Unit 1

Entrepreneur
Introduction:
Entrepreneurship is pivotal in project management, driving innovation and economic
value. This section traces the term "entrepreneur" from its French roots and examines
definitions by key thinkers. These perspectives highlight the entrepreneurial mindset
essential for managing projects and launching ventures effectively in dynamic
environments.
1. Entrepreneur is derived from a French word 'Entreprendre', i.e., 'individuals who
were undertakers', meaning who undertook the risk of new enterprise.
2. According to Adam Smith, "Entrepreneur is an individual who forms an
organisation for commercial purpose."
3. According to Carl Menger, "Entrepreneur is a change agent who transforms
resources into useful goods and services thus, creates the circumstances leading
to industry growth."
4. According to Peter Drucker, "An entrepreneur is one who always searches for
change, responds to it and exploits it as an opportunity."
5. According to Joseph Schumpeter, "Entrepreneurs are innovators who use the
process of shattering the status quo of the existing products and services to set
new products, and services. An entrepreneur is one who innovates, raises money,
collects input, organizes talent, provides leadership and sets the organizations."

Characteristics of an Entrepreneur
Entrepreneurs possess unique traits vital for project management success. This section
lists characteristics like optimism and leadership, reflecting the skills needed to oversee
projects and ventures. Understanding these qualities provides a framework for
cultivating the competencies required in entrepreneurial endeavors.
1. An entrepreneur is always optimistic.
2. He has a desire to succeed.
3. He possesses risk taking ability.
4. An entrepreneur contains managerial skills.
5. He has leadership qualities.
6. He is always ready to fulfil his commitment.
7. Urge to learn new things.
8. Future and result oriented.
9. An entrepreneur always has a vision.
10. He needs independence in his work.
11. An entrepreneur is cooperative and has quality control.
12. He has a desire to do something new.
13. Always innovative.
14. He has problem solving ability.
15. He possesses high level of expectation.

Entrepreneurship
Entrepreneurship blends creativity and risk to drive project outcomes. This section
explores definitions from scholars like Schumpeter, emphasizing its role in innovation
and economic growth. These insights connect entrepreneurial principles to the
structured execution required in project management.
1. According to Schumpeter, entrepreneurship is a creative activity.
2. Entrepreneurship is the propensity of mind to take calculated risks with
confidence to achieve a predetermined business or industrial objective.
3. In the words of A.H. Cole, entrepreneurship is the purposeful activity of an
individual or a group of associated individuals, undertaken to initiate, maintain
or organize a profit oriented business unit for the production or distribution of
economic goods and services.
4. Entrepreneurship means the function of creating something new, organizing and
coordinating and undertaking risk and handling economic uncertainty.
5. Higgins defines "Entrepreneurship is the function of seeing investment and
production opportunity, organizing an enterprise to undertake a new production
process, raising capital, hiring labour, arranging for the supply of raw materials
and selecting top managers for the day-to-day operation of the enterprise."
6. Entrepreneurship is doing things that are generally not done in the ordinary
course of business. Innovation may be in:
o Introducing a new manufacturing process that has not been tested and
commercially exploited.
o Introducing a new product with which the consumers are not familiar or
introducing a new quality in an existing product.
o Locating a new source of raw material or semi-finished product that was
not exploited earlier.
o Opening a new market where the company products were not sold earlier.
o Developing a new combination of means of production.

Fig 1.1: Characterstics of Entrepreneurship

C. Features of Entrepreneurship
Entrepreneurship encompasses distinct features critical to project success. This section
outlines its economic, creative, and risk-bearing aspects, linking them to project
management’s focus on organization and innovation. These attributes provide a
blueprint for managing entrepreneurial initiatives effectively.
 1. The main features of entrepreneurship are as follows:
a. Economic: It involves the creation and operation of an enterprise.ii.
Creative: It involves innovative process.
b. Purposeful: It is a goal-oriented activity seeking to earn profits.
c. Risk Bearing: Risk is an inherent and inseparable element of
entrepreneurship.
d. Organization: It involves organization building capabilities.
e. Human Relations: Ability to work with other people and signing
responsibility is a key to success.
f. Flexibility: Flexibility is the hallmark of a successful entrepreneur.
g. Innovation: Entrepreneurship is an innovative function.
h. Skills: It calls for special skills to handle the situation as it unfolds.
i. Values: It is an attempt to create value recognition of business
opportunities to bring a project to fruition.
2. Thus, entrepreneurship is a multi-dimensional concept. It is an art as well as a
science.
Phases of Entrepreneurship Development
Entrepreneurship development follows a phased approach akin to project lifecycles.
This section details the initial, development, and support phases, essential for building
entrepreneurial capacity. These stages align with project management’s systematic
progression from planning to execution.
1. Initial Phase: Creation of awareness of entrepreneurial opportunities based on
survey.
2. Development Phase: Implementation of training programmes to develop
motivation and management skills.
3. Support Phase: Infrastructural support of counselling and assistance to establish
a new enterprise and to develop existing units.

