Author: indiafreenotes

Overall Maximum and Minimum Remunerations Legal Restrictions:

The Companies Act provides some restrictions on the managerial remuneration provided by a private company (a subsidiary of a public company) or a public company.

These restrictions are enumerated:

(a) Maximum Limit:

According to Sec. 198 of the Companies act, the total managerial remuneration payable by a public company or a private company—which is subsidiary of a public company—to its directors and its managers in respect of a financial year computed in the manner laid down in Sections 349, 350 and 351— except that the remuneration of the directors shall not be deducted from the gross profit.

Explanation:

‘Remuneration’ includes (as per Sections 309, 311, 348 and 387):

(a) Any expenditure incurred by the company in providing any rent-free accommodation or any other benefit or amenity in respect of accommodation free of charge, to any of the persons aforesaid.

(b) Any expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the persons aforesaid.

(c) Any expenditure incurred by the company in respect of any obligation or service, which, but for such expenditure by the company, would have been incurred by any of the persons aforesaid;

(d) Any expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for any of the person aforesaid or his spouse or child.

It is to be noted that according to Sec. 200 of the Companies’ Act, 1956, no company can now pay to any of its officer or employees remuneration, fee or any tax or varying with any tax payable by him.

(b) Minimum Limit:

According to Sec. 198 (Subsection 4) of the Companies (Amendment) Act, 1988—subject to the provisions of Sec. 269 (Schedule XIII)—a company shall not pay to its Directors (including any managing or whole time Director or manager) by way of remuneration any sum exclusive of any fees payable to Directors under Sec. 309 (2) except with the previous approval of the Central Government, if the company has inadequate profits or no profits in any financial year. This is subject to the of Sec. 209 (which deals with appointment of managing or whole time Director or manager) read with Schedule XHL

Remuneration to Directors:

The remuneration to Directors is governed by Sec. 309 of the Companies Act, which is to be determined by – the Articles or by the resolution (special resolution if the articles so require).

Fees may be payable by the articles for attendance of the meeting of the board or committee subject to:

(a) A whole-time or managing director may be paid remuneration by way of monthly pay and/or specified percentage of net profit of the company (not exceeding 5% where there is only one such director, and not exceeding 10% in all where there are more than one whole-time director).

(b) A part-time director (i.e., not whole-time or managing director) may be remunerated either by way of monthly, quarterly or annually (with the approval of the Central Government or by way of commission (if the company by special resolution authorizes) not exceeding 1% for all such Directors, Secretaries, Treasurers or Managers and not exceeding 3% for all such Directors in other cases, or at higher percentage with the approval of the Central Government.

(c) Any whole-time or managing director shall not be entitled to receive any commission from any subsidiary of such company.

(d) The special resolution shall remain in force for a maximum period of 5 years. It may, however, be renewed, from time to time, by a special resolution for further periods of 5 years but no renewal can be effected earlier than 1 year from the date on which it is to come into force.

(e) A Director may be paid fees for attending each meeting of the Board or a committee thereof attended by him.

(f) If any Director receives any sum in excess of remuneration due to him, he shall keep the excess amount in trust for the company and shall refund it to the company. The company, however, cannot waive the recovery of any such sum.

(g) The above rules shall not apply to a private company unless it is a subsidiary of a public company.

(h) Prohibition of tax-free payment. A company shall not pay any officer or employee remuneration free of tax (Sec. 200).

(i) The net profit for the purpose of Directors’ remuneration shall be computed as per prescribed manner laid down in Sections 349 and 350 without deducting the Directors’ remuneration from the gross profit.

However, Sec 310 of the Companies Act, 1956, provides that any increase in remuneration of any Director of a public company or a private company which is a subsidiary of a public company, shall not be valid:

(i) In case where Schedule XIII is applicable (unless such increase is as per the conditions specified in that Schedule) and

(ii) In any other case, unless the same is approved by the Central Government.

Sec. 309 does not apply to a private company unless it is a subsidiary of a public company.

It should be noted that the remuneration payable to a director shall include all remuneration payable to him for services rendered in any other capacity unless the services are rendered in professional capacity and the director possesses the requisite qualifications for the practice of the profession in the opinion of the Central Government.

Remuneration to Manager:

According to Sec. 2 (24), ‘Manager’ means an individual who has the management of the whole or substantially the whole of the affairs of a company. He is actually subject to the superintendence, control and directions of the Board of Directors. Thus, ‘Manager’ includes a director or any other person accompanying the position of a manager—by whatever name called.

