Woman in MSME Part IV

V

PART IV

She Climbs to Conquer

She Climbs to Conquer
Volume IV
Appendices and bibliography

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Appendix 1 :
Analysis of Registered Manufacturing MSME sector Units

Variable Third Census 2001-2 Fourth Census 2006-07

Proportion of enterprises that are 11.54
14.7
Female-managed 9.56
13.72
Female-owned 11.32 16.91

Proportion of Rural enterprises that are 8.99
12.86
Female-managed 11.75
95.22
Female-owned 13.21 4.6
0.17
Proportion of Urban enterprises that are
98.37
Female-managed 7.69 1.58
0.05
Female-owned 9.72

Proportion of All enterprises that are

Micro n.a.

Small n.a.

Medium n.a.

Proportion of firms owned by Women

Micro n.a.

Small

Medium

Top states with enterprises

Owned by women Meghalaya, Meghalaya, Mizoram,
Kerala, Manipur,
Arunachal Pradesh, Tamilnadu
Mizoram,
Mizoram, Sikkim, Meghalaya, Tamilnadu,
Kerala,
Kerala, Manipur Assam

Managed by Women Meghalaya,

Arunachal Pradesh,

Mizoram, Sikkim,

Kerala, Manipur

Female Owned (Managed) Enterprises - Percentage of units in the sector

Apparel 44.84 (53.61) 48.02 (59.92)

Food products & 14.40 (13.40) 13.26 (12.32)

Beverages

Textiles 08.07 (07.95) 10.41 (08.43)

Fabricated Metal 05.03 (?) 04.34 (?)

products

Chemicals & 03.93 (03.30) 4.18 (03.11)

Chemical Products

Furniture ? (03.30) ? (02.84)

Female-owned Rural (Managed)

Apparel 50.57 (57.44) 50.25 (59.92)
16.36 (14.34)
Food products & 16.15 (14.14)
10.35 (08.82)
Beverages 04.10 (02.89)

Textiles 08.72 (08.97) 03.88 (03.24)

Non-metallic mineral 04.87 (03.45) 269

products

Chemicals & Chemical 03.53 (03.14)

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The Woman in the MSME

Female-Owned Urban (Managed)

Female-owned 38.23 (48.64) 45.52 (59.91)
Apparel 07.32 (06.64) 10.48 (07.95)
Textiles 12.37 (12.45) 09.80 (09.78)

Food products & 07.76 (05.23) 06.72 (03.30)
Beverages
Fabricated Metal 04.39 ( ? ) 4.52 ( ? )
products
Chemicals & Chemical ? (4.04) ? (3.21)

Products
Furniture

Average number of employees in

Women Owned Units 3.80 4.64
3.14
Women managed 3.03
18.94
Units

Proportion of

employees who are

Women - All 13.04

-Rural 15.73 19.16
-Urban 11.00 18.85

% of Owner Operated 33.61 (39.30) 41.04(49.57)

Units-Single
Employee
Women
Owned(managed)

Gender-Caste Women Managers Women Owners Women Employees
Overlap
(%) (%) (%)
SC-owned 2001-2 2006-7
ST-owned 15.43 19.95 2001-2 2006-7 2001-2 2006-7
OBC-owned 17.10 21.26
Others-owned 10.36 14.72 16.47 21.54 18.00 23.10
of which, Hindu 7.43 7.35
UC-owned n.a 6.29 16.95 23.28 18.30 23.25
11.88 17.32 14.60 19.70
9.64 11.28 10.50 17.60
n.a. 10.31 n.a. 18.71

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(Source : Deloitte: http://www2.deloitte.com/content/dam/Deloitte/global/
Documents/Risk/gx-ccg-women-in-the-boardroom-a-global-perspective4.pdf)

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Appendix 4

Angel Funding and Venture Capital

An Angel Investor is an investor who provides financial backing for
small startups or entrepreneurs. Angel investors are usually found
among an entrepreneur's family and friends. The capital they provide
can be a one-time injection of seed money or ongoing support to carry
the company through difficult times. Angel investors give more favor-
able terms than other lenders, as they are usually investing in the per-
son rather than the viability of the business. They are focused on help-
ing the business succeed, rather than reaping a huge profit from their
investment. Angel investors are essentially the exact opposite of
a venture capitalist.

Angel Investors are individuals who invest in start-ups and early stage
companies using a high-risk, high-return matrix. The majority of start-
ups fail within the first five years of their operations. This makes the
job of an angel investor even more invaluable. Apart from investing
funds, most angels provide proactive advice, industry connections, and
mentoring to founders. The goal is to create great companies by pro-
viding value creation, while simultaneously helping investors realize a
high return on investment. However, because a large percentage of an-
gel investments are lost completely when early stage companies fail,
professional angel investors seek investments that have the potential to
return at least 10 times their original investment within 5 years,
through a defined exit strategy, such as plans for an initial public offer-
ing or an acquisition.

Most angel investors are current or retired executives, business owners
or high net-worth individuals who have the knowledge, experience,
connections and funds that help start-ups match up to industry stan-
dards. More than the funds, it is the guidance and mentorship of the
angels that helps a start-up in its early days.

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A venture capitalist is an investor who either provides capital to startup ven-
tures or supports small companies that wish to expand but do not have access
to equities markets. Venture capitalists are willing to invest in such companies
because they can earn a massive return on their investments if these companies
are a success.

Venture capitalists also experience major losses when their picks fail, but these
investors are typically wealthy enough that they can afford to take the risks as-
sociated with funding young, unproven companies that appear to have a great
idea and a great management team. Venture capitalists look for a strong man-
agement team, a large potential market and a unique product or service with a
strong competitive advantage. They also look for opportunities in industries that
they are familiar with, and the chance to own a large percentage of the company
so that they can influence its direction.

Venture capital, by it's nature invests in new businesses with high potential for
growth but also an amount of risk substantial enough to scare off banks. Fair-
child Semiconductor one of the first and most successful semiconductor compa-
nies, was the first venture-capital backed startup, setting a pattern for venture
capital's close relationship with emerging technologies in the Bay Area of San
Francisco. Private equity firms in that region and time also set the standards of
practice used today, setting up limited partnerships to hold investments where
professionals would act as general partners and those supplying the capital
would serve as passive partners with more limited control. Limited Partnerships
are those partnerships where the liability of the partners is limited to the money
invested in the venture and does not extend to their private property. Limited
Partnerships are now recognized in India also.

A Venture capital firm, along wealthy individuals, insurance companies, pen-
sion funds, foundations, and corporate pension funds among others pool money
together into a fund to be controlled by a VC firm. All partners have part own-
ership over the fund, The VC firm is the general partner that controls where the
fund is invested, while the pension funds, insurance companies, etc. are limited
partners. Venture Capital Fund Managers levy management fees and depending

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on the firm, roughly 20% of the profits are paid to the company managing the
private equity fund while the rest goes to the limited partners who invested
into the fund. General partners are usually paid an additional 2% fee.

The general structure of the roles within Venture Capital firm vary from firm
to firm, but they can be broken down to roughly three positions.