S.No. Entrepreneur Entrepreneurship

Entrepreneurship is defined as the
The entrepreneur is the bearer of the
1. carrying out of new combination called
"mechanism for change".
enterprise.
Entrepreneur is someone who This appears as a personal quality that
specializes in making judgmental enables certain individuals to make
2.
decisions about the coordination of decisions with far reaching
scarce resources. consequences.
An entrepreneur is one who always Entrepreneurship is the pursuit of a
3. searches for change, responds to it discontinuous opportunity involving
and exploits it as an opportunity. the creation of an organization.

Scope of Entrepreneurship
Entrepreneurship extends beyond business, impacting society and industries. This
section explores its scope, from job creation to innovative solutions, reflecting project
management’s broader stakeholder focus. It underscores entrepreneurship’s role in
driving progress.
1. Entrepreneurship has ability to extend from the closed system of an enterprise.
 2. Entrepreneurship provides jobs for the society and this develops communities.
3. Entrepreneurship provides a lot more solutions to the society than mere creation
of business.
4. Entrepreneurship promotes the new business and provides opportunities to
improve the new business sectors.

Need of Entrepreneurship
Entrepreneurship thrives on passion and practical needs. This section examines drivers
like perseverance and learning, paralleling project management’s emphasis on sustained
effort and skill development. These elements fuel entrepreneurial success.
1. Passion, Perseverance and Persistence:
o Passion is a strong and uncontrollable emotion which is based into
something that is higher to achieve than what the person is carrying within
himself.
o Perseverance is a mature emotion which comes through experiences
gathered and analyzed.
o While persistence is the sail that will row the boat of an entrepreneur
through the toughest of climate.
2. Big Dreamer: Dreaming big further strengthens an entrepreneur with his ability
to dream and see the wide picture. This is actually the very first step which sets
the path to self-discovery.
3. Learning: Learning is never to stop irrespective of age and thus arming oneself
with education does play a vital role in forming leadership qualities when
needed.
4. Good Listener: The ability to contribute will only come once we have
abundance in ourselves, and this comes by absorbing the words of others.
5. Financing Partner: Choosing a financing partner who understands the business
needs is very much essential. This is as critical as choosing the business which
the entrepreneur wants to pursue.

Entrepreneurial Competency or Trait

Competencies define an entrepreneur’s ability to manage projects effectively. This
section outlines traits like initiative and quality control, crucial for superior
performance. These characteristics bridge entrepreneurship and project management
disciplines.
1. Competency is a characteristic of an entrepreneur which defines its effective
performance in work.
2. Job competence is combination of the skills acquired by an entrepreneur which
includes knowledge, skills, motive etc.
3. Under many cases individual have no concern about their entrepreneurial
characteristics and how to use them.
4. All these characteristics, if possessed by an entrepreneur which gives superior
result of growth in enterprise are called entrepreneurial competencies or traits.
5. Earlier, people used to believe that for becoming a successful entrepreneur
having business family background is important. But now a days having good
 entrepreneurial characteristics plays major role in becoming a successful
entrepreneurs.

Major Competencies That Lead to Superior Performance of the Entrepreneurs

Certain competencies elevate entrepreneurial success in project execution. This section
lists traits like assertiveness and planning, vital for managing teams and resources.
These skills enhance project outcomes and enterprise growth.
1. Initiative: An entrepreneur is the one who initiates business activity.
2. Quality Conscious: Have strong urge to do better than other competitive
enterprises.
3. Committed to Work: Get the task completed on the given time.
4. Self-confident: Have strong faith over his strengths and abilities.
5. Assertive: Good on asserting issues and views on others for enterprise.
6. Persuasive: Persuade others easily to do the work that he actually wants from
them.
7. Efficient Monitor: Personally supervises the tasks so that the work standard
does not go down.
8. Effective Strategist: Introduce the work strategy to acquire the required goal.
9. Proper Planning: Makes realistic and proper plans then execute the work to
achieve task efficiently.
10. Problem Solver: Always find out ways from difficulties and hard times.

Traits Found in Successful Entrepreneurs

Successful entrepreneurs exhibit traits that align with project management excellence.
This section details qualities like motivation and risk-taking, offering insights into
effective leadership. These attributes ensure project and venture success.
1. Motivator: An entrepreneur must build a team, keep it motivated, and provide
an environment for individual growth and career development.
2. Self Confidence: Entrepreneurs must believe in themselves and the ability to
achieve their goals.
3. Long Term Involvement: An entrepreneur must be committed to the project
with a time horizon of five to seven years. No ninety-day wonders are allowed.
4. High Energy Level: Success of an entrepreneur demands the ability to work
long hours for sustained periods of time.
5. Persistent Problem-Solver: An entrepreneur must have an intense desire to
complete a task or solve a problem. Creativity is an essential ingredient.
6. Initiative: An entrepreneur must have initiative, accepting personal
responsibility for actions, and above all make good use of resources.
7. Goal Setter: An entrepreneur must be able to set challenging but realistic goals.
8. Moderate Risk Taker: An entrepreneur must be a moderate risk taker and learn
from failures.

