1. ENTREPRENEURSHIP Prof. Sudipto Bhattacharya School of Management Sciences Bengal Engineering and Science University, Shibpur

2. ENTREPRENEURSHIP : THE CALL OF THE DAY “ We need technical education and all else which may develop industries so that men instead of seeking service may earn enough to provide for themselves and to save something against a rainy day. ” SWAMI VIVEKANANDA SUCCESSFUL ENTREPRENEURIAL CULTURE REQUIRES:-  Continuous Skill-up gradation  Sharing of expertise  Openness to new technologies  Career flexibility

3. Technical Insights Technical Strategy (Exploration of Technical Ideas) Every product has three stages in which human expertise is needed:- (a)Production (b) Authorized servicing & sales (c) Maintenance beyond warranty Entrepreneurship possible in all the three fields, but the form suitable for a particular individual depends on - Expertise: Availability of technical know-how Financial strength: Ability to mobilize funds Market influence: Relationship with established players (wholesalers)

4. Design of a New Product Improvements to an existing Product in features or in efficiency Expertise required: Analysis of existing system: - Theoretical (Mathematical modeling) - Practical (Reverse Engineering) Activity to undertake:  Exploration of a number of New Ideas (Skills not emphasized in Colleges) - Technological ideas - Functional design – what are key inputs, outputs & components - Material properties: Mechanical, Chemical & Electrical, Cost & availability - Weak links in product/process where failure occur frequently - Packaging: Appearance, Aesthetics, Simplicity, Ruggedness Benefits: Good understanding of Principles of Design & Costing A. Product-based Enterprise (Good for Technologically - oriented people)

5. B. Servicing & Sales-based Enterprise (Good for Business - oriented people) Assembling & Trouble-shooting using Manufacturer-approved (specialized) tools and instruments Expertise required: Experimental skills (Skills taught in college) - Theoretical (General idea of How Things Work) - Practical (Perform pre-defined experiments) Activity to undertake:  Develop eagerness for hands-on activity - Ability to independently identify appropriate tools needed &use them - Material uses: Engineering properties, cost & availability - Hot spots in product: Weak links where failures occur most frequently  Develop verbal skills: Ability to explain concepts to non-technical people  Psychology: Understand subtle meaning of words and gestures  Cash flows Benefits: Mature ability to Handle Tools & Products, familiarity with actual market

6. C. Maintenance-based Enterprise (Good for Trade - oriented people) Repair & Maintenance using general tools and instruments Expertise required: Technical skill (Skills taught in colleges) - Theoretical (Familiarity with terms, principles of trade) - Practical (Perform routine Trade-related tasks) Activity to undertake:  Language: Ability to understand technical language  Discipline: Ability to work under senior technicians (humility, openness/eagerness to learn) - Practical Ability to use tools needed - Material handling: How to handle various engineering material- Commonly occurring routine problems & their solutions Benefits: Good reputation & familiarity with Market Leaders (necessary for sub-contracts etc.)

7. Financial Vision Analysis of Financial Merits There are three stages in which Financial Resources operate: (a) Financial Planning (b) Mobilization & Investment (c) Profit generation & Depreciation Initial Financial Planning 3 Stages of Planning - Project Report: Total investment required - Profitability Estimation: Expected returns over time - Comparative Analysis: Selection of Best Project

8. Project Report (Assessment of Capital Required) - Given: - Estimates of Cost/Rent of Land, Machinery, etc.(Predictable) - Expected Income, operating Cycle, etc. (Unpredictable) - Objective: Study of following scenarios - How much capital required – How much to obtain on Loan Profitability Estimation (Assessment of Turnover & Profits) - Given: - Estimates of Running Costs: Cost of Inventory,(Predictable) - Expected quantity of sales (Unpredictable) Objective: Study of following scenarios - What is the total turnover, net profit, BEP, DSCR, etc. - How to set sale price - What inventory levels to maintain - How much monthly installments to pay

9. Comparative Analysis - Assessment of Goodness of different Implementations of a given project - Given estimates of Capital & Running Costs, Income - Objective: What is the best-case BEP, DSCR, etc. Debt Service Coverage Ratio (DSCR): It is the ratio of the Net Cash Accruals and the Periodic Repayment Commitments. The DSCR is important to the investors, financiers and other loan providers to judge the financial strength of the project. Break Even Point (BEP): It is the quantity of goods and services that must be sold at a chosen price so that the Revenue obtained will be exactly equal to the cost of Production. BEP is important to the entrepreneur for running the production.