Associates usually come into VC firms with experience or a qualification in
either business consulting or finance They tend to more analytical work, ana-
lyzing business models, industry trends and subsections, while also working
with companies in a firm’s portfolio. Those who work as ‘junior associate’
and can move to ‘senior associate’ after a consistent couple of years.

Principal is a mid level professional, usually serving on the board of portfo-
lio companies and in charge of making sure they’re operating without any big
hiccups. They’re also in charge of identifying investment opportunities for
the firm to invest in, and negotiating terms for both acquisition and exit.

Partners are primarily focused on identifying areas or specific businesses to
invest in, approving deals whether they be investments or exits, occasionally
sitting on the board of portfolio companies, and generally representing the
firm.

Crowdfunding is the practice of funding a project or venture by raising
monetary contributions from a large number of people, today often per-
formed via internet-mediated registries, but the concept can also be executed
through mail-order subscriptions, benefit events, and other methods. It is
based on three types of actors: the project initiator who proposes the idea
and/or project to be funded; individuals or groups who support the idea; and a
moderating organization (the "platform") that brings the parties together to
launch the idea .

The inputs of the individuals in the crowd trigger the Crowdfunding process
and influence the ultimate value of the offerings or outcomes of the process.
Each individual acts as an agent of the offering, selecting and promoting the
projects in which they believe. They will sometimes play a donor role ori-

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ented towards providing help on social projects. In some cases they will be-
come shareholders and contribute to the development and growth of the of-
fering. Individuals disseminate information about projects they support in
their online communities, generating further support (promoters).

Additionally, individuals participate in Crowdfunding to see new and innova-
tive products before the public. Early access often allows funders to partici-
pate more directly in the development of the product. An individual who
takes part in Crowdfunding initiatives tends to reveal several distinct traits:
innovative orientation, which stimulates the desire to try new modes of inter-
acting with firms and other consumers; social identification with the content,
cause or project selected for funding, which sparks the desire to be a part of
the initiative; (monetary) exploitation, which motivates the individual to par-
ticipate by expecting a payoff. Crowdfunding platforms are motivated to gen-
erate income by drawing worthwhile projects and generous funders. These
sites also seek widespread public attention for their projects and platform.

One of the challenges of posting new ideas on Crowdfunding sites is there
may be little or no intellectual property (IP) protection provided by the sites
themselves. Once an idea is posted, it can be copied. Simon Brown, founder
of the UK-based United Innovation Association, suggests that ideas can be
protected on Crowdfunding sites through early filing of patent applications,
use of copyright and trademark protection as well as a new form of idea pro-
tection supported by the World Intellectual Property Organization called
Creative Barcode.

{Creative Barcode is a nonprofit organization that allows members to share
new ideas without the risk of unauthorized copying. Members embed digital
codes in creative works to indicate usage permissions. Private disclosure is
made to other members who agree not to publicly disclose the idea or use the
idea without permission of the original creator. Members agree to dispute
resolution through the World Intellectual Property Organization.}

(Source : Wikipedia, and investopedia)

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Crowdfunding campaigns provide producers with a number of benefits, be-
yond the strict financial gains. The following are non financial benefits of
Crowdfunding.
 Profile – a compelling project can raise a producer's profile and provide a

boost to their reputation.
 Marketing – project initiators can show there is an audience and market

for their project. In the case of an unsuccessful campaign, it provides
good market feedback.
 Audience engagement – crowd funding creates a forum where project ini-
tiators can engage with their audiences. Audience can engage in the pro-
duction process by following progress through updates from the creators
and sharing feedback via comment features on the project's Crowdfund-
ing page.
 Feedback – offering pre-release access to content or the opportunity to
beta-test content to project backers as a part of the funding incentives pro-
vides the project initiators with instant access to good market testing
feedback.

Financial benefits include acquisition of low-cost capital. With Crowdfund-
ing, one can find funders from around the world, sell both the product and
equity, and benefit from increased information flow. Additionally, it facili-
tates obtaining early feedback on the product. It allows good ideas which do
not fit the pattern required by conventional financiers to break through and
attract cash through the wisdom of the crowd. They also cite that a benefit for
companies receiving Crowdfunding support is that they retain control of their
operations, as voting rights are not conveyed along with ownership when
Crowdfunding. Many Interactive Digital Media developers and content pro-
ducers are reluctant to publicly announce the details of a project before pro-
duction due to concerns about idea theft and plagiarism. The businesses also
forgo potential support and value that a single angel investor or venture capi-
talist might offer. Likewise, Crowdfunding requires that businesses manage
their investors. This can be time consuming and financially burdensome.

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Appendix 5

Some Examples Of Support For Women Entrepreneurs In South
Asia

Several different providers, including governmental, non-government-
tal, international and membership organizations, provide support for
the development of women entrepreneurs in South Asia. The following
are a few examples in India.

The FICCI Ladies Organization (FLO) is a wing of the Federation
of Indian Chambers of Commerce and Industry (FICCI), the apex body
of Industry and Chambers of Commerce in India. It was established in
1983 with the basic objective of "women empowerment", to encourage
women to exploit to the maximum their own human potential as entre-
preneurs, business women and professionals and serve the community
and nation at large through activities of social welfare on the cultural
and social fronts.

As an all India organization for women, FLO has around 1000 mem-
bers comprising entrepreneurs, professionals and executives. It cur-
rently has five chapters – in Chennai, Hyderabad, Kolkata, Mumbai
and Coimbatore. In order to intensify operations and extend its reach,
FLO seeks to eventually open a chapter in each State.

The primary objective of FLO is to promote entrepreneurship and pro-
fessional excellence in women and society at large. FLO works on
three levels. At the basic level, it holds entrepreneurship development
programmes for women, working with them in advising on how to
start a business and following it through with some help in vocational
training. At the middle level, it holds seminars and workshops for
women who run small-scale businesses, such as computerization and
financial management. At the senior level, FLO has sophisticated pro-
grammes for women at the helm in areas such as marketing and fi-
nance.

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Besides undertaking several business oriented activities for women
through entrepreneurship development programmes, workshops and
panel discussions, FLO has an active Business Consultancy Cell where
free professional guidance is offered and which serves as a single win-
dow stop for all information on diversified statutory compliances, pro-
cedures and obligations in its Hyderabad chapter. It advises women
entrepreneurs on subjects such as company incorporation, registration,
preliminary documentation, taxation and policies of Governments.
FLO has recently launched Young FLO (YFLO), a forum/community
of career women between 20 and 39.
In discharge of its functions, FLO has also started giving awards to
recognize outstanding women in various walks of life. It presents the
“Outstanding Woman of the year

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Appendix 6

Public Programmes For MSMEs

Entrepreneurship development is by far a gender neutral subject, with a few
extended benefits for women. There have been continuous experimentation
of small business policies for over two thirds of a century and still it contin-
ues. The following is a synoptic view of important schemes for assistance to
MSMEs under various ministries of Government of India. For details please
refer to the booklet “MSME Schemes” published by the Ministry of Micro,
Small and Medium Enterprises in August 2015. It is available as an e-book at
the website of the Ministry http://www.msme.gov.in/WriteReadData/ebook/
MSME_Schemes_English.pdf

Ministry of MSME Schemes

 International Cooperation (IC)

The scheme covers the following activities:

a) Deputation of MSME business delegations to other countries for exploring
new areas of technology infusion/upgradation, facilitating joint ventures, im-
proving markets for MSMEs products, foreign collaborations, etc.

b) Participation by Indian MSMEs in international exhibitions, trade fairs and
buyer-seller meets in foreign countries as well as in India, in which there is
international participation.

c) Holding international conferences and seminars on topics and themes of
interest to MSMEs.