Factors Affecting Entrepreneurial Development

External and internal factors shape entrepreneurial growth. This section explores
economic, non-economic, psychological, and governmental influences, akin to project
management’s environmental analysis. These elements impact project feasibility and
success.
1. Economic Factors:
o Capital: The availability of the capital helps the entrepreneur to bring
together various resources like land, machine and raw material to combine
them and produce goods. Thus, capital is known as lubricant to process
of production.
o Labour: The quality and skilled labour is another factor which affects
entrepreneurial development.
o Raw Materials: Before establishing any industrial activity, the
availability of raw material is the primary need. Therefore it affects
entrepreneurial development.
o Market: It's necessary to find the ideal target market for your idea,
service or product if you have hope of opening an enterprise.
2. Non-Economic Factors:
o Social Mobility: It involves the degree of mobility in both social and
geographical aspects. And the nature of mobility channel within the
system of enterprise.
o Marginality: Individuals or groups on the perimeters of given social
system provide the ideas to assume the entrepreneurial roles.
o Security: If an entrepreneur is fearful of losing assets or being subjected
to various negative sanctions, their actions become less entrepreneurially.
3. Psychological Factors:
o Need Achievement: Characteristics which indicates high need of
achievement is the major determinant of entrepreneurship development.
o Withdrawal of Status Respect: There may be some kind of events that
lead an entrepreneur to the loss of status.
4. Governmental Actions: The government actions, and the failure of the
governmental acts, influence the both economic and non-economic factors for
entrepreneurship.

Motivation
Motivation fuels entrepreneurial action and persistence. This section defines it as an
inner drive directing behavior, linking it to project management’s focus on goal
attainment. Understanding motivation enhances leadership in entrepreneurial projects.
1. The term 'motivation' has been derived from the word motive.
2. Motive is defined as inner state of our mind that activates and directs our mind
to reach at our goals.
3. Motivation thus defined as the process which makes person to get into action and
induces him to continue the course of action for the achievements of goals.
4. According to Dalton E. McFarland, motivation refers to "the way in which urges,
drives, desires, striving, aspirations or needs direct, control or explain the
behaviour of human beings".
5. Process of motivation can be understood by the diagram below:
[Note: Diagram not provided in text; typically includes steps like need
identification, drive activation, goal pursuit.]
 Fig 1.2 : Process of Motivation

Motivating Factors Inspire Entrepreneurs

Entrepreneurial drive stems from diverse motivators. This section categorizes them into
ambitions, reasons, and facilitating factors, reflecting project management’s need for
clear incentives. These elements sustain effort in ventures.
1. Entrepreneurial Ambitions:
o To make money
o To secure self employment
o To fulfill desire of self
o To gain social prestige
2. Compelling Reasons:
o Unemployment
o Dissatisfaction with job
o Make use of idle funds
o Make use of professional skills
3. Facilitating Factors:
o Success stories of entrepreneurs
o Previous association with job
o Property inheritance
o Influence of others.

McClelland’s Achievement Motivation Theory

McClelland’s theory explains motivational needs shaping entrepreneurial behavior.
This section examines achievement, power, and affiliation drives, connecting them to
project leadership. These insights enhance strategies for motivating project teams.
1. David McClelland is most noted for describing three types of motivational need,
which he identified in his 1961 book, The Achieving Society:
o Achievement motivation (n-ach)
o Authority/power motivation (n-pow)
o Affiliation motivation (n-affil)
2. These needs are found to varying degrees in all workers, and this mix of
motivational needs characterizes a person's style and behavior, both in terms of
being motivated and in the management and motivating others.
3. Achievement Motivation (n-ach): The n-ach person is 'achievement motivated'
and therefore seeks achievement, attainment of realistic but challenging goals.
 There is a strong need for feedback as to achievement and progress and a need
for a sense of accomplishment.
4. Authority/Power Motivation (n-pow): The n-pow person is 'authority
motivated'. This produces a need to be influential, effective and to make an
impact. There is a strong need to lead and for their ideas to prevail. There is also
motivation and need towards increasing personal status and prestige.
5. Affiliation Motivation (n-affil): The n-affil person is 'affiliation motivated', and
has a need for friendly relationships and is motivated towards interaction with
other people. The affiliation driver produces motivation and needs to be liked
and held in popular regard.

Conceptual Model of Entrepreneurship

Kao’s model frames entrepreneurship as a blend of personality, tasks, and environment.
This section explores its components, aligning them with project management’s focus
on execution within constraints. It offers a holistic view of entrepreneurial dynamics.

