Steps in Starting a Small Industry
Who do establish small business enterprises? Broadly, there are two types of people who establish small enterprises. One people who want to take the advantages of opportunities available. Two, people who have no option for making a livelihood.
These two types of entrepreneurs are also termed as ‘entrepreneurs by choice’ and ‘entrepreneurs by compulsions’ respectively. Starting an enterprise is not so simple and cannot be set up just. In fact, there are several steps involved in setting up a small business enterprise.
Any entrepreneur desirous of starting a small – scale industry should have a clear picture of the objectives of his project. It is advisable a comprehensive check list.
An impression seems to have gained ground among some people that there are some restrictions on the getting up of small scale industrial units and that licenses from either the central or state governments have to be taken out before an entrepreneur to set up an industrial unit in the small scale sector no formal permission from the state or Central government is necessary for this purpose. Also industries employing less than 100 workers and having fixed assets of less than Rs.10 lakh need not obtain any license under the Industries. (Development and Regulation) Act.
Registration of Small scale industries
In their won interest all existing small – scale units or intending entrepreneurs employing more than 10 workers should get themselves registered with the Director of industries in their State. A copy of this application for registration should be sent to the Director of small industries service Institute in the concerned state.
The small entrepreneur needs the requisite type of machines for production. He can get the necessary machinery from the National Small Industries Corporation under a hire – purchase scheme.
- The raw materials required by SSIs may broadly be classified as under:
- Raw materials components and spares both indigenous and imported.
- Non – ferrous materials – both indigenous and imported.
- Iron and steel – both indigenous and imported and
- Chemicals – indigenous and imported
The finance function in a small – scale industry is similar to the financial function in any other organization, but with this essential difference – that there are a host of banking and insurance regulations to be strictly adhered to and quite to fe precautions to be taken.
Following are the major Steps
- Information Collection
The first step involved is to decide which enterprise one wants to set up. This begins with collecting information about the units already working in that field of concern. This can be done by various ways such as going through the telephone directories or by visiting the registrar’s office of the small-scale units.
This will enable the prospective entrepreneur to make an assessment of the present market situation in that business activity. Based on this information, they can weigh the pros and cons involved in entering into that business activity.
For example, they can come to know that the medical transcription and call centers have been doing very well in the service sector enterprises in the country. This is because of high labour cost in high income countries; the multinational companies have gradually started shifting their labour-intensive manufacturing activities to the developing countries.
In view of this, there is a great opportunity to tap those products which would be outsourced by the Multi-National Companies (MNCs) through quality vendors. Similarly, the rapid increase in the tourist influx in Jammu & Kashmir due to improvement and restoration of peaceful law and order situation indicates very good prospects for service providing enterprises like travel, tour, and hospitality industry in the region.
- Information Organization
Having collected information about enterprise concern, the prospective entrepreneur needs to organize the same in an orderly and systematic manner to derive the meanings from them. This will help to make assessment about the minimum requirements to start an enterprise in a particular business line.
Here, one generally undertaken exercise is to prepare a checklist for ready reference of all required and available resources in terms of space, fund, training and development, and manpower requirements. Once this exercise is over, the step involved will be to prepare a summary of how the checklist will be transformed into the desired products and services. Here we are presenting you one exercise based on your above understanding.
- Acquiring Required/Vocational Skills
The third step is to understand the need for upgrading one’s vocational skills if it is a pre-requisite for your Small Enterprise Unit (SEU). The importance of acquisition of required skills is justified by the statement that “it is better to teach a man to fish than to provide him with fish everyday”.
There is a need to build on one’s strengths in order to gain and feel confident of implementing your project of setting an SEU. Awareness and training in required subject can remove structural barriers. You will feel sure of yourself in taking loans and as also taking risk. Risk is a part of setting up an SEU.
Once your clients have set up their SEU, updating themselves on the latest developments in the field should be a continuous process. They can also hire skilled workers and staff to carry out the major tasks at their SEU.
- Financial Requirements
The fourth step involved is ascertaining the financial requirements for setting up a small business enterprise. This is particularly important because generally small entrepreneurs do not have their own funds. Hence, they depend upon borrowed funds from family members or relatives or friends or financial institutions.
While planning for finance, the prospective entrepreneur needs to consider issues like sources, availability, estimation and management of working capital. One should have the basic knowledge of preparing income and expenditure statements.
One should also go for insurance cover provided by the concerned financial institutions. Providing financial services in a commercial way is gaining a lot of credence these days. There are well-planned credit schemes for small enterprises available offered by the banks and co-operatives.
- Market Assessment
No business enterprise can be thought of without market. Enterprise exists, survives and thrives because of market. Production has no value or meaning if it is not sold /marketed. Therefore, while planning for establishing a small business enterprise, the prospective entrepreneur needs to know who will buy his/her product.
- Provision for Crisis
The last but not the least step involved in setting up a business enterprise is the preparedness to manage crisis situations, if any. Yes, some may not consider it as a necessary step because foreseeing any crisis and its handling is simply an additional step.
Even many may view why to think in a negative way for the worst which may not happen at all. Admitting that optimism helps, there is no harm in being prepared for any eventuality, if it arises. It is always useful to remain prepared for something unexpected in terms of resources, policies, finances and natural calamities takes place. Seeking insurance cover is the best way to deal with these situations.