project report

project report – a series

·        Details about project report

            The Project Report is an important document; it is a proposal of proposed plan or business activity. The project report contains detailed information about following aspects.

1)     – Identity of an Entrepreneur with detailed address.

– Name of the Enterprise with detailed address

– Type of Enterprise (Proprietary/Partnership/Limited Company, etc)

–        Entrepreneurs background

–        Details of services or products.

–        About availability of market

–        Product process

–        About the competition

–        About availability of raw materials (Indigenous/Imported)

2)     Plan : Information about capital requirement

a)     Land and building area details (Owned/Rental), The Price or Rent details

b)     Machinery details. It includes the information about:

i)                   Title and description of machine

ii)                Indigenous/Imported

iii)              Machinery details with production capacity

iv)              Power required

v)                 Price, etc total of all above

You also have to consider –

i)                   If the machinery is imported the different taxes

ii)                Octroi

iii)              Transportation charges

iv)              Machinery erection/installation expenses. Total of all above         

c)     Testing equipments

d)     Other financial investments like

i)                   Contingency expenses

ii)                Power connection

iii)              Jigs & fixture

iv)              Office equipment & furniture etc

e)     Total fixed capital expenditure (a+b+c+d)

f)      Expenses on manpower

i)                   Office staff

ii)                Technical staff. Total of per month salaries

g)     Raw material details. Here one has to calculate requirement of raw materials. It includes:

i)                   Whether it is indigenous or imported

ii)                Requirement for one month.

iii)              Weight and numbers

iv)              Price; Total of all above points 

h)     Other expenses such as:

i)                   Power

ii)                Promotion & travelling

iii)              Communication & stationery

iv)              others

i)       Total working expenditure (f+g+h)

j)       Working capital requirement for 3 month (Total working expenditure X 3)

k)     Total capital investment, i.e.

–        Fixed capital (E)

–        Working capital (J) Total

l)       Arrangement of capital investment.

Here the fixed capital & working capital is divided into

i)                   Own investment

ii)                Loan from the financial institution

iii)  Working capital and total of the same; (It would be divided as per the scheme offered by the institutions)

m)   Annual sales; it includes,

i)                   Production of different services/products

ii)                Total production

iii)              Rate

iv)              Total sales price – Total of the same

n)     Annual production expenses; it includes,

i)                   Annual working expenditure (i X 12)

ii)                Repairs & maintenance (3 & ½ %)

iii)              Depreciation on machinery (25%)

iv)              Depreciation on building (10%)

v)                 Interests of investment……Total of all.    

o)      Total profit i.e. Annual sales – Annual production expenses (m-n)

p)     Annual taxes

q)     Net profit i.e. Total profit – taxes (o-q)

r)      Addresses of Machinery suppliers

s)      Addresses of Raw material suppliers

t)       Signature of entrepreneur

Preparation of project report requires knowledge about Calculations, Break Event Point (BEP) analysis, Ratio analysis like Return on Investment (ROI), etc. One has to learn, read and write his/her own project report. It is always better to understand & know your project well.

·         Availability of standard profiles/pro forma for preparation of project report.

The model project profiles are available with CEDs, TCOs, Banks, MSME, DIC etc organizations. One may also get blank pro forma of the reports form financial institutions, CEDs and TCOs. However, the available project profiles have to be recast in accordance with specific needs of the entrepreneurs and the current prices of inputs. 

·         Support agencies to prepare project report.

Agencies namely Maharashtra Industrial & Technical Consultancy Organization (MITCON); organizations registered with MSME under RGUMI Project in the States, Chartered Accountants, DIC, SFCs, NSIC, MSME institutions also support to prepare projects.

·        Support agencies for selection of production process & equipments.

Micro Small and Medium Enterprises Development Institute; Design and Development Centres like MSME Technology Development Center/Tool rooms; R&D agencies like NRDC, CSIR, Regional Research Laboratories; TCO’s, NSIC are the support agencies, in this regard.

Finance for Msm enterprises

Finance for Msm enterprises – a series

·        Support agencies providing financial assistance for msme

            There are following financial institutions which make finance available under their schemes for MSM Enterprises.

-         Credit societies

-         Micro finance from SHGs

-         District Co-operative Banks

-         Scheduled Banks

-         Regional Rural Banks

-         Nationalized Banks

-         State Financial Corporations

-         National Small Industries Corporation

-         Small Industries Development Bank of India etc.