Fig 1.3: Kao’s Model of Entrepreneurship

1. Kao has developed a conceptual model of entrepreneurship which is presented

below.
2. The Entrepreneurial Personality: The personality of an entrepreneur is made
up of the person, his skills, style.
3. The entrepreneur is central to entrepreneurship because without the key
individual who makes the thing happen in an enterprise, there will be no positive
result.
4. The Entrepreneurial Task: The main task of an entrepreneur is to identify and
exploit those opportunities that may come from any sources. He should have the
ability to perceive opportunities where normal person do not.
5. The Entrepreneurial Environment: Entrepreneurship is controlled by the
environment in many ways. The world surrounding organisation may help or
hinder the growth of entrepreneurship.
6. The entrepreneurial environment is made of several elements such as economic,
sociocultural, politico-legal and other.
7. The Organisational Context: The organisational context is the immediate
setting in which creative and entrepreneurial work takes place. It includes the
organisation structure and the systems, the definition of work roles, group culture
etc.
Intrapreneurs
Intrapreneurs innovate within organizations, merging entrepreneurial flair with
corporate resources. This section defines their role, linking it to project management’s
focus on internal innovation. It highlights their contribution to organizational growth.
1. An employee who is given the freedom and funds to create new products or
service within an organisation is called intrapreneur.
2. An intrapreneur or corporate entrepreneur starts business in the existing
company.
3. Established corporations use the concept of intrapreneurship in order to retain
innovative minds by providing them freedom to experiment with their ideas.
4. The term 'Intrapreneurs' was first used in America in late 1970's.

Critical Elements in Intrapreneurial Environments

Intrapreneurship requires a nurturing environment. This section identifies elements like
resources and teamwork, essential for project success within firms. These factors ensure
intrapreneurial initiatives thrive.
1. Critical Elements for Intrapreneurial Environment are:
o Innovative Ideas: The organization should encourage innovative ideas
and operate on the latest of technology.
o Encourage Experimentation: Experimentation must be encouraged in
an intrapreneurial environment. In the initial stages almost every
intrapreneur meets with initial failure before establishing a successful idea
product or strategy.
o Availability of Resources: Finance and human resources must be
available on an ongoing basis. They should be easily accessible to the
intrapreneur.
o Encourage Team Work: For success of intrapreneurial activities in the
organization teamwork approach need to be encouraged.
o Reward: The organization should have a system of rewarding the
intrapreneur so that he is motivated further to contribute to the growth of
the company.
o Support of Top Management: Top Management must support and
encourage the intrapreneurial activity. Without their support a successful
intrapreneurial environment cannot be created in an organization.

Difference Between Entrepreneur and Intrapreneur

Entrepreneurs and intrapreneurs differ in scope and context. This section compares them
across status, risk, and rewards, reflecting project management’s diverse leadership
roles. These distinctions clarify their contributions to ventures.

Basis of
S.No. Entrepreneur Intrapreneur
Distinction
An independent Works as a senior executive in
1. Status
businessman. company.
 Have complete ownership Have partial ownership or may
2. Ownership
of the business. be an employee.
Controls the finance of the Not responsible for the
3. Financing
business. business finance.
Bear full risk of the Does not bear the risk of
4. Risk Bearing
business. business.
There may be uncertain Salary is fixed with some
5. Reward
profits or loss. incentives.
It starts as a separate It pursues the idea within an
6. Origin
enterprise. existing organisation.
High need of security is
7. Security Need of security is low.
required.
Decision They guide their venture by They have to persuade their
8.
Making their own judgment. bosses for their new ideas.

Type of Entrepreneurs
Entrepreneurs vary by approach and motivation. This section classifies them based on
economic development, business type, technology, and drive, offering a taxonomy
relevant to project management’s leadership diversity. It aids in understanding
entrepreneurial roles.
1. On the Basis of Economic Development:
o Innovating Entrepreneurs: Entrepreneurs falling in this class are
generally aggressive in experimentation and in putting attractive
possibilities into practice.
o Adoptive or Imitative Entrepreneur: The imitative entrepreneurs copy
or adopt suitable innovations made by the innovative entrepreneurs.
o Fabian Entrepreneur: They love to remain in the existing business with
the age-old technique of production.
o Drone Entrepreneur: Drone entrepreneurs are those who refuse to adopt
and use opportunities to make changes in production.
2. On the Basis of Type of Business:
o Business Entrepreneurs: They are the entrepreneurs who conceive an
idea for a new product or service and then create a business to convert
their idea into reality.
o Trading Entrepreneur: These entrepreneurs undertake trading activities
and are not concerned with the manufacturing work.
o Industrial Entrepreneur: These entrepreneurs are essentially
manufacturer who identifies the needs of customers and creates products
or services to serve them.
o Corporate Entrepreneur: These entrepreneurs used their innovative
skill in organizing and managing a corporate undertaking.
o Agricultural Entrepreneur: Agricultural entrepreneurs are those who
undertake agricultural activities as through mechanization, irrigation and
application of technologies to produce the crop.
3. According to the Use of Technology:
 oTechnical Entrepreneurs: These entrepreneurs may enter business to
commercially exploit their inventions and discoveries.
o Non-technical Entrepreneur: They are concerned only with developing
alternative marketing and promotional strategies for their product or
service.
o Professional Entrepreneur: Entrepreneur who is interested in
establishing a business but does not have interest in managing it after
establishment.
4. According to Motivation:
o Pure Entrepreneur: A pure entrepreneur is the one who is motivated by
psychological, economical, ethical considerations.
o Induced Entrepreneur: This type of entrepreneur is one who is induced
to take up an entrepreneurial task due to the policy reforms of the
government.
o Motivated Entrepreneur: They come into being because of the
possibility of making and marketing some new products for the use of
consumers.

