SETTING UP A NEW VENTURE

INTRODUCTION
Entrepreneurship is the pursuit of market opportunities to produce innovative goods and services.
Once the enterprise gets established, the entrepreneurial process becomes effectively a recurring
progress of opportunities. It becomes the process of allocating scarce resources judiciously to
pursue the value-adding opportunities. The steps involved in the establishment of a new enterprise
are explained as follows:
SETTING UP NEW ENTERPRISE:

1 Idea Generation

2 Feasibility & Market Assessment

3 Developing Business Plan

4 Selecting the Business form

5 Selecting the Location

6 Setting up Infrastructure

7 Naming & Registering

8 Marketing the Product

9 Financing the Business

10 Hiring Human Resource

 IDEA GENERATION
The idea generation is baseline of entrepreneurial activity. Implies that an entrepreneur
identifies business opportunities, selects the most suitable business opportunity, and
converts that opportunity/idea into a successful business venture. Idea generation involves
exploring ideas to develop a new business. A business idea can be generated with the help
of different methods that are as follows:
Brainstorming: Refers to the method that aims at creating a pool of ideas based on four
general rules. The rules for brainstorming include avoiding criticism, focusing on quantity,
being creative as possible, and combining ideas to arrive at a comprehensive solution. This
technique is practiced in a group of 10 to 12 people.
Focus Group: Refers to the formation of groups by an entrepreneur to generate business
ideas with the help of people who are experienced in that field. In focus groups, there are
8 to 12 members in a group and they are provided with a topic for discussion. They are
informed about the motive of conducting discussion, the various aspects that would be
covered during the discussion.
Surveys: Refers to the method in which an entrepreneur tries to seek out information from
people about their needs and desires. This helps the entrepreneur in identifying market
trends and opportunities to set up a new enterprise. In this method, the entrepreneur
generally makes a draft that contains various questions regarding some common things that
people face in their day-to-day life. The entrepreneur asks individuals to fill that form and
become the part of survey. The entrepreneurs can conduct surveys either by directly
approaching people or sending them mails. In addition, the entrepreneur can create an
online questionnaire for the respondents.

FEASIBILITY STUDIES & MARKET ASSESSMENT

Feasibility studies comprise comprehensive, detailed information about ones’ business

structure, the products and services, the market, logistics of how one will actually deliver
a product or service, the resources one needs to make the business run effectively, as well
as other information about the business (Women in Business, 2010). A Business Feasibility
Study can also be defined as a controlled process for identifying problems and
opportunities, determining objectives, describing situations, defining successful outcomes,
and assessing the range of costs and benefits associated with several alternatives for solving
a problem (Thompson, 2005). The importance of Feasibility Studies: According to Women
in Business (2010), the information you gather and present in your feasibility study will
help you: It serves as the standard or yardstick for assessing performance of envisaged
business.
 COMPONENTS OF FEASIBILITY STUDIES