A company cannot have more than one manager at a time

The remuneration to manager is governed by Sec. 387 of the Companies Act. The manager of a company may receive remuneration by way of a monthly payment and/or by way of a specified percentage on net profit calculate according to Sees. 349, 351 provided that such remuneration shall not exceed in the aggregate of 5% of the net profit without the approval of the Central Government— Sec. 387.

The provisions do not apply to private company unless it a subsidiary of public company.

To Sum Up:

It has already been highlighted above that the Companies Act provides certain restrictions on managerial remuneration (the same is not, however, applicable to a private company which is not a subsidiary of a public company.)

Method of Computation of ‘Profit’ for Calculating Managerial Remuneration:

General Illustrations:

Computation of Managerial Remuneration under Different Conditions:

Illustration 1:

From the following Profit and Loss Account of X Ltd. compute the maximum permissible managerial remunerations under each of the following conditions:

(a) When there is only one whole-time Director

(b) When there are two whole-time directors

(c) When there are two whole-time Directors, a part-time director and a manager

(d) When there is only a part-time Director and no whole-time directors.

Calculation of Maximum Managerial Remuneration:

(a) When there is only one Director:

As per Sec. 349 of the Companies Act, where there is only one Director the maximum limit of managerial remuneration will be @ 5% of the net profit. So, the Managerial Remuneration will be Rs.1, 46,650 (i.e. Rs.29, 33,000 x5/100)

(b) When there are two Whole-time Directors:

The Maximum limit of managerial remuneration will be @ 10% of net profit i.e. Rs.2,93,300 (i.e. Rs. 29,33,000 x 10/100)

(c) When there are two Whole-time Directors, a Part-time Director and a Manager

Under the circumstances, the maximum limit of managerial remuneration will be @ 11% of Net Profit.

So, the Managerial Remuneration will be Rs.3, 22,630. (i.e. Rs.29, 33,000 x11/100).

(d) When there is only a Part-time Director and no Whole-time Director:

The maximum limit of managerial remuneration in this case will be only @ 1% of net profit. So the managerial remuneration will be Rs.29, 330 (i.e. Rs.29, 33,000 x 1/100).

1. Finances

We are all bustling with ideas that are unique and can make for an amazing business start-up. But no matter how good your idea is, you will always need stable finances and funding from the investors to begin the process and take the first step towards your journey of entrepreneurship.

And getting a sound financial investment or funding can be one of the biggest Barriers to Entrepreneurship as many of banks, private investors, angel investors, and organizations find it quite difficult to believe in the start-up ideas owing to the risk of failure and losing their money.

2. Fear of not to be a success

We all go through the fear of failure. And if the fear is associated with the risks and stakes taken in the stream of business and entrepreneurship, the level of fear elevates.

There is a fear if we are on the right track, is the idea worthwhile, will there be profit, will I find investors, and various such fears and tensions act as the Barriers to Entrepreneurship.

3. No strategic plan in place

Lack of proper planning and strategy in place is one of the most common Barriers to Entrepreneurship. Many of us think to build a business out of a hobby without having any sort of long term and short term vision and plan in mind.

Running a fully-fledged business or being an entrepreneur requires a huge amount of skill set, passion for excelling, strategic vision, the mission to accomplish the goals, market research, and a lot more.

Right from the target market, finances, human resources, to a proper strategic plan is required to build a successful business or a brand in the market.

4. Human resource issues

Entrepreneurs cannot handle and run a business alone by themselves. We require the support of human resource to carve a niche in the market.

Employees with the required knowledge, expertise, and experience are needed for the efficiency of the business processes and high levels of productivity.

First of all, it is quite difficult to find the employees that share the same vision and wavelength of the business. Plus paying a hefty annual or even a monthly retainer income is a problem of the start up’s as the finances at hand are always limited, and the overheads and expenses are also to be taken care of.

And secondly, it is also difficult to manage human resources as each of us work with a different mindset and perspective. Hence, human resources and employees can be as one of the Barriers to Entrepreneurship.

5. Stringent rules and regulations of the market

It is not very easy for entrepreneurs to enter the new market as there are quite many rules and regulations imposed by the government authorities.

Plus there are various laws and compliances to be adhered to such as taxation, environmental regulations, licenses, property rights, and much more than act as the Barriers to Entrepreneurship.