Entrepreneurial Development Programmes (EDPs)

EDPs foster entrepreneurial skills for project execution. This section defines their role
in developing abilities needed for enterprise creation, aligning with project
management’s training focus. They accelerate socioeconomic growth effectively.
1. Entrepreneurship Development Programme (EDP) is a program which helps in
developing entrepreneurial abilities among individuals.
2. In other words, it refers to development and polishing of entrepreneurial skills
into a person needed to establish an enterprise.
3. EDP is an effective way to develop entrepreneurs which can help in accelerating
the pace of socio-economic development, balanced regional growth, and
exploitation of locally available resources.
4. In recent times, EDP has become a professional task which extensively
encourages the development of funded and private businesses.

Main Objectives of EDPs

EDPs aim to equip individuals with entrepreneurial knowledge. This section outlines
goals like legal understanding and industrial growth, mirroring project management’s
structured skill-building. These objectives ensure comprehensive preparation.
1. To make people having good understanding with law.
2. To develop and strengthen entrepreneurial quality, i.e., motivation or need for
achievement.
3. To develop small and medium scale enterprises in order to generate employment
and widen the scope of industrial ownership.
4. To industrialize rural and backward sections of the society.
5. To understand the merits and demerits of becoming an entrepreneur.
6. To investigate the environmental set-up relating to small businesses, industries
and.
7. To design project for manufacturing a product and creating services.
Phases of EDPs
EDPs progress through stages to nurture entrepreneurs. This section details pre-training,
training, and post-training phases, reflecting project management’s lifecycle approach.
Each phase builds capacity for venture success.
1. Pre-Training Phase: This step is introductory phase in which the
entrepreneurship development programmes are launched. Various activities are
performed in this phase are described below:
o Identification of suitable location where the operations can be initiated,
like a city.
o Selection of a course coordinator or project leader to coordinate the EDP
activities.
o Organisation of basic infrastructural facilities related to the programme.
o Conducting the environmental scanning or industrial survey in order to
look for better business opportunities.
o Developing various plans associated with the programme.
o Looking for the assistance of various entrepreneurial agencies such as
DIC, SISI, NSIC, SIDO, etc.
o Conducting industrial motivational campaigns to increase the number of
applications.
2. Training Phase: The main function of any EDP is to impart training to future
entrepreneurs and guiding them for establishing the enterprise. The normal
duration of the entrepreneurship development programme is 4-6 weeks and it is
usually a full time course. The objectives, training inputs and the centre of focus
are explained in the programme.
3. Post-Training Phase: This phase is also referred as the phase of follow-up
assistance. In this phase, the candidates who have completed their programme
successfully are provided post-training assistance and other activities which
includes:
o Review the pre-training work.
o Review the process of training programme.
o Review past training approach.

Some Institutions Which Provide Financial and Training Support to

Entrepreneurs
Institutions bolster entrepreneurial projects with resources. This section lists key
organizations like DIC and NABARD, linking them to project management’s support
systems. They provide critical aid for venture growth.
1. DIC: District Industries Centre (DIC) provides help to prepare project report and
help to provide technical support services.
2. TCO: TCO stands for Technical Consultancy Organization and help SSI to
project formulation, implementation and provide consultancy on management.
3. State Financial Corporation (SFC): Provide loan to SSIs and also these
corporations provide loan for setting up a SSI or for renovation or for its
expansion also.
 4. SISI: Small Industries Service Institute (SISI) prepare designs and layouts of the
products for SSIs and also these institutes also train the employees of the SSI
and provide them technical guidance to maintain quality standards.
5. NSIC: National Small Industries Corporation (NSIC) help the workers on
operation of modern machinery and help to import the raw materials.
6. SIDO: Small Industries Development Organisation (SIDO) help SSI in
production and marketing of the product and provide consultancy on quality
control.
7. NABARD: National Bank for Agriculture and Rural Development (NABARD)
help and provide capital to SSI in rural areas.