Executive Summary: The Executive Summary is a summary of all key sections of the Business
Feasibility Study and should work as a separate, standalone document. Key points to remember
include: Write this document after the content section of Business Feasibility Study is completed.
Although the Executive Summary is written last, it is presented first. The Executive Summary
should be no more than one page long
Product/Service: Describe the enterprises, product at service in simple language. It describes how
customers would use and buy the product or service.
Technology: As necessary, provide further technical information about the product or service. It
describes additional or ongoing research and development needs.
Intended Market Environment: This includes;
Target Market: Define and describe the target market(s).
Distinguish between end users and customers.
For business-to-business markets, include: What industry is the target market, who is the key
players, frequency of product purchase, replacement needs versus expansion, purchasing process?
For business-to-consumer markets, include: Demographic factors, such as income level, age range,
gender, educational level, and ethnicity.
Competition: Describe direct and indirect competition (as it pertains to the target markets only).
For key competitors, give market share, resources, product and market focus, goals, strategies,
strengths and weaknesses. List all key barriers to entry.
Industry: Clearly define and describe the industry in which the enterprise operates. Include the
size, growth rate, and outlook. Define key industry segments and state where enterprise fits in.
Business Model: Describe the proposed enterprise's business model. How will the business
generate revenue (i.e. sell the product; charge licensing, retail sales)? Will there be recurring
revenue?
Marketing and sales strategy: Lay out the basic marketing and sales strategies. Describe the
pricing strategy and justification. Include the expected gross profit margins.
Production / operating requirements: Describe enough of how and where the enterprise will
manufacture, source or create and deliver the final product or service to be able to estimate costs.
Will space be owned or leased? Will renovations be required? At what cost?
Management and personnel: List the proposed key managers, titles, responsibilities, relevant
background, experience, skills, and costs. Sketch personnel requirements: what people will be
needed now, in a year, in the long term? What skills and qualifications are required and what
financial implications result?
Regulations/environmental issues: Outline non-economic forces that might affect the prospects
of the firm: Key government regulations and the enterprise’s plans for compliance; any
environmental problems on property, plans to address the problems, and their cost and Political
stability, if applicable.
Financial Feasibility: Financial feasibility analysis involves assessing the financial viability of an
enterprise. It also includes estimation of cost as well as review of profit and loss account, break-
even point, cash flow statement, balance sheet, and sales plans. Financial feasibility analysis also
determines the requirement of funds, sources to obtain funds, and ways to utilize these funds. An
entrepreneur performs financial feasibility analysis to ensure that the projected figures are
achievable and realistic. Financial feasibility analysis can be done by comparing break-even point
(the sales level at which a business has neither a profit nor a loss) with the estimated sales figure.
Estimating break-even point helps in knowing sales per day, per month, and per year.
Organizational Feasibility: Organizational feasibility involves estimating the viability of an
enterprise in terms of competence of management and availability of resources. The main factors
that are used for judging the organizational feasibility are as follows:
Management Competence: Refers to the ability and efficiency of the management of an
enterprise. An enterprise should have a management team that is capable of not only launching a
business, but also be able to make it run on the growth path. An entrepreneur should judge his/her
management team with respect to their efficiency, skills, and knowledge. The management of a
new enterprise should be familiar with the mission and vision of the enterprise. It should have a
passion about the business idea and be able to convert it into a successful venture. Apart from this,
it should have sound knowledge and understanding about its business to be launched and the target
market. According to Scott Cook, people generally consider financing an important factor for
launching a new business. However, without the passion of launching a business and
understanding of customer preferences and tastes, even an enterprise with huge financing may lead
to failure. Starting a business involves many barriers related to finance, selection of market and
product, availability of resources, location of the business, and other social and political issues. In
such a condition, if management does not have a passion for the business, then it would not be able
to overcome these barriers and may not be able to launch or run the business.
Resources: Refer to the main requirement of launching a business. Resource can be of two types,
financial and non-financial. While estimating organizational feasibility, we analyze non-financial
resources, such as availability of labor in nearby area of office premises, plant location, and getting
the intellectual property protection. The location of a business plays an important role in making
other non-financial resources available easily. For example, jute industry of India is located in
Bengal, sugar industry in Uttar Pradesh, and iron and steel in Bihar. In such locations, the new
ventures can easily get skilled labor, raw material specific to their industry, transportation facility,
and power supply. This helps in reducing the cost to the enterprise and provides efficient resources.
Project Feasibility: Project feasibility exactly means whether the proposed project is worth
executable or not. Project feasibility analysis is performed to determine the viability of a project.
It also focuses on modifying the scope and content of the project to improve the viability of the
project. The feasibility of a project is estimated by considering its financial, technical, economical,
and ecological aspects. Moreover, an entrepreneur needs to determine whether there is market for
the project to be started. The project feasibility analysis involves the following facets:
Market Analysis: Refers to a process of determining the potential of the market in which an
enterprise operates. In other words, market analysis is a method of analyzing the market share of
a project that is to be started. It also helps in identifying the market opportunities and threats
associated with the project. David A. Aaker has highlighted the following aspects that need to be
determined in market analysis:
Market Size: Refers to the potential of the market determined on the basis of present and estimated
future sales of the product, government reports, financial data, and customer surveys.
Market Growth Rate: Refers to the rise or fall in the demand of the product in the market. It is
determined by extrapolating the historical data with the estimation of demand of the product in
future. The market growth rate indicates the stage of the product life cycle and sales of a product.
Market Profitability: Refers to an aspect of market analysis that gets influenced by various factors,
such as buyers’ power, suppliers’ power, barrier to entry, threat of substitute products, and
competition in the market. For example, if the purchasing capacity of buyers increases, they would
spend a large sum of money in buying products, which, in turn, increases the profitability of the
market.
Project Cost Structure: Helps in preparing budget and formulating strategies to get an edge over
the competitors.
Channel of Distribution: Increases the demand of the product in the market. The direct channel
of distribution makes the product easily available to the customers, which, in turn, increases the
demand of the product in the market.
Market Trends: Act as an important aspect that needs to be considered by the enterprise while
performing the market analysis. The change in the tastes and preferences of customers in the
market helps in identifying price sensitivity and demand for variety.
Technical Analysis: Seeks to analyze the technical aspects of the project‘s ability to convert the
input into the product/service.
Financial Analysis: Refers to the fact that an enterprise needs to consider the financial aspect of
a project before selecting it.
Economic Analysis: Refers to the analysis of costs and benefits. It ascertains whether sales
revenue is more than the capital cost as well as the cost of the production. In economic analysis,
the requirements for raw materials, level of capacity utilization, anticipated sales and expenses,
and the probable profits are analyzed. The analysis seeks to calculate how much sales would be
necessary to earn the targeted profit. The government offers specific incentives and concessions
for setting up industries in notified backward areas. Therefore, it is essential to ascertain whether
the proposed enterprise comes under this category or not.
Ecological Analysis: Indicates determining the effect of a project on the environment and health
of human beings. Project that have a significant ecological implication include bulk drugs, leather,
and chemical processing.