Normally any institution looks for few aspects before financing the units; i.e. economical viability of the project, technical feasibility of the project and entrepreneurial abilities of an entrepreneur.

Financial assistance has two components. Loan for fixed capital is used to acquire plant and machinery, land and building. Working capital loan is used to meet day to day operational cost of the production.

Entrepreneur has to assess the possibility of providing composite loan from the financial institution. Composite loan covers plant & machinery, land & building and working capital.

·         Private agencies providing financial assistance for msm enterprises

Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a subset of private equity. Therefore all venture capital is private equity, but not all private equity is venture capital.

In addition to angel investing and other seed funding options, venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the company's ownership (and consequently value).

It is also a way in which public and private actors can construct an institution that systematically creates networks for the new firms and industries, so that they can progress. This institution helps in identifying and combining pieces of companies , like finance , technical expertise , knows and how's of marketing and business models, once integrated these enterprises succeeds by becoming nodes in the search networks for designing and building products in their domain.

·        Choosing the most suitable source of funding

One has to study the different financial schemes announced by the financial institutions. It is necessary to evaluate & compare the terms and conditions mentioned in the schemes. Comparisons of interest rate, the period of repayment. The location of the institution should also be considered; it should be near to your enterprises. It is necessary to get the feedback of old customers of the bank so that you will get an additional information about the overall approach of the institutions, nature of the institution, after loan services of the institution, whether they have the development attitude, etc about the financial institution.

·        The eligibility criteria for getting a loan

The major eligibility criteria are Return On Investment (ROI) and the profitability of the project. Any financial institution sees to it that the repayment is assured.   

·        Investment from the own resources/funds

Some portion of the total investment has to be contributed by an Entrepreneur. This owners contributed is known as margin money. Entrepreneurs are classified in different categories namely SC/ST, women, defense, physically challenged, minority, technocrat, open etc; Depending upon the category of an entrepreneur the financial institutions insist on 7.5% to 30% margin money, one has to study this category pattern and arrange for his own investment or decide for the total project cost/investment.  

·        The procedure for getting a loan

Prescribed loan application forms are available in the financial institutions. One has to fill up the loan application form. Apart from this one has to prepare and submit a project report: with enclosures of all supportive documents such as identity, educational qualifications, residence, land/building proof, quotations of raw materials, machinery, letters about market potential, collateral securities. Simply whatever you write should support by evidence as papers. It is the discretionary power of financial institution to sanction and disburse the loan or they may give the loan if the project meets all the scheme norms, terms & conditions.

 

·        Funding for the land & building costs

The Banks & SFCs offer assistance for land/building/shed to certain extent. However, some qualifying parameters have been laid down by these institutions. Housing Development Finance Corporation (HDFC) also provides funds for land/building.

·        State & Central Government Schemes for financial assistance.

Ø By District Industries Centers (DIC)

1.      INDUSTRIAL PROMOTION SUBSIDY SCHEME :

Govt. of Maharashtra is one of the first States implementing Package Scheme of Incentives for decentralization of industries. Scheme is proven as most effective for indl. decentralization. Govt. involves the Chamber of Commerce & Industries, Indl. Organizations while framing the policies. Govt. has simplified the procedural Rule & Regulations while framing the policy and classified whole State in 6 categories like A, B, C, D, D+ & No Industry Dist. as per the Indl. development so far achieved.

2.      REVISED SEED MONEY SCHEME :

To encourage self employment venture amongst unemployed youths, Govt. has specially announced New Seed Money Scheme w.e.f.18.5.07 increasing project cost limit from Rs.10 lakhs to 25 lakhs, reducing rate of interest on seed capital from 10% to 6%. A special rebate of 3% is admissible for regular repayment of seed capital.

Eligible educated unemployed gets 15% soft loan from D.I.C @ 6% as seed money loan for the project cost upto Rs.25 lakhs and the upper limit of seed money Rs.3.75 lakhs. In the interest of social justice, for all backward categories and handicapped youths, 20% seed money loan is eligible for the project cost upto Rs.10 lakhs.

Eligibility:

1. Age limit - 18 to 50 years.

2. Minimum 7th Std. pass.

3. Domicile of Maharashtra State.

3.      D.I.C Loan Scheme:

1. Any rural service and cottage industry is eligible to get the benefit under the scheme.

2 Soft loan from D.I.C for general categories 20% upto Rs.40,000/- and 30% for r the SC/ST category upto Rs.60,000/- against the project cost approved by the Financial Institutions.