EDPs Launched by Government

Government EDPs promote innovation and employment. This section reviews
initiatives like Startup India, aligning them with project management’s policy
framework. These programs enhance national entrepreneurial ecosystems.
1. Startup India: Startup India is an initiative of the Government of India, intended
to build a strong eco-system for nurturing innovation and Startups in the country
that will drive sustainable economic growth and generate large scale
employment opportunities.
2. Atal Innovation Mission (AIM): AIM's objective is to develop new
programmes and policies for increasing innovation in different sectors of the
economy, provide platforms and collaboration opportunities for different
stakeholders, and to oversee the innovation and entrepreneurship ecosystem of
the country.
3. Support to Training and Employment Programme for Women (STEP):
STEP Scheme aims to provide skills that give employability to women and to
provide competencies and skill that enable women to become self-
employed/entrepreneurs.
4. National Skill Development Mission: The National Skill Development Mission
launched by the Ministry of Skill Development and Entrepreneurship on July 15,
2015, aims to create convergence across sectors and States in terms of skill
training activities.
5. Pradhan Mantri Kaushal Vikas Yojana (PMKVY): PMKVY is skill based
training scheme started by the government of India. Indian nationals can join
skill-based training course and pursue education with free of cost.
6. Trade Related Entrepreneurship Assistance and Development (TREAD):
TREAD Scheme for Women. This scheme foresee economic empowerment of
women by providing credit, training, development and activities related to
trades, products, services etc.

Problems Faced by EDPs

EDPs face challenges impacting their success. This section identifies issues like policy
gaps and infrastructure deficits, akin to project management obstacles. Addressing these
enhances program effectiveness.
 1. No Clear Policy at the National Level: In lack of proper policy the growth of
entrepreneurship stopped due to the unsupportive attitude of the agencies like
banks, financial institutions and other supporting agencies.
2. No Clear Objectives: Majority of institutions engaged in EDP are themselves
not convinced and certain about the task they are supposed to perform and
objectives to achieve.
3. Poor Follow-up: Institutions providing EDPs do not show much concern for
objective identification and selection of entrepreneurs.
4. Non-availability of Infrastructural Facilities: EDPs are not successful due to
non-availability of adequate infrastructural facilities required for the conduct of
EDPs.
5. Lack of Commitment and Involvement by the Corporate Sector: Corporate
sector shows less concern for the successful conduct of EDPs. They lack of
commitment and involvement in EDPs.
6. Non-availability of Competent Faculty: The faculties selected for giving
training are sometimes not competent enough to give proper training to
entrepreneur.
7. Non Helpful Environment: Non helpful environment and constraints in the
backward regions has become a major problem for the conduction of EDPs.

Conclusion
This chapter lays the foundation for integrating entrepreneurship with project
management, emphasizing innovation, risk-taking, and structured development. By
detailing entrepreneurial definitions, traits, and support systems like EDPs, it equips
readers to manage ventures effectively, fostering economic and social progress through
disciplined execution.
 Unit 2
Entrepreneurial Idea and Innovation
Innovation
Innovation transforms ideas into practical solutions, enhancing goods and services. This section defines
innovation as a value-driven process critical to entrepreneurship and project management. It explores
how innovative advancements fuel organizational growth, aligning creativity with structured project
execution for impactful outcomes.
1. Innovation is the practical implementation of ideas that result in the introduction of new goods
or services or improvement in offering goods or services.
2. Innovation also implies a value system which seeks to derive a positive outcome from the
inventive act.
3. For a business, innovation is a product, process, or business concept, or combinations that
produce profits and growth for the organization.
4. True innovation is an advancement of what is done normally. Therefore, something is an
innovation not because it is new, but because it is useful.
Role of Innovation in Entrepreneurship
Innovation drives entrepreneurial success by enhancing creativity and competitiveness. This section
outlines its roles, from improving products to responding to trends, linking them to project
management’s focus on adaptability. These roles ensure ventures thrive in dynamic markets.
1. Creative Development: Innovation enhances the nature, creativity, and design thinking
process of an organisation.
2. Persistent Improvement: Innovation gives durability to organisation when you are making
continuous improvements in products and services.
3. Reinforcing Your Brand: The process of development in branding helps an entrepreneur to
learn different ways of being more innovative.
4. Making the Best of Your Existing Products: We know that for an entrepreneur, it is important
to introduce new products but more than that, to maintain the innovation culture making the
best of old product is more important.
5. Responding to Trends and Competition: With the help of innovation in entrepreneurship,
responding to future trends can help an entrepreneur's business to come with solutions to make
their business grow more.
6. Having a Unique Selling Point: Consumer generally consider innovation cultures as
something that adds some interesting values to its products. Innovations in entrepreneurship
can add advantage that can help the company to get positive exposure.
Types of Innovations
Innovations vary by scope and impact, shaping entrepreneurial projects. This section categorizes them
into product, technology, and process types, reflecting project management’s diverse applications.
Understanding these types aids in selecting the right approach for venture success.
 1. Product & Product Performance Innovation: In this type of innovation either a new product
is developed or the performance of an existing product is improved.