Some of the countries have many corrupt officials that act as a hindrance for the new entrepreneurs and start-up brands to start or expand their business in the new market. And if the brand is planning to expand its business operations in any of the foreign countries, it gets even more difficult.

6. Fewer opportunities

Even though there is a lot of talent pool in the market with the aspiring entrepreneurs buzzing with the ideas, but the opportunities presented to them are quite less and fewer.

Reasons such as nepotism and corruption act as the Barriers to Entrepreneurship with not many vital and lucrative opportunities.

7. Lack of capacity

Even if there are opportunities presented to the aspiring entrepreneurs, there is a lack of capacity in some them to embrace the opportunities with open arms. The reasons can vary from lack of knowledge, lack of education, lack of willingness, lack of strategic knowledge, and cultural hindrances amongst others; but the factor of motivation and zeal gets missing.

To start a new business venture amidst all the risks and market-related issues, it requires a lot of hard work, passion, and high capacity to handle all of it.

8. Less market experience

The experts always mention that one should never rush in setting up a business. It is quite necessary to gain a relative amount of work experience by working in the industry domain or sector of choice and as per the education levels. It also helps to sharpen the required expertise and find the ground in the career graph.

Once the person is ready to take risks and have a relative amount of market exposure, he is ready to take the entrepreneurial plunge.

9. Lack of risk-taking capacity

It is always said that entrepreneurs never sail in safe waters and are never confined to their comfort zones. Lack of risk-taking capacity is the psychological mindset and perspective towards the business and acts as one of the major Barriers to Entrepreneurship.

The budding entrepreneur has to have a structured and organized approach towards the various business elements and should risks rather than averting them.

10. Corrupt business situations

As mentioned earlier, if the business situations and the environment are not very supportive and corrupt for the young and aspiring entrepreneurs, it acts as one of the top Barriers to Entrepreneurship.

Bribing, rampant corruption, unfriendly ties of government with other nations, inconsistent laws, stringent compliances, and enforcing regulations that are unhealthy and negative in their approach hamper the growth of businesses in the country.

Russia is one of the examples of having an unhealthy and unsupportive business environment.

11. Inadequate training

With no proper education, development, training, entrepreneurial skills, and technical know-how acts as the Barriers to Entrepreneurship.

12. Lack of practical knowledge

Having a strong educational background is just not enough to pursue business as it requires practical knowledge as well to stay relevant amidst the various market cycles. And many entrepreneurs lack practical knowledge.

The competencies may be classified into following categories:

1. Personal entrepreneurial competencies
2. Venture initiation and success competencies

a) Enterprise launching competencies

b) Enterprise management competencies

1. Personal Entrepreneurial competencies

It is the personal characteristics of an individual who possess to perform the task effectively and efficiently.Personal entrepreneurial competencies include the following:

a) Initiative

The entrepreneur should be able to take actions that go beyond his job requirements and to act faster. He is always ahead of others and able to become a leader in the field of business.He Does things before being asked or compelled by the situation and acts to extend the business into new areas, products or services.

b) Sees and acts on opportunities

An entrepreneur always looks for and takes action on opportunities. He Sees and acts on new business opportunities and Seizes unusual opportunities to obtain financing, equipment, land, work space or assistance.

c) Persistence

An entrepreneur is able to make repeated efforts or to take different actions to overcome an obstacle that get in the way of reaching goals. An entrepreneur takes repeated or different actions to overcome an obstacle and Takes action in the face of a significant obstacle.

1. d) Information Seeking

An entrepreneur is able to take action on how to seek information to help achieve business objectives or clarify business problems.They do personal research on how to provide a product or service.They seek information or ask questions to clarify what is wanted or needed.They personally undertake research and use contacts or information networks to obtain useful information.

e) Concern for High Quality of Work

An entrepreneur acts to do things that meet certain standards of excellence that gives him greater satisfaction. An entrepreneur states a desire to produce or sell a top or better quality product or service. They compare own work or own company’s work favourably to that of others.

f) Commitment to Work Contract

An entrepreneur places the highest priority on getting a job completed.They make a personal sacrifice or take extraordinary effort to complete a job.They accept full responsibility for problems in completing a job for others and express concern for satisfying the customer.

