business plans are working documents and are always undergoing iterations

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Notes by Dr. Sneha