3. The value of Plant & Machinery should not be more than Rs.2.lakhs.Soft loan is admissible @ 4% interest p.a.

4.      NABARD MARGIN MONEY SCHEME :

1. Any rural small scale industry.

2. Maximum Project cost upto 25 lakhs.

3. 20% Interest free loan from NABARD with service charges.

Eligibility:

1. Special high-tech projects are eligible only.

2. All nationalized and schedule commercial banks are eligible for finance. 

5.      Prime Minister's Employment Generation Programme (PMEGP) :

1. Ministry of Micro, Small and Medium Enterprises (MoMSME) has launched a new credit linked subsidy programme called Prime Minister’s Employment Generation Programme (PMEGP) on 61st anniversary of Indian Independence by merging the two schemes that were in operation till 31.03.2008 namely Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP) for generation of employment opportunities through establishment of micro enterprises in rural as well as urban areas. PMEGP will be a central sector scheme to be administered by the Ministry of MSME.

2. The subsidy levels under PMEGP are as under: 

Categories of beneficiaries under PMEGP	Owner’s contribution	Rate of Subsidy
		(of cost of Project)
Area		Urban	Rural
General	10%	15%	25%
Special (including SC/ STs/ OBCs/ Minorities/ Women, Ex-servicemen, Physically Handicapped, NER, Hill and Border Areas)	05%	25%	35%

3. The upper limit of the cost of project that could be setup in the manufacturing sector is Rs.25 lakh while that in the business/service sector is Rs.10 lakh. There are no ceiling limits of annual income in respect of beneficiaries while a minimum educational qualification of VIII standard fail will be required for beneficiaries in respect of projects costing more than Rs.10 lakh in manufacturing sector and more than Rs.5 lakh in business/service sector. The beneficiaries would be identified, inter alia, with the help of Panchayats, Special Awareness Camps and will be provided with a mandatory Entrepreneurship Development Programme (EDP) training of a duration of two to three weeks. The scheme envisages electronic tracking of applications, 100 per cent verification of projects/units that will be established and model project profiles have been updated in association with banks. The scheme will be implemented at the national level through Khadi and Village Industries Commission (KVIC), an organization created under an Act of Parliament reporting to MoMSME which will place the funds of Government subsidy with the participating banks which in turn will disburse the same to the beneficiaries on receipt of applications and their own contribution ‘upfront’ in accordance with the guidelines of the scheme.

4. While KVIC has been given the overall responsibility for implementing PMEGP at the national level, it will directly do so in respect of the targets for rural areas, as defined in the KVIC Act, through its State Offices and State Khadi and Village Industries Boards (KVIBs). Implementation of PMEGP in urban areas and other rural areas will be done through the State Governments {District Industries Centres (DICs)}. The newly introduced Rajiv Gandhi Udyami Mitra Yojana of MoMSME can also be tapped for providing handholding support to the beneficiaries under PMEGP.

6.      VARIOUS SCHEMES OF CENTRAL GOVT. FOR INDL. DEVELOPMENT

1. MINISTRY OF FOOD PROCESSING, GOVT. OF INDIA:

Scheme - Grant to Food Processing Industry

Eligible Industry - Fruit Processing, Vegetable Processing, Milk Processing, Meat processing, Dal Industry, Edible Oil Industry, Spices, and manufacturing all other food items.

Grant Limit - 25% of the fixed capital investment.

Maximum Limit - Rs.50 lakhs.

Website: www.mofpi.nic.in

2. Scheme - Grant to basic infrastructure established for food processing Industries.      

(Food Park)

Eligibility - Basic infrastructure required for Food Processing Industry viz. Roads, Water, Electricity, Cold Storage, Laboratory, Godown, etc. to make such basic infrastructure available.

Grant Limit - 25% of the basic infrastructure investment.

Website: www.mofpi.nic.in

3. Ministry of Commerce & Industries, Govern of India:

Scheme - To make modernization of the basic indl. Infrastructure (IIUS)

Eligibility - Modernization of basic facilities in the industrial area viz. Roads, water, electricity, etc.

Grant limit: 75% of total fixed investment.

Maximum Limit - Rs. 50 crores.

Website: www.dipp.nic.in 

4. MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES, GOVT. OF INDIA

Scheme - To provide/ modernize basic infrastructure facilities (IID) up to 5 crores

Eligibility - Establishment /Modernization of basic facilities in the industrial area viz. Roads, Water, Electricity etc.