g) Efficiency Orientation

A successful entrepreneur always finds ways to do things faster or with fewer resources or at a lower cost.They look for or finds ways to do things faster or at less cost.An entrepreneur uses information or business tools to improve efficiency. He expresses concern about costs vs. benefits of some improvement, change, or course of action.

h) Systematic Planning

An entrepreneur develops and uses logical, step-by-step plans to reach goals.They plan by breaking a large task into subtask and develop plans,then anticipate obstacles and evaluate alternatives.They take a logical and systematic approach to activities.

i) Problem Solving

Entrepreneurs identify new and potentially unique ideas to achieve his goals.They generate new ideas or innovative solutions to solve problems and they take alternative strategies to solve the problems.

j) Self-Confidence

Entrepreneur with this competency will have a strong belief in self and own abilities.They express confidence in their own ability to complete a task or meet a challenge.They stick to their own judgment while taking decision.

k) Assertiveness

An entrepreneur confronts problems and issues with others directly.Entrepreneur with this competency vindicate the claim to asset their own rights on others.They demand recognition and disciplines those failing to perform as expected.They asset own competence,reliability or other personal or company’s qualities.They also assert strong confidence in own company’s or organization’s products or service.

l) Persuasion

Entrepreneurs with this competency successfully pursue others to perform the activities effectively and efficiently.An entrepreneur can persuade or influence others for mobilizing resources, obtaining inputs, organizing productions and selling his products or services.

m) Use of Influence Strategies

An entrepreneur is able to make use of influential people to reach his business goals.Entrepreneurs with this competency influence the environment (Individuals/Institution) for mobilizing resources organizing production and selling goods and services to develop business contacts.

n) Monitoring

Entrepreneurs with this competency normally monitor or surprise all the activities of the concern to ensure that the work is completed by maintaining good quality.

o) Concern for Employee Welfare

Entrepreneurs with this competency take action to improve the welfare of employees and take positive action in response of employee’s personal concerns.

2. Venture Initiation and success Competencies

In addition to personal competencies Entrepreneur must also possess the competencies required to launch the enterprise and for its growth and survival.

It is further divided into two categories of competencies:

1. Enterprise launching competencies
2. Enterprise management competencies

1)  Enterprise launching competencies

• Competency to understand the nature of business

-To analyse the personal advantage of owning a small business.

-To analyse the personal risks of owning a small business.

-To analyse how to maximize the opportunities and minimize the risks of owning a business.

• Competency to determine the potential as an entrepreneur

-To consider the personal qualification and abilities needed to manage own business.

-To evaluate the own potentials for decision-making,problem solving and creativity.

-To determine own potential for management,planning,operations,personnel and public relations.

• Competency to develop a business plan

-To identify how a business plan helps the entrepreneur.

-To recognize how a business plan should be organized.

-To identify and use the mechanisms for developing a business plan.

• Competency to obtain technical assistance

-To prepare for using technical assistance.

-To select professional consultants.

-To work effectively with consultants.

• Competency to a choose the type of ownership

-To analyse the type of ownership of business.

-To follow the steps necessary to file for ownership of the business.

-To define politics and procedures for a successful multi-owner.

• Competency to plan the market strategy

-To use goods classification and life cycle analysis as planning tools for marketing.

-To develop and modify marketing mixes for a business.

-To use decision making tools and aid in evaluating marketing activities.

-To evaluate operations to improve decision making about marketing.

• Competency to locate the business

-To analyse customer transportation,access,parking and so forth. i.e. relative to alternative site locations.

-To complete a location feasibility study for the business.

-To determine the cost of renovating or improving a site for the business.

-To prepare an occupancy contrast for the business.

• Competency to finance the business

-To describe the source of information available to help in estimating the financing necessary to start a new business.

-To determine the finance necessary to start a new business.

-To prepare a project profit and loss statement and a projected cash flow statement for the new business.

-To prepare a loan application package.

• Competency to deal with the business

-To determine the need for legal assistance.

-To select the provisions that is desired in the lease.

-To prepare sales contract(such a s credit sales or long term sales) that may be utilized in the contracts

-To evaluate contracts.

-To determine the need for protection of ideas and intentions.

• Competency to comply with government regulations

-To appraise the effects of various regulations on the business operations.

-To acquire the information necessary to comply with the various rules and regulations affecting the business.

-To develop policies for the business to comply with the Government rules and regulations.

2) Enterprise Management Competencies

• Competency to manage the business

-To plan goals and objectives for the business.

-To develop a diagram showing the organizational structure for the business.