The scheme provides financial assistance of up to 95% of airfare and space
rent for entrepreneurs. Assistance is provided on the basis of size and type of
the enterprise. It also provides assistance for common expenses of delega-
tions like freight & insurance, local transport, secretarial/communication ser-
vices, printing of common catalogues, etc.

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State/Central Government Organizations; Industry/Enterprise Associations;
and c) Registered Societies / Trusts and Organizations associated with pro-
motion and development of MSMEs can apply online, or applications in the
prescribed form can be sent to the Director (International Cooperation),
Ministry of MSME, Udyog Bhavan, New Delhi - 110 011

 Assistance to Training Institutions (ATI)

The scheme provides assistance to training institutions in the form of capital
grant for creation/ strengthening of infrastructure and support for conducting
entrepreneurship development and skill development training programmes.

Maximum assistance for creation or strengthening of infrastructure will be
Rs.150 lakh on matching basis, not exceeding 50% of project cost. How-
ever, for the North-Eastern Region (including Sikkim), Andaman & Nicobar
and Lakshadweep, maximum assistance on matching basis would be Rs.270
lakh or 90% of project cost, whichever is less. Maximum assistance per
trainee per hour for entrepreneurship development and skill development
programmes is Rs.50 (Rs.60 for NER, A&N and Lakshadweep).

Any State/Union Territory Government training institutions, NGOs and
other development agencies can apply for assistance for creation or
strengthening of infrastructure. Training institutions who wish to conduct
training programmes under the scheme will have to enrol themselves with
national level EDI i.e., ni-msme, Hyderabad. Organizations who wish to
apply for assistance for creation or strengthening of infrastructure may send
their applications to the Director (EDI), Ministry of Micro, Small and Me-
dium Enterprises, Udyog Bhawan, Rafi Marg, New Delhi - 110 107. Train-
ing institutions who wish to conduct training programmes or persons who
wish to enroll for training programmes under the scheme may visit http://
msmetraining.gov.in/ or approach the EDI : ni-msme.

 Marketing Assistance (MA)

Under marketing assistance the assistance is provided for following activi-
ties:

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a) Organising exhibitions abroad and participation in international
exhibitions/trade fairs

b) Co-sponsoring of exhibitions organised by other organisations/
industry associations/ agencies

c) Organising buyer-seller meets, intensive campaigns and marketing
promotion events

Financial assistance is provided for up to 95% of the air-fare and space rent
for entrepreneurs on the basis of size and type of the enterprise. Financial as-
sistance for co-sponsoring would be limited to 40% of the net expenditure,
subject to a maximum amount of Rs.5 lakh.

MSMEs, Industry Associations and other organisations related to MSME sec-
tor can apply. The applications / proposals for seeking assistance under the
scheme shall be submitted to the nearest office of the National Small Indus-
tries Corporation, with full details and justification.

 Credit Guarantee

Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries
Development Bank of India (SIDBI), established a Trust named Credit Guar-
antee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement
Credit Guarantee Fund Scheme for Micro and Small Enterprises. The corpus
of CGTMSE has been contributed by GoI and SIDBI.

The scheme is intended to provide collateral free loans up to a limit of Rs.50
lakh for individual MSEs for which both existing and new enterprises are eli-
gible. Candidates meeting the eligibility criteria may approach any scheduled
bank, Regional Rural Bank or other banks/financial institutions, which are
eligible under the scheme.

 Trade Related Entrepreneurship Assistance and Development
(TREAD) for Women

The scheme envisages economic empowerment of women through trade re-
lated training, information and counseling extension activities related to

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trades, products, services etc. The Scheme provides for financial loans
through NGO's who are also provided GoI grant for capacity building. This
Assistance is provided for self-employment ventures by women for pursuing
any kind of nonfarm activities. .

There is a provision for Government of India Grant up to 30% of the loan/
credit maximum up to Rs. 30.00 lakh as appraised by lending institution/
banks. The lending institutions/ banks would finance loan assistance for
women through NGOs for undertaking non- farm activities, who usually have
no easy access to credit from banks due to cumbersome procedures and their
inability to provide adequate security demanded by banks in the form of col-
laterals.

GOI Grant and the loan portion from the lending agencies to assist such
women shall be routed through NGOs engaged in assisting poor women
through income generating activities.

GoI grant upto Rs.1.00 lakh per programme to training institutions / NGOs
for imparting training to the women entrepreneurs subject to their contribu-
tion minimum 25% and 10% in case of NER.

:Institutions such as Entrepreneurship Development Institutes (EDIs),
NIMSME, NIESBUD, IIE, MSME-DIs, EDIs sponsored by State Govt. and
any other suitable institution of repute will be provided need based Govern-
ment grant up-to Rs. 5.00 lakh per project primarily for undertaking activities
aiming at empowerment of women such as field surveys, research studies,
evaluation studies, designing of training modules, etc. covered under the
scheme.

With a view to ensure the scheme user friendly and is implemented in an ef-
fective way submission of application on line has since been introduced from
May, 2015. The Ministry organizes motivational campaigns though MSME-
DIs to motivate banks to come forward to approve more proposals and sanc-
tion loans under the scheme and also to NGOs to ensure more participation.

 Credit Linked Capital Subsidy (CLCS) for Technology Upgrada-

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tion

Technology upgradation would ordinarily mean induction of state-of-the-art
or near state-of-the art technology. In the varying mosaic of technology cov-
ering more than 7,500 products in Indian small scale sector, technology up-
gradation would mean a significant step up from the present technology level
to a substantially higher one involving improved productivity, and/or im-
provement in quality of products and/or improved environmental conditions
including work environment for the unit. It includes installation of improved
packaging techniques as well as anti-pollution measures and energy conser-
vation machinery. Further, units in need of introducing facilities for in-house
testing and online quality control would qualify for assistance, as the same
are a case of technology up-gradation. Replacement of existing equipment/
technology with same equipment/technology will not qualify for subsidy un-
der this scheme, nor would the scheme be applicable to units upgrading with
used machinery.

The scheme aims at facilitating technology upgradation by providing 15%
upfront capital subsidy to MSEs, including tiny, khadi, village and coir indus-
trial units, on institutional finance availed by them for induction of well es-
tablished and improved technologies in specified sub-sectors/products ap-
proved under the scheme.

