Steps to Start a SSI

Preliminary stage Decision making stage Planning stage Implementation stage Managerial stage

STEPS TO START A SSI

Preliminary Stage

Decision to become an entrepreneur and start an enterprise

Developing entrepreneurial characteristics Studying business environment Meeting entrepreneurs, people, experts and

others. Searching business opportunities.

Decision making stage

Selecting business opportunities Consulting DIC, consultants, banks, licensing

authorities Final selection of business opportunity Deciding the size, type, technology etc of the project. Preparation of project report Studying the project from technical, financial,

managerial and operational point of view. Selection of exact site. Decide the product policy, pricing and marketing

policy.

Planning Stage Application for acquisition of land or exact site. Application for provisional registration, NOC,

assurance from banks for finance. Application for licenses, permissions, clearance from

state/central government and local authorities. Application for loans and arrangement of capital. Preparing plans of factory buildings, acquiring plants

& machineries, furniture & fittings etc. Prepare the detailed project report.

Implementation Stage

Acquisition of land and development of site. Construction of buildings and infrastructure. Placing orders for plants and machineries, tools &

equipments etc. Arranging electricity, water connection. Installation of plants & machineries. Recruitment, selection, training & placement of

manpower. Procurement of raw materials. Carry on trial production & test marketing.

Managerial stage Evaluate the field performance of product and

examine the consumer’s response. Appoint dealers, wholesalers, agents,

arrange showrooms etc. Carry on commercial production, advertising

and marketing activities. Managing enterprise Ensure growth and generate profits. Repayment of loan & interest

GOVERNMENT POLICIES FOR SSI

All the SSI are started and managed as per the rule applicable to the state as devised by the respective State Government.

Every state has its own industrial policy to attract the entrepreneurs to start industries.

Govt. policies are flexible and change from time to time, place to place and product to product.

Policies of State Govt. All state govt. have opened DIC in all districts of the

country as per the guidance of the central govt. They are created for the industrial development of

the district. All SSIs are to be registered with the local DIC and

can start the operation. No large scale formalities are needed to start an

SSI Industrial corporations specifically created to

provide services to SSI have also been created to provide other support services to SSIs.

Ex- Readymade industrial sheds are available to the entrepreneurs to start SSI where all the facilities are made available by the govt.

Industrial estates are created by the state govt. where industrial plots are available to the entrepreneurs at concessional rates where facilities like road, electricity, water etc are available.

An entrepreneur is forced to start a SSI anywhere but if it is started in an industrial estate, pollution control board certificate is not required.

Industrial plots are available at concessional rates

Registration charges are also less. Commercial banks provide easy finance to the

SSI on easy terms. Interest subsidies on term loans& working capital

loans. Subsidies on purchase of plant and machineries

are allowed for establishing industries in backward areas.

Special subsidies for priority industries:

Sales tax exemptions/concessions. Electricity duty exemption/concession. Assistance for procurement of plants &

machineries, raw materials etc. Subsidy on expenses made on R & D. Subsidy on acquiring quality certificates like ISI

mark, AG mark, ISO 9000 etc. Help in providing consultancy services, information

relating to plant & machineries.

It has created many institutions for extending different facilities and benefits to SSI like SIDBI, IDBI.

Allow subsidy for use of energy conservation measures.

Helps in procuring domestic and imported machineries for SSI.

Extend help in expansion, modernization, upgradation etc. of SSI.

Facilities by Central Govt.

Provide free consultancy and technical support services.

Govt. has reserved about 800 items to be produced only by small scale sector.

Special interest subsidy for women entrepreneurs.

Provide training facilities for the workers and entrepreneurs on various technical aspects of their products.

PROJECT IDENTIFICATION

IDENTIFICATION OF A PROJECT

Entrepreneur has to decide what is his goal, what he has to do.

He needs a good business idea on which he can start a project.

Project identification is a tough task. Identification & selection of a project depends

upon strength, weakness, preference, likes, dislikes, capabilities, skill, talent etc, of the person.

He needs to move around in different markets to collect ideas and gain experience on different businesses.

Project identification is nothing but searching business ideas on which a person can make an enterprise of his own and run it smoothly.

A business opportunity should have 5 components:

An assured market scope.An attractive rate of return on investment.Practicability of the idea.Competence of the entrepreneur.Assurance for future growth.

SEARCHING & SELECTING BUSINESS OPPORTUNITIES

He must be careful about the look-alikes opportunities.

He requires good visionary power as business opportunities are not visible to all.

He has to concentrate his vision on: the population of area, taste, fashion, requirement, preferences, likes, dislikes, standard of living, income level etc.

Study the resources of the area. Know the demand, supply position, market

trend, reaction of dealers, producers about various products and their services.

Possibility of any business opportunity due to ancillary or substitute product to any industries.