-To establish control practices and procedures for the business

• Competency to manage human resources

-To plan goals and objectives for the business.

-To develop a diagram showing the organizational structure for the business.

-To establish control practices and procedures for the business.

• Competency to manage human resources

-To write a job description for a position in the business.

-To develop a training programme online for employees.

-To develop a list of personnel for employees in the business.

-To develop an outline for an employee evaluation system.

-To plan a corrective interview with an employee concerning a selected problem.

• Competency to promote the business

-To create a long-term promotional plan.

-To describe the techniques used to prepare advertising and promotion

-To analyse competitive promotional activities.

-To evaluate promotional effectiveness.

-To plan a community relations programme.

• Competency to manage sales efforts.

-To develop a sales plan for the business.

-To develop policies and procedures for serving the customers.

-To develop a plan for training and motivating sales people.

• Competency to keep business records

-To determine who will keep the books for the business and how they will be maintained.

-To describe double-entry bookkeeping.

-Select the types of journals and ledges that you will use in the business.

-To identify the types of records that will be used in the business to record sales,cash receipts,cash disbursements,accounts receivable,accounts payable,payroll,petty cash,inventory,budgets and other items.

-To evaluate the business records.

-To identify how a micro-computer may be used to keep he business records.

• Competency to manage the finances

-To explain the importance of cash flow management.

-To identify financial control procedures.

-To describe how to find cash flow patterns.

-To analyse trouble spots in financial management.

-To describe how to prepare an owner’s equity financial statement.

-To analyse financial management ratios applicable to a small business.

-To identify the components of break even point problem.

-To review microcomputer application for financial management.

• Competency to manage customer credit and collection

-To analyse the legal rights and resource of credit guarantors.

-To develop a series of credit collection reminders and the follow up activities.

-To develop various credit and collection policies.

-To prepare a credit promotion plan.

-To discuss information resources and systems that apply to credit and collection procedures.

• Competency to protect the business

-To prepare policies for the firm that will help minimize losses due to employee theft, vendor theft, bad cheques, shoplifting, robbery, injury or product liability.

The Entrepreneur is a change agent that acts as an industrialist and undertakes the risk associated with forming the business for commercial use. An entrepreneur has an unusual foresight to identify the potential demand for the goods and services.

The entrepreneurship is a continuous process that needs to be followed by an entrepreneur to plan and launch the new ventures more efficiently.

Entrepreneurial Process

1. Discovery: An entrepreneurial process begins with the idea generation, wherein the entrepreneur identifies and evaluates the business opportunities. The identification and the evaluation of opportunities is a difficult task; an entrepreneur seeks inputs from all the persons including employees, consumers, channel partners, technical people, etc. to reach to an optimum business opportunity. Once the opportunity has been decided upon, the next step is to evaluate it.

An entrepreneur can evaluate the efficiency of an opportunity by continuously asking certain questions to himself, such as, whether the opportunity is worth investing in, is it sufficiently attractive, are the proposed solutions feasible, is there any competitive advantage, what are the risk associated with it. Above all, an entrepreneur must analyze his personal skills and hobbies, whether these coincides with the entrepreneurial goals or not.

2. Developing a Business Plan: Once the opportunity is identified, an entrepreneur needs to create a comprehensive business plan. A business plan is critical to the success of any new venture since it acts as a benchmark and the evaluation criteria to see if the organization is moving towards its set goals.

An entrepreneur must dedicate his sufficient time towards its creation, the major components of a business plan are mission and vision statement, goals and objectives, capital requirement, a description of products and services, etc.

3. Resourcing: The third step in the entrepreneurial process is resourcing, wherein the entrepreneur identifies the sources from where the finance and the human resource can be arranged. Here, the entrepreneur finds the investors for its new venture and the personnel to carry out the business activities.
4. Managing the company: Once the funds are raised and the employees are hired, the next step is to initiate the business operations to achieve the set goals. First of all, an entrepreneur must decide the management structure or the hierarchy that is required to solve the operational problems when they arise.
5. Harvesting: The final step in the entrepreneurial process is harvesting wherein, an entrepreneur decides on the future prospects of the business, i.e. its growth and development. Here, the actual growth is compared against the planned growth and then the decision regarding the stability or the expansion of business operations is undertaken accordingly, by an entrepreneur.

The entrepreneurial process is to be followed, again and again, whenever any new venture is taken up by an entrepreneur, therefore, its an ever ending process.