The terms of CLCS is as follows:

a) Ceiling on loans under the scheme will be Rs.1 crore

b) Rate of subsidy 15%.

c) Admissible capital subsidy is calculated with reference to purchase price
of plant and machinery.

d) There is no categorization of MSEs in different slabs on the basis of their
present investment for determining eligible subsidy.

e) Beneficiaries include sole proprietorships, partnerships, co-operative so-
cieties, and private and public limited companies in the MSE sector. Priority

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shall be given to women entrepreneurs.

Candidates meeting the eligibility criteria may approach all scheduled com-
mercial bank, scheduled cooperative bank [including urban cooperative
bank co-opted by SIDBI under Technological Upgradation Fund (TUF)],
Regional Rural Bank (RRB), State Financial Corporation ( S F C ) and
North Eastern Development Financial Institution (NEDFi).

 ISO 9000/ISO 14001 Certification Reimbursement

The scheme provides incentives to those SMEs/ancillary undertakings who
have already acquired ISO 9000/ ISO 14001/HACCP certification. The
scheme is enlarged so as to include reimbursement of expenses for acquiring
ISO 14001 certification. Reimbursement will be upto 75% of the expendi-
ture subject to a maximum of Rs.75,000 in each case. Permanent registered
Micro and Small Enterprises (MSEs) are eligible to avail the incentive
scheme. MSEs with their EM No. are required to submit their application,
duly completed, to their local Director, MSME-DI addresses given in the
website: www.dcmsme.gov.in

 Micro & Small Enterprises Cluster Development Programme
(MSE-CDP)

Objectives of the scheme are:

i) To support sustainability and growth of MSEs by addressing common is-
sues such as improvement of technology, skills and quality, market access
and access to capital.

ii) To build the capacity of MSEs for common supportive action through the
formation of self-help groups, consortia, upgradation of associations, etc.

iii) To create/upgrade infrastructural facilities in the new/existing industrial
areas/clusters of MSEs.

iv) To set up common facility centres (for testing, training, raw material de-
pot, effluent treatment, complementing production processes, etc.)

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Assistance is available for :
• Diagnostic Study
• Soft Intervention

• Setting up of Common Facility Centres (CFCs)
• Infrastructure Development (Upgradation/New)

Cost of project and Govt. of India assistance:

• Diagnostic study - maximum cost Rs.2.50lakh.

• Soft interventions - maximum cost of project Rs.25.00 lakh, with GoI con-
tribution of 75% (90% for special category States and for clusters with
more than 50% women/micro/village/SC/ST units).

• Hard interventions, i.e., setting up of CFCs –maximum eligible project cost
of Rs.15.00 crore with GoI contribution of 70% (90% for special category
States and for clusters with 9 more than 50% women/micro/village/SC/ST
units).

• Infrastructure development in the new/existing industrial estates/areas;
maximum eligible project cost Rs.10.00 crore, with GoI contribution of 60%
(80% for special category States and for clusters with more than 50%
women/micro/SC/ST units).

Industrial associations/Consortia, Clusters can apply. Only online applica-
tions are considered with effect from 01-04-2012. Hard copy of applications
need to be sent through State Governments or their autonomous bodies or
field institutes of the Ministry of MSME i.e., MSMEDIs. The proposals are
to be approved by the Steering Committee of MSE-CDP.

 Micro Finance Programme

The scheme is being operated in the under-served States and under-served
pockets/districts of other States. Government of India provide funds for mi-
cro finance programme to SIDBI, which is called ‘Portfolio Risk
Fund’ (PRF). At present SIDBI takes fixed deposit equal to 10% of loan
amount. The share of MFIs/NGOs is 2.5% of loan amount (i.e., 25% of secu-

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rity deposit) and balance 7.5% (i.e., 75% of security deposit) is adjusted
from funds provided by the Government of India.

 MSME Market Development Assistance (MDA)

MDA is offered in three forms as mentioned below:

1) Participation in the international exhibitions/fairs - for registered small &
micro manufacturing enterprises with DI/DIC.

2) Financial assistance for using Global Standards (GS1) in barcoding.

3) Recognise importance of bar coding and avail financial assistance
through Office of the Development Commissioner Micro, Small and Me-
dium Enterprises (DC -MSME).

The scheme offers funding up to 75% in respect of to and fro air fare for
participation by MSME entrepreneurs in overseas fairs/trade delegations.
The scheme also has provision of funding for producing publicity material
(up to 25% of costs), sector specific studies (up to Rs.2 lakh) and for con-
testing anti-dumping cases (50% up to Rs.1lakh) - for individual MSMEs &
associations.

Individual MSMEs & industry associations meeting the eligibility criteria
may send their applications to Office of the DCMSME through the con-
cerned Micro, Small andMedium Enterprise Development Institutions
(MSME-DIs).

 National Awards

The MoMSME with a view to recognising the efforts and contribution of
MSMEs, gives National Awards annually to selected entrepreneurs and en-
terprises under the scheme of National Awards. The Scheme provides for a
special award of Rs. 1 lakh for women entrepreneurs recognized for Out-
standing efforts in Entrepreneurship in Micro & Small Enterprises engaged
in manufacturing. The candidates must have been in business for a mini-
mum period of three years to be eligible for the award.

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 National Manufacturing Competitiveness Programme (NMCP)

The National Manufacturing Competitiveness Council (NMCC) has finalised
a five-year national manufacturing programme. Ten schemes have been
drawn up including schemes for promotion of ICT, mini tool room, design
clinics and marketing support for SMEs. Implementation will be in PPP
mode, and financing will be tied up. Under this plan nine schemes are being
implemented. Nature of assistance varies for each scheme; For details visit
the website: http://www.dcmsme.gov.in/schemes/nmcp_scm.htm MSMEs
can submit the proposal in the prescribed form to be obtained from the DC -
MSME.

The following is a brief indication of incentives provided under the schemes:

1. Marketing support/Assistance to MSMEs (Bar Code): Financial assis-
tance by way of reimbursement of 75% of one-time registration fee
(Under MSE-MDA) 75% of annual recurring fee the first three years
(Under NMCP) paid by MSEs to GS1 India for the use of barcoding.

2. Support for entrepreneurial and managerial development of SMEs
through incubators: Early stage funding for nurturing innovative busi-
ness ideas (new indigenous technology, processes, products, proce-
dures, etc.) which could be commercialized in a year. Under this
scheme financial assistance is provided for setting up of business incu-
bators. Funding support for setting up of ‘Business Incubators (BI)’
varying from Rs.4 to 8 lakh for each incubatee/idea, subject to overall
ceiling of Rs.62.5 lakh for each BI. Items @ per BI:

a) Upgradation of infrastructure Rs. 2.50 lakh

b) Orientation/training Rs. 1.28 lakh

c) Administrative expenses Rs. 0.22 lakh

Total assistance per BI Rs. 66.50 lakh

Any individual or MSME having innovative ideas ready for commercializa-

tion can apply to the host institution (e.g., IITs, NITs, technical colleges, re-

search institutes, etc.).