10. Stage 1: Consider Technological Strategy Stage 2: Prepare a Project Report Stage 3: Prepare Profitability Estimate for 5 years & Calculate BEP, DSCR Study of Stage 3 done? Stage 4: Identify best Project Study of Stage 2 done? Study of Stage 1 done? Done Modify Stage 3 Parameters: Installment, Price, Inventory, etc. Modify Stage 2 Parameters: Area, Machinery, etc. Modify Stage 1 Parameters: Product, Process, etc. Yes No Flowchart of Financial Planning

11. Project Report Project Details (For quick reference and future usage) 1.Product/Service: A clear description of the Product/Service 2.Process: Description of the Technological Plan under consideration 3.Use & Market of Product: Appropriate description Non-Recurring Expenditure 4. Land & Shed/Building Item Area Unit Cost (Rs.)Total Cost (Rs.) (a) Land, Boundary Wall, etc. (b) Office Building (Administration, etc.) (c) Production Shed (Factory) (d) Store / Go down Total : 5. Plant, Machinery & Equipment Sl.No. Description No. of Units Unit Cost (Rs.) Total Cost (Rs.) (a) (b) Total : 6. Other Expenses (a) Installation Costs (Machinery, Electrical, etc.) (b) Tools & Implements (c) Furniture & Fixtures (d) Other Preliminary Expenses Total : A. Total Fixed Capital:(4) + (5) + (6)

12. Project Report (Contd.) Non-Recurring Expenditure (Expense per Month) 7. Raw Materials Sl.No. Description No. of Units Unit Cost (Rs.) Total Cost (Rs.) (a) (b) Total : 8. Other Recurring Expenses (a) Rent, Electricity, Telephone, Water, etc. (b) Postage & Stationary (c) Conveyance & Marketing Expenses (d) Petty Cash, etc. Total 9. Salary & Wages CategoryNo. Rate per MonthTotal (Rs.) (a) (b) Total Total Recurring Expenses: (7) + (8) + (9) per Month B. Total Working Capital: (Total Recurring Expenses) x (Operating Cycle in Months) C. Total Capital Investment: (A + B)

13. Project Details (For quick reference and future usage) 1. Product/Service: Clear description of Product/Service 2. Process: Description of Technological Plan 3. Reference : Reference Number of the relevant Project Report 4. Price per Unit, P : Unit Sale Price (in Rs.) 5. Repayment Plan : Parameters of installment scheme for loan repayment Construction period1 st. year2 nd. Year3 rd. Year4 th. Year5 th. Year 1. Production during the year (Q) 2. Cost of Production (I) Raw Materials (II) Power & Fuel (III) Labor & Wages (IV) Repair & Maintenance (V) Misc. Manufacturing Expenses Variable Cost (VC): (I+II+III+IV+V) / (Q) (VI) Rent, Administration, Office Expenses (VII) Depreciation on Plant Equipment (D) Fixed Cost (FC): (VI + VII) Total Cost of Production (TC): (FC + Q x VC) Break Even Point : (FC / (P – VC) 3. Net Sales (NS) : (P x Q) 4. Cost of Sales (I) Freight & Transportation Costs (II) Advertisement Costs Total Cost of Sales (SC) 5. Gross Profits (GP) : (NS – (TC + SC) 6. Taxes (Tx) 7. Net Profits (NP) : (GP – Tx) 8. Net Cash Accruals (NCA) : (GP + D) 9. Installment Repayment Obligation (INS) 10. Debt Service Coverage Ratio : (NCA / INS) Profitability Estimation