Fig. 2.1: Market vs. Technology

2. Technology Innovation: New technologies can also lead to the birth of many other
innovations. The best example is Internet, which is itself an innovation but also lead to other
innovations in various fields.
3. Business Model Innovation: Using different channels, technologies and new markets can lead
to new possible business models which can create, deliver and capture customer value.
4. Organizational Innovation: Managing and sharing resources in a new way can also be an
innovation.
5. Process Innovation: Possible process innovations involve production, delivery, or customer
interaction. Innovation in the processes can improve the efficiency or effectiveness of existing
methods.
Types of Innovations on the Basis of Change in Market and Technology
Innovations differ by market and technology shifts, influencing project strategies. This section classifies
them as incremental, disruptive, architectural, and radical, aligning with project management’s
adaptability needs. These distinctions guide entrepreneurs in navigating change.
1. Incremental Innovation: Incremental Innovation utilizes your existing technology and
increases value to the customer (features, design changes, etc.) within your existing market.
2. Disruptive Innovation: Disruptive innovation, also known as stealth innovation, involves
applying new technology or processes to your company's current market.
3. Architectural Innovation: Architectural innovation is simply taking the lessons, skills and
overall technology and applying them within a different market.
4. Radical Innovation: Radical innovation involves the creation of technologies, services, and
business models that open up entirely new markets.
Idea Generation
Idea Generation in Entrepreneurship
Idea generation sparks entrepreneurial ventures, forming the basis of project development. This section
defines it as a creative process to solve problems, essential for project management’s planning phase. It
underscores its role as a vital asset for innovation.
1. Idea generation is the process of creating, developing, and communicating ideas which are
abstract, concrete or visual.
2. Idea generation is the first step for any product development.
3. Idea generation simply focuses on identifying solutions for a problem.
4. Idea generation is the backbone for every organization and one of the most important assets for
marketing teams.
Idea Generation Process
The idea generation process follows structured steps to yield actionable concepts. This section outlines
its phases, from enabling to nurturing, mirroring project management’s systematic approach. These
steps ensure ideas evolve into viable project solutions.
1. Enabling: The search for the right field of innovation.
2. Defining: Develop search queries and specify search paths.
3. Inspiring: Search for thoughts and stimuli from other areas.
4. Selecting: Generate and evaluate ideas.
5. Optimizing: From the initial idea to the mature concept.
6. Nurturing: Enrich ideas with various implementation strategies.
Idea Generation Techniques
Techniques enhance idea generation, fueling entrepreneurial creativity. This section explores methods
like brainstorming and SCAMPER, linking them to project management’s problem-solving tools. These
approaches drive innovative project outcomes efficiently.
1. Mind Mapping: A mind map involves writing down a central theme and thinking of new and
related ideas which radiate out from the centre.
2. Reverse Thinking: This technique asks us to think oppositely. Instead of working on the
problem in front of us, we work on the exact opposite of it.
3. Brainstorming: Brainstorming is a group creativity technique by which efforts are made to
find a conclusion for a specific problem by gathering a list of ideas.
4. SCAMPER: The word SCAMPER is an acronym. S - Substitute, C - Combine, A - Adapt, M
- Modify, P - Put to another use, E - Eliminate, R - Reverse.
5. Role-Playing: In this technique, the participants take up roles to play. These roles are different
from the ones they usually play. It adds an element of fun and helps get innovative ideas.
6. The 5 W’s: Who, What, Where, When, and Why are the five W's. Answering these five W's
helps us achieve a view of the topic under discussion. And it is an efficient way to come up
with solutions and ideas.
7. Synectics: In this technique, we take apart a thing and then put it back together. This helps us
get a better understanding of how things work.
Business Opportunities
Business opportunities offer pathways to entrepreneurial success. This section defines them as
investments with autonomy, distinct from franchises, aligning with project management’s opportunity
assessment. It highlights their role in fostering independent ventures.
1. A business opportunity is a business investment that allows the buyer (purchaser-licensee) to
begin a business.
2. Unlike a franchise, the business opportunity seller exercises no control over the buyer's business
operations.
3. In most business opportunity programs, there's no continuing relationship between the seller
and the buyer after the sale is made.
4. Although business opportunities offer less support than franchises, one could thrive on freedom
it provides.
Characteristics of Good Business Opportunities
Good business opportunities share traits that ensure growth. This section lists qualities like scalability
and passion, crucial for project management’s feasibility analysis. These characteristics guide
entrepreneurs in selecting viable ventures.
1. Scalability: Look for a business that can grow fast.
2. Create Intellectual Property: A business that consistently generates a valuable intellectual
property that you can sell or license.
3. Passion: Working on something you love helps make the whole process of starting and running
a business so much easier.
4. Low Start-up Cost: Having a low start-up cost means you can use your money to start the
business and bootstrap your business growth.