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3. Enabling manufacturing sector to be competitive through Quality Man-
agement Standard & Quality Tech. Tools (QMS/QTT): The scheme
endeavours to sensitise and encourage MSEs to understand and adopt
latest Quality Management Standards (QMS) and Quality Technology
Tools (QTT). Assistance provided includes:

 Funding support for introduction of appropriate course modules in
technical institutions

 Funding support for conducting ‘QMS awareness’ workshops
(applicant – expert organisation or industry associations)

 Funding support for conducting competition watch (C-watch), study
and analysis

 Funding support for introduction of QMS and QTT in selected MSMEs
(applicant – expert organisation or industry association)

 Participation in international study mission (MSEs as selected by Moni-
toring and Advisory Committee

 A total contribution of Rs.425 lakh per year to be made by the GoI for
introduction of course material, training the trainer, awareness work-
shop and other activities

 Funding support of Rs.1.25 lakh per programme to be provided for con-
ducting awareness programme.

 Under C-watch

§ GoI contribution of Rs.2.5 lakh for professional study on threatened
products.

§ GoI contribution of Rs.7.5 lakh for technical exposure visit

§ GoI contribution of Rs.2.5 lakh for procurement of samples

§ GoI contribution of Rs.5 lakh for product development

§ GoI contribution of Rs.1.5 lakh for popularisation of improved prod-

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ucts

 GoI contribution of Rs.2.5 lakh/unit for covering the costs of diag-
nostic study and for the implementation of Quality Technology
Tools/Quality Management Standards (25 to 50% cost will be paid
by the participating units)

 GoI contribution of Rs.2.5 lakh per SME for International visit
(25% and 50% cost to be collected by the Micro and Small Enter-
prise respectively).

Individual MSEs and technical institutes can apply for assistance under
the scheme. MSEs or clusters may contact Office of the DCMSME. The
DC office will decide on the MSME clusters for conducting the Aware-
ness Programme on Quality Management Standards and Quality Technol-
ogy Tools.

4. Building awareness on Intellectual Property Rights (IPR) for
MSME : The purpose of the scheme is to enhance awareness among
the MSMEs about Intellectual Property Rights, to take measures for
protecting their ideas and business strategies. The scheme provides
Funding support to registered MSMEs, MSME organizations,
MSME facilitation agencies and expert agencies for :

 Conducting awareness/sensitisation programmes on IP
 Conducting pilot studies for selected clusters/groups of indus-

try
 Funding support for conducting interactive seminars/

workshops
Funding support for conducting specialised training on IP
 Funding support in the form of Grant on Patent/GI Registra-

tion
 Funding support for setting up IP Facilitation Centre (IPFC)
 Funding support for organizing interaction with international

agencies

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Scale of assistance will be as follows:

• Rs.1 lakh per awareness programme

• Rs.2.5 lakh per pilot study

• Rs.2 lakh per programme of interactive seminar

• Rs.6 lakh per short term and Rs.45 lakh per long term training
programme

• For registered Indian MSMEs, one time financial support lim-
ited up to Rs.25,000 on grant of domestic patent and Rs.2 lakh for foreign
patent; for registering under Geographical Indications of Goods Act, one
time financial support limited up to Rs.1 lakh

• A total financial support up to Rs.65 lakh each for establishing
IPFCs which will include one-time grant of Rs.45 lakh and Rs.18 lakh as
recurring expenses for 3 years, and Rs.2 lakh as miscellaneous charges

• Financial support by GoI up to Rs.5 lakh and Rs.7.50 per event
for domestic interventions and international exchange programme respec-
tively.

5) Lean manufacturing competitiveness scheme for MSMEs: Financial
assistance for the implementation of lean manufacturing techniques, primar-
ily the cost of lean manufacturing consultant (80% by GoI and 20% by
beneficiaries). Lean manufacturing consultants (LMCs) will raise bills for
services provided to Special Purpose Vehicle (SPV); SPV will pay the first
instalment of 20% to the LMC and will get it reimbursed by the NMIU;
funds will be transferred to the NMIU by GoI. The payment to LMC by
SPV would be on a milestone basis in 5 tranches of 20% each. The scheme
is open to all manufacturing MSEs registered with the DIC (EMII) or with
any other agency (professional body, association, Government agency, de-
partment, etc.). The units are required to form a MC, ideally of 10 units
(minimum 6), by signing among themselves a Memorandum of Understand-
ing (MoU) to participate in the scheme.

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6) a) Design clinic scheme for design expertise to MSMEs manufacturing
sector (DESIGN).

b) Case studies of design projects under design clinic scheme for
MSMEs.

The scheme is for increasing competitiveness of MSMEs and hence to spread
awareness on the importance of design and its learning. Assistance is pro-
vided for ‘Design Awareness’ workshops & seminars and for implementing
‘Design’ projects GoI contribution will be of Rs.60,000 per seminar and 75%
subject to a maximum of Rs.3 lakhs per workshop ; 60% of the total ap-
proved project cost or Rs.9 lakhs, whichever is less, in case of individual
MSME or a group of not more than three MSME applicants; 60% of the total
approved project cost or Rs.15 lakhs, whichever is less, in case of a group of
four or more MSME applicants; 40% to be contributed by the applicant
MSME(s) in both cases.

7) Marketing assistance & technology upgradation scheme in MSMEs.

This is a GoI initiative for adoption of modern marketing techniques by
MSMEs, consistent with the requirement of global markets. The scheme is
divided into eight sub-components, and GoI assistance is available in various
proportions. Assistance is provided in the form of funding support to the ex-
tent of 80% of expenses, unless specified otherwise, subject to certain maxi-
mum limits, as shown.

• Conducting awareness on new packaging technologies, Rs. 50,000 per
programme

• Cluster based studies on packaging status and need for upgradation
(gap analysis), Rs. 10 lakh

• Unit based intervention for packaging requirement (pilot), Rs. 9 lakh
for a group of ten units

• Conducting skill upgradation / development programmes for modern
marketing techniques, Rs. 6 lakh per cluster

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• Conducting trade competition studies, Rs. 8 lakh

• Participation in marketing events by MSMEs belonging to North-
Eastern Region, Upto Rs. 75,000 per unit and transport charges to and fro,
full reimbursement.

•Participation of MSMEs in State/District level local exhibitions/trade
fairs, Rs. 30,000 for SC/ST/Women/physically handicapped entrepreneurs;
Rs. 20,000 for others (full reimbursement)

• Reimbursement to MSMEs for adopting corporate governance prac-
tices, 50% subject to a maximum of Rs. 45,000 per MSM unit

• Setting up of marketing hubs, Rs. 30 lakh for marketing hubs; Rs. 5
lakh for furniture and Rs. 15 lakh for recurring expenses for two years.

• One time re-imbursement of expenditure for ISO 18000/ISO 22000/
ISO 27000 certification for MSMEs, 75% limited to Rs. 1 lakh.