Entrepreneurship is a process of turning market gaps into concrete results by putting the following things in place:

Step 1. Idea Generation:

To kick start operations, entrepreneurs must be imbued with rich ideas that can work. In order to generate ideas, entrepreneurs need to have an eye for detail. They should keep a close watch over changing trends in the market place and identify gaps that can be prof­itably exploited.

Step 2. Nature of Business:

The entrepreneur should be clear about the nature of type of business that he wants to be in:

1. What type of business- Wholesale or retail, independent or fran­chise business or simply a trading business.
2. What to offer- Products or services or a mix of both; he wants to trade in these or wants to produce and distribute.
3. In Which sector- Entertainment, construction, software, hardware, fashion, etc.
4. Is it a profitable business or a risky one -Carefully studying the prospects of chosen business. He needs to calculate the gains, the challenges ahead and the type of risks that exist and the viability of business in the long run.
5. Whether inputs, resources and requisite manpower available- It is better to carry out a feasibility study of everything beforehand.
6. Whether the idea will actually work or not- To this end, he has to conduct a feasibility study examining the pros and cons of everything.
7. Prepare the business plan and move ahead with other steps that follow the decision.

Step 3. Determine the Size and Scale of Operations:

The entrepreneur should be clear about what kind of sales could be generated at different price points. He should plan for a volume that recovers his costs fully and generates enough profits for survival initially. Then he can think of expanding volumes, size and scale of operations. A gradual step by step, trial and error process is what most market experts suggest. Rushing into catch a temporary wave of demand created by artificial mismatch between demand and supply might eventually put a very good business also on the stretcher.

For a budding small business venture, size should not be a fascinating option unless the market is totally ignored, unexplored or underserved (like it happened in the case of iodized salt, vegetarian tooth paste, low priced but reasonable quality detergents; multigrain wheat flour, etc.) The size and scale of operations chosen must be in sync with what the entrepreneur has in terms of available capital and other resources at his command.

Step 4. Select a Place for Business:

The entrepreneur must pick up a location that is closer to all the inputs, resources and materials that the business would require. Availability of manpower and transport links also need to be looked into. Other services like banking, telecommunications, and power supply need closer attention of course, different organisations in the same industry may have different facilities requirements.

For example Benetton uses only one distribution centre for the entire world, whereas Wal-Mart has several distribution centres in the United States alone. In any case, a small business owner of retail business must pay close attention to the convenience factor especially from the customers’ point of view.

Step 5. Choose the Form of Ownership:

The entrepreneur must be clear about the form of ownership that is closer to his heart. He could think of a small business owned by him exclusive or start the venture in partnership with someone or create a company with diversified shareholding. To start with, he can pick up the entity that is easy to form, simple to operate, allows freedom to implement his ideas without any legal or taxation problems and gives him enough room to expand further, whenever the opportunity turns out to be big.

Step 6. Determine Financial Requirements:

Here it is a question of calculating the fixed capital and working capital needs of the firm, keeping the present and future plans of the business in mind. The entrepreneur should be clear about the type of expenses that are going to eat up resources at different points of time. Requisite funds for emergency use need to be put in place. The sources of funds also need to be calculated well in advance. How much through bank financing, how much from the long term lending institutions, how much from the general public—if equity is a preferred option—how much from own sources etc.?

Step 7. Plan for Physical Facilities:

This is a question of giving a concrete shape to the business plan by arranging the physical infrastructure required. It includes decisions regarding machines, equipment, factory and of­fice design, choosing furniture, space planning, providing for repair and maintenance, availability of spare parts, degree of sophistication required in terms of modernizing the plant in every way—keeping the availability of skilled hands in the chosen location etc. An appropriate organisation structure must also be designed keeping the space needs of various departments, divisions and plants in mind.

Step 8. Select an Appropriate Plant Layout:

The choice of physical configuration or the layout of facilities is closed related to other operation decisions. A product layout is appropriate when large quantities of a single product are needed. It makes sense to custom design a straight line flow of work for a product when a specific task is performed at each work station as each unit flows past. Most assembly lines use this format.

For example, Dell’s personal computer factories use a product layout. The type of layout depends on the expected volume of production, space available, type of equipment, etc. The chosen layout, in any case, must be in sync with space available and must permit easy flow of production without posing any danger to human life.