Is any opportunity is available in service sector.

These information must be analyzed minutely and best suited alternative must be selected.

ASSESSMENT OF VIABILITY

Market ViabilityTechnical ViabilityFinancial ViabilitySocial & Environmental Viability

MARKET VIABILITY

A feasibility study relating to the market of the product has to be conducted.

A product shall be considered viable if it will have : assured quantity of customersStay in market fairly for a long period of time.Fair rate of return to the projectEdge over other products in the marketFuture growth prospects.

The study should reveal good market scope of the product.

Study the present & future demand & supply position.

Expected level of competition, position of similar products.

Consumers, their location, behavior, characteristics. Are consumers satisfied with existing products? Reaction of competitors, dealers & others to new

product. What is the price & T& C of sale?

TECHNICAL VIABILITY

1. Study of technology

2. Cost of technology

3. Availability of technology

4. Permission to use such technology

5. Advantages of it in comparison of other technologies

6. Cost of installing & maintaining the technology

7. Rate of change of technology

8. Durability

9. Government policies on such technologies.

10. Plant capacity

11. Product Mix

12. Technical Know-how: The consultant providing technical know-how should have requisite knowledge and experience to execute similar projects successfully. If the project promoter has entered into agreement with foreign collaborators, T&C of it should be mentioned clearly.

13. Plant layout: is the arrangement of various production facilities within production area.

14. Location and Site: Proximity to Raw Materials and Markets Availability of Infrastructure: Labor Governmental Policies Availability of supporting (ancillary) units Site Selection

FINANCIAL VIABILITY Calculate the entire amount of fund required Entrepreneur’s capability to arrange that amount

of fund. Amount invested may lead to over-capitalization

or under-capitalization. Pay -back period of the project. Calculation of various ratios.

SOCIAL & ENVIRONMENTAL VIABILITY

Study of the impact of the project on the society. Impact on the people, their health, economic,

social and cultural status. Is project socially harmful? Is project going to protect social interest of people Is it going to cause any environmental hazard?

PROJECT FINANCING

Most important ingredient of a project It is needed not only to complete project but

also to manage day-to-day activities. Requirement of finance depend on the type of

project, size of project, volume of production, technology involved etc.

Financial planning is important. Prepare financial budget to know how much

money is required and when .

SOURCES OF FINANCE

1. Investment made by entrepreneur from his own sources/savings.

2. Loans & assistance from friends & relatives

3. Loans & advances from banks and financial institutions. (Term Loans)

4. Shares and debentures.

5. Deferred Credit: the suppliers of plant and machinery offer a deferred credit facility under which payment for the purchase of the plant and machinery can be made over a period of time.

6. Capital investment subsidy: government provides subsidy for setting up of industries. Area subsidy: is available for projects set up in notified backward

areas. The quantum of capital investment subsidy is in range of 15% to 20 % on the investment on fixed assets.

Product subsidy: is available for projects that manufacture specified products. A project can avail only one subsidy either area or product subsidy.

7. Lease financing: Lease is a contract whereby the lessor (the owner of an asset) gives to the lessee (the user of the asset) the right to use the asset, usually for an agreed period of time, in return for the consideration of periodical payments by the lessee to the lessor called, lease rentals.

8. Purchase of plant & machinery on hire-purchase or installment basis.

CAPITALIZATION

The entire amount of fund to be invested in an enterprise is known as capital.

Amount invested in fixed assets is known as block capital

Capital utilized on day to day basis is known as working capital.

Entrepreneur should make sure that adequate amount of capital is inducted into the business.

Over -CapitalizationIf the entrepreneur raises excess capital than the

required amount in relation to the rate of earning.

Causes:1. Mismanagement of funds

2. Idleness of investment

3. Unnecessary investment

4. Improper financial planning

5. Excessive dependence on others.

6. Irrational financial decisions

7. Easily availability of fund

8. Extravagant nature of the entrepreneur

Demerits of Over-Capitalization

Reduction in rate of return on investment Unnecessary blockage of fund. Financial mismanagement Reduction in reputation Reduction in market value of shares. Financial weakness Lose business to competitors Higher chance of misappropriation Ineffective utilization of resources

Under-CapitalizationIf an entrepreneur invests inadequate or less

amount of capital than required in relation to the earning capacity. Causes:

1. Scarcity of fund

2. Non-availability of external debt

3. Lack of creditworthiness

4. Excessive financial control

5. Over valuation of investment proposals.

Benefits Best possible utilization of fund Rate of return is high in relation to similar

industries. Increase the market value of equity shares. Increase in Earning per share Reduced dependence on external finance Increase goodwill Higher dividends for investors

Demerits

Higher rate of profits will attract competition There may be demand for more bonus &

wages Higher profits will attract higher taxes. More speculation in stock market.