8) Technology and quality upgradation support to MSMEs:

Capacity building of MSME clusters for energy efficiency/clean devel-
opment and related technologies

Implementation of energy efficient technologies in MSME units

Setting up of Carbon Credit Aggregation Centres

Encouraging MSMEs to acquire product certification/licenses from Na-
tional/International bodies

Funding support :

75% for awareness programmes subject to maximum of Rs.75,000 per
programme

75% of actual expenditure for cluster level energy audit and prepara-
tion of model DPR

50% of actual expenditure subject to a maximum Rs.1.5 lakh per DPR to-

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wards preparation of subsequent detailed project reports for individual
MSMEs on EET projects

25% of the project cost as subsidy by Government of India, balance
amount to be funded through loan from SIDBI/banks/financial Institutions;
minimum contribution as required by the funding agency to be made by the
MSME

75% of the actual expenditure, subject to a maximum Rs.15 lakhs for
establishing Carbon Credit Accreditation Centres

75% subsidy to manufacturing MSME towards licensing of products
to national/ international standards; maximum GoI assistance allowed per
MSME: Rs.1.5 lakh for obtaining product licensing /marking to National
standards and Rs.2 lakhs for obtaining product licensing/marking to Interna-
tional standards.

9) Promotion of ICT in Indian manufacturing sector.

Schemes by other national agencies

National Small Industries Corporation

 Performance and Credit Rating : Reimbursement of 75% of rating fee
subject to certain upper limits based on the firms turnover.

 Bank Credit Facilitation : NSIC arranges for credit support (fund or
non-fund based limits) from banks without any cost to MSMEs. All
documentation is handled by NSIC.

 Raw Material procurement : Financial assistance for procurement of
raw material up to 90 days; MSEs are helped to avail economics of
purchases like bulk purchase, cash discount, etc. All the procedures,
documentation & issue of letter of credit in case of imports are taken
care of by NSIC.

 Single Point Registration : Purchase and Price Preference Policy of
the GoI is administered through Single Point Registration Scheme of

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NSIC. Under this, 358 items are reserved for exclusive purchase from
MSME by the Central Government. Other facilities include tender
documents free of cost, exemption from earnest money and security
deposit and 15% price preference in Central Government and PSU
purchases – for individual MSMEs. Tender participating MSEs quot-
ing price within the price band of L1+15% allowed to supply a portion
up to 20% of requirement by bringing down their price to L1 price
where L1 is non-MSEs. Out of this 4% is earmarked for units owned
by SC / ST.

 Infomediary Services : One stop and a one-window bouquet of aids
that will provide information on business, technology and finance, and
also exhibit core competencies of Indian SMEs. NSIC offers services
through its MSMEG Global Mart www.msmemart.com ; which is a
Business to Business (B2B) and Business to Customer (B2C) compli-
ant web portal. Services are available through annual membership
(Platinum Rs. 10,000+Service Tax; Gold Rs. 5,000 + service Tax; Ba-
sic free).

 Marketing Intelligence Services Lease: The information collected and
made available to MSMEs on request includes:

 Database of bulk buyers (product-wise), buyers in Government/
public sector undertakings.

 Database of rate contracts of various Government departments
and PSUs.

 Information on tenders floated by the Government departments
and PSUs.

 Database of Indian exporters to various countries, with lists of
products

 Database of International buyers with lists of products
 Database of technology suppliers & projects for MSMEs
 Business partner matchmaking (one to-one meetings for foreign

delegations with Indian exporters)

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 Market Intelligence reports can be found on web portals pertain-
ing to several sectors, trends analysis and export – import statis-
tics.

 International library provision with: global importers’ directory,
sector specific booklets, National and International business re-
lated magazines/databases/booklets, information guides.

 List of Micro & Small Enterprises registered with NSIC for Gov-
ernment purchases, raw material assistance, performance & credit
rating schemes, MSME Industrial associations.

ARI Division Schemes

 Prime Minister’s Employment Generation Programme
(PMEGP)

The scheme is administered by KVIC through the State units. A capital
investment subsidy is granted by the government (General category –
urban 15%, Rural 25%; Women and special category – Urban 25%, Rural
35%) . Beneficiaries must invest a portion (Women and other disadvan-
taged persons 5% and others 10%) and the balance amount is provided by
banks as term loan and working capital loan.

 Janshree Bima Yojana for Khadi Artisans

Insurance cover is provided to Khadi workers in the age group of 18 to 59
years at Rs. 20,000 for natural death and Rs. 50,000 for death due to acci-
dents and total disabilty. For partial disability the cove is Rs. 25,000.
Children of Khadi workers studying in Standards IX to XII are granted
scholarship of Rs. 300 per quarter, for upto two children.

 Market Development Assistance

Financial assistance is provided to institutions at 20% of the value of pro-
duction of Khadi and Polyvastra, to be shared among the artisans produc-
ing Institutions and selling Institutions in the ratio 25:30:45.

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 Coir Udyami Yojana

This is a credit linked subsidy scheme for setting up of coir units with
project cost up to Rs.10 lakh plus one cycle of working capital which
shall not exceed 25% of the project cost. Beneficiary’s contribution 5%
of the project cost; Bank credit 55%; Subsidy 40% of the project cost
excluding Working capital.

 Skill Upgradation & Mahila Coir Yojana (MCY)

The scheme aims at women empowerment through the provision of spin-
ning equipment at subsidised rates after appropriate skill development
training. Trainees are provided a stipend of Rs. 1,000 per month; the
trainer an honorarium of Rs. 6,000 per month and the sponsoring agency
Rs. 400 pr trainee per month to meet the operational cost of the training
for raw material, power charges, other incidentals etc. Under MCY, the
Coir Board provides 75% cost of motorised Ratt / motorised traditional
Ratt as one time subsidy, subject to a ceiling of Rs.7,500 in the case of
motorised Ratt and Rs.3,200 for motorised traditional and Electronic Ratt.

 Development of Production Infrastructure

Financial assistance is provided by Coir Board for setting up of coir units
with a project cost up to Rs. 10 lakhs in the country. Subsidy will be pro-
vided at 25% of the project cost subject to a maximum of Rs. 6 lakh for
setting up of De-fibering Unit, Rs.4 lakh for Automatic Spinning Unit and
Rs.5 lakh for others, including Coir Pith Unit. For a Composite or a Mul-
tiple Unit, the maximum monetary ceiling of assistance would be Rs. 9
lakh. For calculation of subsidy amount, the cost of building will be re-
stricted to a maximum of Rs. 8 lakh for Defibering and coir pith units and
Rs. 6 lakhs for others including Automatic spinning Unit.

 Personal Accident Insurance Scheme

Coir workers are covered for accidental death and total disability to the

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extent of Rs. 50,000 and for partial disability to Rs. 25,000. Loss of fingers
is also covered in proportion to the loss.

Ministry of Training and Entrepreneurship Development Schemes

Udaan Training Programme for unemployed youth of J&K (SII J&K)

This scheme provides employment oriented training to the youth from the
state over five years covering various sectors like business management,
software, BPO.