 Grant Limit - 40% of the basic infrastructure investment.

Limit - Rs. 2.00 Crores

Website: www.smallindustry.india.com

5. MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES, GOVT. OF INDIA

Scheme - To provide basic infrastructure to small scale industrial cluster

Eligibility - Cluster of small scale industries.

Limit of project - Rs. 10 Crores

Grant Limit - 80 % of the capital investment

Limit - Rs. 8 Crores

Website: www.laghuudyog.com

6. MINISTRY OF HEALTH, GOVT. OF INDIA

Scheme - National Medicinal Plant Board

Eligibility - Cultivation of medicinal plants, processing, research etc.

Grant Limit - 30 % of the capital investment in the industry.

Limit - Rs. 9 Lacs

Website: www.nmpb.nic.in

7. DEPT. OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA.

Scheme - Various Industrial and Scientific Research Project

 Eligibility - Institutions / persons willing to work in this sector

 Grant - Income tax concession, Excise duty concession, Import Duty Exemption etc

 Website: www.dsir.nic.in

8. MAHARSHTRA ENERGY DEVELOPMENT AGENCY (MEDA):

GRANTS: 20 % of total expenditure for the plant & machinery of the project or a maximum of Rs. 4.00 Lacs (whichever is less).

Website: www.mahaurja.com

Ø   By KVIC in all States

1.      Prime Minister's Employment Guaranty Programme

2.      Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

3.      Rural Industry Service Centre (RISC)

4.      Export Incentive Scheme

5.      Interest Subsidy Scheme      

How the would-be entrepreneur can become a successful entrepreneur

How the would-be entrepreneur can become a successful entrepreneur – a series

          The success pentagon

            There are five dimensions which act as driving force to become a successful Entrepreneur. They are Attitude, Skills, Knowledge, Habit & Strategy; first three dimensions are familiar to us, it is also known to us as ASK model or the three H model i.e. Heart, Hand & Head.

Attitude: Attitude is related to the state of mind. It is internal and associated with once thinking pattern, the way of interpretations, and the use of language, In short it comprises of self concept i.e. Belief, Feelings & Behavior, Beliefs are thought about self, Feelings are self worth, dare & Behavior is tendency to act towards one’s self in a self-enhancing manner etc. Therefore it is related to mind & heart.

Skills: Skills are of two kinds, one management skills & two technical skills, it’s a combination of head & hand.

Knowledge: Entrepreneurs requires general knowledge of product opportunities, how to set up MSM Enterprises, sales & marketing etc. This is a domain of Head.

Two more dimensions in addition to earlier modules are also equally important.

Habit: One may have a unhealthy habits or healthy habits. Un entrepreneurial habits or entrepreneurial habits, It is very difficult to remove habit. If you remove h-abit remains, if you remove a-bit remains, if you remove b-it remains. So a transformation from an ordinary person to an extraordinary person is a very interesting process.

Strategy: It is specific path of action chosen by the person to achieve his objective.

Considering the path of becoming a successful entrepreneur we would address the issues as follows.

General knowledge –

·        Self Employment & Entrepreneurship

Nowadays the terminologies like livelihood, self employment has become very popular. Dr. Mohmad Unus’s contribution to the innovative idea of Self Help Group (SHG) and the problems in India of educated Unemployed Youth has given rise to livelihood activities for below poverty line people & self employment activities for educated unemployed youth. These are very micro, cottage or that way small activity. But to begin with these initiatives are good as stepping stone towards becoming an entrepreneur.

Entrepreneurship is a broad term. It is being used for those who have potential to become an entrepreneur. And starts sizable activities as small scale industries; they can generate employment for others.

·        The terms micro, small or medium enterprises.

Nowadays the term ‘Industries’ has been changed to ‘Enterprises’

Broadly the Enterprises have been classified in to two areas.

1)     Enterprises engaged in providing or rendering of services. Service enterprises have been defined in terms of their investment in equipment (excluding land & building) and further classified into:

·        Micro Enterprises – investment upto Rs. 10 lakh.

·        Small Enterprises – investment above Rs. 10 lakh upto Rs. 2 crore.

·        Medium Enterprises – investment above Rs. 2 crore upto Rs. 5 crore.

2)     Enterprises engaged in the manufacture or production of goods. Manufacturing enterprises have been defined in terms of investment in plant and machinery (excluding land and building) and further classified into:

·        Micro Enterprise - investment upto Rs. 25 lakh.