Step 9. Determine Human Resource Requirements:

Here it is a question of finding human resource requirements in terms of physical numbers and also in terms of quality such as technical skill sets, managerial competencies, degree of expertise, necessity for people possessing latest knowledge in a high-tech area etc. The necessity for hiring people with qualities of head and heart must be recognized and the small business owner must keep plans ready for this purpose.

Step 10. Keep an Eye on Legal and Procedural Requirements:

All approvals, sanc­tions must be obtained well in advance. The needed paper work must be entrusted to experienced people hired for this purpose. Help from external consultants could also be obtained to avoid surprises of various kinds hitting the budding venture at a later stage. All taxation matters be carefully looked into at this stage. If required, the owner must carry out a drill looking into each and every detail personally.

Step 11. Launch the Business:

The owner should get ready to launch the business formally after acquiring physical and financial resources, providing for infrastructural facilities and hiring the people needed.

i.Observe the Local Market:

The environment would offer vital clues for starting rewarding ventures. For example, it can be retirement homes for ageing population. It could be a holiday resort to entice people earning good salaries. It could be developing a religious spot -emphasizing peace, tranquility, rejuvenation of mind and soul etc.

ii. Look at the Customer:

The changing tastes and preferences of customers would be ready made source of valuable ideas. The need to look good is making many young boys and girls to spend heavily on hair dressing, personal grooming, beauty salons, fitness, power dressing, perfumes, burgers, pizzas, gourmet coffee, designer pens, etc. One needs to have a critical eye for detail in order to exploit the oppor­tunities that present themselves from time to time.

iii. Observe Markets All Over the Globe:

Global market changes could be pointers to a change in trends in local markets as well. When global markets are crazy about latest cell phones, trendy watches, designer clothes, IPads and I-phones, Tablets etc. you can be sure of customers in local markets getting impacted sooner than later. Many entrepreneurs have picked up these trends and made a huge fortune in recent times— especially by joining hands with producers from markets such as South Korea, Taiwan, Singapore, China etc. (known for cheaper varieties of cell phones, tablets etc.)

iv. Look at Existing Products/Services Closely:

The entrepreneur can look at existing products and services offered by Indian as well as foreign companies to find out the ‘gaps’ that could be exploited profitably. You have the famous examples of Chik shampoo in sachets, use and throw kind of perfumes, cheaper detergents in the form of Ghadi, Nirma etc. Think back 30 years ago.

Did you find anyone in the field of anti-virus software, internet service providers, laptops, domestic fire protection devices etc.? One can think of converting raw wood into finished lumber. It can be fine-tuned to get designer beds and almirahs, dining tables, sofas of various kinds and put them all in a Furniture Mall! An existing service can be improved -such as getting fresh vegetables straight from farmers to city population through a home delivery service.

v. Mass Media:

The mass media is a great source of information, ideas and often opportunity. Newspapers, magazines, television, and nowadays the Internet are all examples of mass media. Take a careful look, for example, at the commercial advertisements in newspaper or magazine and you may well find businesses for sale. Well, one way to become an entrepreneur is to respond to such an offer.

Exhibitions another way to find the ideas for a business is to attend ex­hibitions and trade fairs. These are usually advertised on the radio or in newspapers; by visiting such events regularly, you will not only discover new products and services, but you will also meet sales representatives, manufacturers, wholesalers, distributors and franchisers. These are of­ten excellent sources of business ideas, information and help in getting started. Some of them may also be looking for someone just like you.

vi. Surveys:

Surveys conducted by reputed organisation on changing hab­its, tastes, preferences of customers could prove to be valuable sources of business ideas. Sometimes the age profiles of customers living in a locality might prompt an entrepreneur to start a fast food centre near a College, a designer watch show room in a posh locality, a beauty salon near a school etc.

vii. Complaints:

Complaints and frustrations on the part of customers have led to many a new product or service. Whenever consumers complain bitterly about a product or service, or when you hear someone say ‘I wish there was … “or” If only there were a product/service that could …” you have the potential for a business idea. The idea could be to set up a rival firm offering a better product or service, or it might be a new product or service which could be sold to the firm in question and/or to others.

viii. Brainstorming:

Brainstorming is a technique or creative problem-solving as well as for generating ideas. The object is to come up with as many ideas as possible. It usually starts with a question or problem statement. For example, you may ask “What are the products and services needed in the home today which are not available?” Each idea leads to one or more additional ideas, resulting in a good number.