National Skill Certification & Monetary Reward (STAR scheme)

The scheme will provide monetary incentives for successful completion of
market-driven skill training to approximately 10 lakh youth in a span of one
year from the date of implementation.

Pradhan Mantri Kaushal Vikas Yojana

Key features of the PMKVY includes adhering to standards (National Occu-
pational Standards –NOS and Qualification Packs – QPs for specific job
roles), greater outreach and ownership; improved curricula, better pedagogy
and trained instructors (all skill training would include soft skill training,
personal grooming, behavioural change for cleanliness and good work eth-
ics as a part of the training curricula), Enhanced monitoring, mentorship
support, evaluation and grievance redressal.

Candidates undergoing skill training by authorized institutions will be
granted an average monetary reward of Rs.8,000 per candidate. The scheme
would benefit 24 lakh youth.

Ministry of Labour Schemes

Apprenticeship Training

This scheme aims to provide facilities available in industry for imparting
practical training with a view to meeting the requirements for skilled man-
power of Industry. Monthly stipend ranging from Rs.1,970 to Rs.3,560 per

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month is provided to any person who is 14 years or above, fulfills basic
physical and educational standards as per the apprentices act.
Craftsmen Training (ITIs)
The scheme is formulated to impart skills in various vocational trades to
persons from class-VIII pass to class-XII pass depending upon the trade by
way of Industrial Training Institutes (ITIs).
Schemes of Other Ministries
Every other ministry has industry related programmes, which provide spill
over benefits to MSMEs. They are not detailed here as it is beyond the
scope of this work. Interested readers may consult the compendium “MSME
Schemes” available at
http://www.msme.gov.in/WriteReadData/ebook/
MSME_Schemes_English.pdf.

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Appendix 7
Preparation of a Business Plan

Conducting a study on the feasibility is essential for any business venture as
it gives an indication of the risk the entrepreneur is undertaking. The extent
of the risk and the depth a feasibility study should take depends on a number
of factors. The most important of them are the market for the product, avail-
ability of appropriate technology and suitable manpower. The study should
reflect the effects of all these factors in terms of investment-income-surplus
over a period of time : start-grow-stabilize-decline and exit or re-energize. It
should specify the ‘assumptions’ on which the study is based and the
changes that would happen, should the real situation turns out to be different
from the assumptions.

Before going into detailed feasibility study it is necessary to gather data on
the market size and minimum viable production size. A preliminary investi-
gation with similar existing businesses, business associations like industry
associations, chambers of commerce and the like can be informative. Pub-
lished documents like industry reports can also be useful indicators. This
step should also involve determination of the needed inputs such as raw ma-
terials, technical manpower, maintenance services and their availability
within reasonable reach, reasonable in terms of access time and cost. The
investigation must then extent to identifying reliable and experienced sup-
pliers or fabricators of the necessary equipment and obtaining preliminary
cost indication (Budgetary quotes) as well as an estimate of the building re-
quirement. At this stage it should be possible to ascertain the availability of
built in space at the government or private industrial estates as also the addi-
tional civil works you may be required to carry out. Once you have an idea
about the funds required for investment you can determine the volume of
credit needed from a bank or financial institution or other sources such as
friends and relatives.

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The information thus gathered could be arranged in a computation format to
arrive at the economics of each of the shortlisted activities. The net result
can be ascertained by the formula :
A. Investment in land, buildings and equipment + preliminary expenses

like property registration, company registration, self and employees’
training, erection of equipment etc.;
B. Income expectation from a stated percentage of market share for a
year;
C. Cost of producing the goods and services appropriate to the expected
market share, towards cost of raw materials, services to be procured,
utilities like electricity and water, manpower cost, local taxes other
than income / corporate tax, depreciation of capital assets, insurance
etc. for one year;
D. Cost of financing being the interest payable on borrowed funds;
E. Annual Net Income before Taxes=B-C-D
F. Profitability as a percentage of investment = 100 X E ∕A (Return on
Investment)
G. Profitability as a percentage of own investment = 100 X E / Own in-
vestment (Equity)
H. Pay Back period = A/E
By comparing the values of F , G and H you can assess the desirability of a
venture you should move into. In making the decision before making a se-
lection you would also need to ascertain various factors affecting the actual
implementation. They include, availability of power and water as the alloca-
tion of the utilities are dependent on the local constraints. If they are not
available from sources close to the premises you may have to consider cre-
ating your own sources which will add to the total investment. Similarly you
should also consider the pollution factors such as fumes, noise and waste
disposal. Pollution control system has norms for the permissible levels of
pollution which must be observed at the time of start up and throughout the
life of the unit. Pollution norms get infringed in two circumstances,

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(1) when your business which is at the threshold when established is ex-
panded and (2) when new human settlements occur within the threshold lim-
its. You must therefore take into consideration the possibility of these two
occurrences, which will call for investment in corrective measures or being
forced to close down, though it could happen only on a distant day.

Preparing a Business Plan

Having made a choice of the business, it is necessary to build up a business
plan. A business plan is highly necessary for the proper implementation and
control of the project. The business plan comprises of the following ele-
ments.

Market Intelligence : Get a proper market study done by an expert. It should
tell you the real opportunities and constraints in marketing the product or
service in question. In the case of an existing market for the proposed prod-
uct, the present and possible future gap in the demand and supply, together
with the extent of market share you can exploit, needs to be determined. If it
is a substitute for an existing product acceptability and willingness to shift
on the part of the consumer must be assessed. Most entrepreneurs fall into
the trap of making assumptions about the market without pointed studies. It
must be remembered that even detailed market studies do not predict the
exact attitude of the consumer towards a new or modified product, and that
venturing without any study or depending on spurious estimates is suicidal.
Further, the existing and future possible competition must be assessed. It
may be that some one else has already gone ahead with a project and would
soon enter the market as a competitor. Such contingencies can be learned
with an analysis of the market-impact region. Development agencies like
DICs, financial institutions including banks, industry associations and the
local self government institutions in the impact region can provide indica-
tive information regarding projects in the offing. Market study should indi-
cate the maximum and optimum market shares you can reasonably expect.
Never go by the outdated estimates in old studies or claims of “tremendous
market”.

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Sourcing of Technology and equipment : The next important factor to be
considered is the availability of appropriate technology and equipment and
sourcing them. This step also involves ascertainment of the impact on the
ecology of the area where the plant is to be put up, as both local self govern-
ments and the people are much sensitive about even the slightest environ-
mental issues. Your choice will obviously be the least pollutive technology,
if alternatives are available and when there are no choices there should be
economically implementable corrective procedures. Technology suppliers
and equipment vendors must be asked to provide details and guarantees on
pollution and efficacy issues so that you are not engulfed between an inop-
erative enterprise and an inimical public or mob.

All elements forming part of the capital investment should be assessed prop-
erly. They include cost of technology as an outright purchase or as royalty
on actual production or sales or both, cost of equipment, their transportation
and erection expenses including the cost of utilities, materials, labour and
expert services to be locally provided.