·        Small Enterprises – investment above Rs. 25 lakh upto Rs. 5 crore.

·        Medium Enterprises – investment above Rs. 5 crore upto Rs. 10 crore.

One has to compare service enterprises with manufacturing enterprises.

Service Enterprises requires no or less investment, No land or building can be operated from home or rental place, good communication, networking, innovative ideas will do to start it, it involved less risk, easy to start, etc these may be the plus point of service enterprise.

Comparatively one has to take moderate or calculative risk to start manufacturing Enterprises. For livelihood or self employment activities one may use service enterprise as a stepping stone. Whether it is service or manufacturing Enterprise one has to create a structure or set up which will give a sustainable growth to the enterprises.

·        Business opportunities search and scanning (BOSS)

How to select an activity for MSM Enterprise? How to identify the MSM Enterprise activity? These are very fundamental and important issues. Entrepreneurs are opportunity seekers; for them it becomes easy to select or identify the business opportunities. But for general public like educated unemployed youth it may be a tedious, difficult, confusing issue. Many such people drop their idea of becoming an entrepreneur by exploring many good ideas for others.

            In fact this environment is full with business opportunities provided you see it;

            Environment scanning, creativity, project profile scanning etc are the tools for divergent thinking. This divergent thinking is useful to generate as many ideas. During this phase you have to think out of the box, do not consider whether this idea is practical or impractical. Just go on generating ideas.

            Conducting market survey, preparation of preliminary project profile are the tools for convergent thinking. Where practically you have to consider location, place, available resources, customer needs, your network & market, infrastructural advantages, own investment, availability of required manpower, raw material, technology and think convergent & narrow down your choice for selection of enterprise or activity.

            Preliminary market survey would give you the gap between demand and supply. But this terminology has become out dated nowadays. You must have to come up with creative service or product ideas; customer or consumer is always behind what is new. So this new creates a need or demand for the product.

·        Support mechanism for enterprise identification

Development Commissioner, MSM Enterprises has published many books on project profiles they are as follows:

·        Mechanical products

·        Metallurgical products

·        Hosiery products

·        Electrical products

·        Plastic products

·        Chemical products

·        Food/agriculture products

·        Glass & Ceramics products

·        Leather & Sports products

All these books are available on their website, libraries of Centre for Entrepreneurship Development (CEDs) in the State, Technical Consultancy Organization (TCOs) in the State, specific Main/Lead Bank in the State, Chamber of Commerce & Industries in the State, Offices of the Industries Associations, are some of the sources for getting the right kind of data.

District Industrial Centers (DIC) have their offices almost in the every district of all the States. This is also one of the good sources.

·        Market potential for MSM Enterprises   

Again all above mentioned institutions may be supportive in this regard.

Basically entrepreneur has to design a specific questionnaire for conducting a market survey. S/he should identify their market area and carry out the market survey; this would give them an insight of the product/services to be set up. He himself should visit to wholesale and retail markets, bulk consumers etc.

There are few marketing schemes by MSME, MSSIDC, NSIC etc. in case of specific products. Entrepreneurs may take advantage by visiting these organizations.

There is nothing like readymade in this area. Finally it is the efforts of an entrepreneur which will make them survive in the market.

·        Where to set up the enterprise     

Rental premises or place own land & building, co-operative industrial estates, different theme based industrial parks, State Industries Development Corporations etc. These are some of the options where one can start his/her enterprise.

·        Different target who are coming and joining the industrial fields

Following are the different sections of the society who are joining industrial fields nowadays.

-         Below poverty line men & women

-         Uneducated or little educated but experienced workers/skilled class

-         Educated unemployed youth

-         Schedule Class/schedule Tribes

-         Ex-service men

-         Women

-         VRS/CRS/NRI people

-         Science & Technology class

-         Physically challenged class etc

It does not matter whether you have technical background or experience or not. It just requires the fire in belly or the will to start something on own or the spirit of entrepreneurship. Rest of the things can be managed through other sources which are available with others or in the market.

·        Facing the competition

Creative & innovative services or products, latest technology & production process, mass production, reduction in production costs, good-better-best quality of the products, niche marketing-it is the subset of the market on which a specific product is focusing; therefore the market niche defines the specific product/service features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that is intended to impact; service of product costing, are some of the tools to face the competition and win the game.