Before investing in an expensive piece of equipment you would typically
listen to the manufacturers claims, talk to existing users of the equipment
and read professional reviews of the equipment in industry magazines. If
you get a consistent picture on the product then you can be more confident
about your final decision to proceed, or perhaps to proceed subject to condi-
tions.

Location, Land and buildings : It is important to find a suitable location.
Though of great advantage, locating the business close to raw material
sources or the market is not essential in the case of manufacturing enter-
prises as the country has a reasonably good transport system and rail / road
network. What is more important is finding a location where the present and
future human settlements will be beyond the pollution belt relevant to the
industry chosen. Many industrial units have suffered because of the pollu-
tion reaching the neighbourhood and thereby causing public agitations and
eventual suspension or closing of the activities. It will be a good idea to dis-

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cuss with the residents or their associations as well as the municipal authorities
before finalizing the location and seek their cooperation. However, the best
course of action could be to find a suitable workshed or piece of land in an in-
dustrial estate or an industrial cluster. It will have the added advantage of com-
mon facilities, common approach to issues and least public interference. Space
in industrial estates and clusters are generally cheaper than private lands, be-
cause they form part of the industrial development programme of the state,
central or local government.

The specifications of the infrastructure required depends on the nature of the
business and should be determined in consultation with the equipment suppli-
ers and architects having knowledge about the factory law requirements. Note
that clearance by the local factory inspector is an essential element for munici-
pal license to run the business. Hence obtaining guidance and advice from the
factory inspector before starting the construction is also desirable. Appropriate
safety measures and waste disposal facilities, including recycling where rele-
vant, must also find their place in the construction plan. An estimate of cost of
construction should be made based on the blue print of the infrastructure.

Sourcing of rawmaterials, other supplies and services: Sourcing of raw mate-
rials involves locating the places where the required raw materials are avail-
able, their quality and cost at your door, which depends on the transportation
and the need to visit the suppliers’ places every time you buy. Possibility of
supply through agents and also of on-line purchases should be considered,
keeping in mind the advantages in costs and quality. Same approach applies to
other supplies also. Services are normally sought from nearby areas. However,
regular maintenance and breakdown services when supplied by the technology
providers or equipment suppliers need to be evaluated on the basis of response
time and consequent loss of production and the service cost to be paid. A gen-
eral idea about the local availability of emergency services would be helpful.

Manpower: One of the most important factors demanding your attention
should be the availability of appropriate manpower. You should determine the
kind and number of people required to run your business and ascertain their

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availability and cost. Employment exchanges, vocational training centres and
specialized institutions can be a good source of information, though not neces-
sarily adequate for your need. You might need to recruit suitable hands and
train them on the job, may be with the help of technology providers or equip-
ment suppliers. Keep in mind, the possibilities of some of the trained personnel
leaving before you had the opportunity to utilize their services commensurate
with the cost of training. Training should therefore include developing substi-
tute personnel. You must decide on a retention policy well in advance as it will
have a bearing on your performance and costs.

Working Capital :Working capital requirements are estimated taking into ac-
count the costs of inputs, production cycle, lead time between purchase, produc-
tion and sale, where stock holding occurs for a time period. Credits that may be
available from input suppliers depends on the market custom relevant to the
items. It may vary from a few days to a couple of months. Desirably, credit ar-
rangements should be contracted with the suppliers in advance.

Capacity Utilization: An important factor to remember is that no business nor-
mally achieves its full built in capacity because there will be some time loss due
to normal shutdowns for repairs and maintenance or because of load shedding,
delays in procurement etc. Practical capacity utilization should be estimated on
the basis of the possible market penetration. It is logical to assume a low profile
in the beginning steadily improving over a time period.

Terms of Financing: How the business will be financed is to be determined with
reference to the volume of investment and the working capital requirement. Re-
serve Bank of India’s directives require the banks to lend upto Rs. 1 crore with-
out any collateral security—i.e. by accepting the assets created by the loan as
sufficient security. The borrower is expected to put in a share of the total invest-
ment cost as equity. For the working capital also a portion is to be brought in by
the owners as margin money. To encourage investment in industries govern-
ments provide various subsidies which will reduce the financial burden of the
investors. However, it should be noted that capital subsidies are routed through
the lending bank with a stipulation that they are to be adjusted only against the

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last instalment of loan repayment. The burden of repayment of loan and the
interest on the loan amount, less subsidy credited, will continue until the loan
is closed. Other incentives like subsidy on power consumption, registration
expenses etc will be available only after the expenses are incurred and the
sales volumes are established after the close of the year for which incentives
are granted. As such, in the business plan these benefits are taken into ac-
count only in the year following.
Once you have gathered the required information on the lines described
above it will be desirable to engage a knowledgeable consultant to prepare a
business plan.

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Appendix 8
Selection of a Franchiser

What to look for while selecting a franchisor :

Before deciding on buying a franchise you must carefully consider factors
that are critical to your success. Start by asking yourself what kind of fran-
chise you want to operate. You will need to consider the hours you are will-
ing to work, the kinds of work you enjoy and whether you prefer working
directly with customers or remaining behind the scenes. Key factors also
include how much income you need to generate and how much cash and
borrowed funds you can commit to the deal.

As a general rule, you will want to avoid fields that are either too crowded
or too thinly populated. Crowding creates competition, while the absence of
franchisees in a particular niche suggests that it either doesn’t lend itself to
franchising or that the market hasn’t yet developed adequately. Lenders pre-
fer to fund franchises in proven markets, so keep that in mind as well.

The franchiser should offer a well-known brand name, a track record of
proven performance and a good reputation among past and present franchi-
sees. The franchiser should also have a detailed manual of operations to
help you run the business according to tested principles but also give you
enough flexibility to help you adapt to specific circumstances. The franchise
must also conform to your requirements for income and investment.

The International Franchise Association (IFA), a Washington trade group,
provides a free online directory of more than 1,200 opportunities searchable
by category, franchise name, amount of start-up capital required, availability
of financing and other important criteria. No such documentation is readily
available, although the website if Indian Franchise association gives some
useful information.

A checklist published by the International Franchise Association, USA con-
tains questions to be answered before deciding on a franchise deal:

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Costs:
 How much money will this franchise cost before it becomes profitable?
 Can you afford to buy this franchise?
 Can you make enough money to make the investment worth my time and

energy?
Your Ability
 Do you have the technical skills or experience to manage the franchise?
 Do you have the business skills to manage the franchise?
Demand
 Is there enough demand in your area for the franchisor's products or ser-

vices?
 Is the demand year-long or seasonal?
 Will the demand grow in the future?
 Does the product or service generate repeat business?
Competition
 How much competition do you have, including other franchisees?
 Are the competing companies/franchises well established?
 Do they offer the same products and services at the same or lower prices?
 Is there a specialty or niche you can capture?
Brand Name
 How well known is the franchise name?
 Does it have a reputation for quality?
 Have any consumers filed complaints against the franchisor with the au-

thorities concerned or whether any suits are known to be pending in
courts?
Training and Support
 What kind and how much training & support does the franchisor provide?
 Do existing franchisees find this level of training and support adequate?

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