5. Specific Market: Find a market place where your business can grow more efficiently.
6. Making Long Term Clients: Work to build a real connection with your clients and take them
deeper into your business tasks.
Business Opportunities
Identifying business opportunities requires strategic analysis. This section explores methods like
demand assessment and risk evaluation, paralleling project management’s planning tools. These
approaches ensure informed venture selection.
1. Analysis of Internal Demand: Business opportunities may be identified by assessment of
internal demand of the existing and proposed products, as to what will be the possibility of
future demand.
2. Availability of Raw Materials: Easy availability of raw material also has an important role in
selecting the business opportunities; the reason is that the quantity and level of future
production are decided only by it.
3. External Assistance: Role of external assistance, like - government, suppliers, investors, and
specific institutions is also important, in Identification of business opportunities.
 4. Knowledge about Industrial Development: By having detailed knowledge about proposed
industrial development, the entrepreneur may know which type of industry and at which place
will be profitable.
5. Internal Sources: The availability of internal sources also has an important role in the
identification of business opportunities.
6. Risk in Business Opportunities: Every business goes on increasing or decreasing with the
environment, in such conditions the entrepreneur has to identify when and how much risk is
involved in the business opportunities.
7. Performance of Existing Units: The entrepreneur’s main objective to analyse the performance
of existing units is to identify business opportunities.
Importance of Managerial Skills
Managerial skills underpin entrepreneurial and project success. This section explains their importance
in resource optimization and leadership, vital for effective project management. These skills ensure
efficient venture operations.
1. To optimize the use of scarce resources.
2. For ensuring effective leadership.
3. To motivate employees by creating a safe and secure environment.
4. For promoting synchronization amongst industries and their relations.
5. For strategizing towards the achievement of primary goals of an organization.
6. For facilitating developmental opportunities to boost morale and help upgrade skills.
7. To provide knowledge and expertise to expand productivity.
8. To regulate competition in the market.
Requirement of Managerial Skills
Specific managerial skills are essential for entrepreneurial projects. This section details skills like time
and financial management, aligning with project management’s core competencies. These abilities drive
successful venture execution.
1. Time Management: It is vital to get more work done in less amount of time by eliminating
interruptions, prioritizing tasks and increasing effectiveness as well as productivity.
2. Business Planning: Every entrepreneur needs to develop a business plan that facilitates the
entrepreneurs to make their business fit into the industry, identify their target market and plan
to capture them.
3. Employee Management: Successful entrepreneurs should know how to motivate the
employees in order to work effectively.
4. Customer Management: An entrepreneur must know how to manage his relationship with
existing customers with a focus on creating loyalty towards his business.
5. Sales Management: Understanding the sale activities helps the entrepreneurs to tackle the
challenges that they may face in their sale management journey.
 6. Financial Management: Even if your business's finance is handled by an accountant, you must
know planning, organizing, directing and controlling the financial activities.
7. Business Management: For being a successful entrepreneur a thorough understanding of
general management, finance, marketing, operations management, purchasing, supply chain,
human resources and public relations is required.
Value Creation
Value creation enhances outputs beyond inputs, central to entrepreneurship. This section defines it as a
core economic process, linking it to project management’s focus on stakeholder value. It drives business
worth and customer satisfaction.
1. Value creation is the process that creates outputs which are more valuable than the input.
2. The creation of value is the core purpose and central process of economic exchange. Traditional
models of value creation focus on the firm's output and price.
3. It is performance of actions that increase the worth of goods, services or even a business.
4. Many business operators now focus on value creation both in the context of creating better
value for customers purchasing its products and services, as well as for shareholders in the
business who want to see their stake appreciate in value.
Value Creation (Importance)
Value creation is vital for business sustainability. This section highlights its role in meeting customer
needs and attracting stakeholders, akin to project management’s value delivery focus. It ensures long-
term enterprise success.
1. It grasps customer requirements for product quality, design, and development of products.
2. It attracts customers, investors and other stakeholders.
3. It creates the organization's purpose, strategy, and business model taking into account all
resources, capitals, and relationships in an integrated way.
4. It delivers stakeholders through responsible products and services at an appropriate price.
5. It helps in retaining and protecting value internally and distribution to shareholders and
customers.
Value Creation (Management)
Managing value creation requires control over key areas. This section explores aspects like quality and
innovation capacity, reflecting project management’s oversight needs. These controls enhance
enterprise value effectively.
1. Quality Management: Quality management is the act of overseeing all activities and tasks that
must be accomplished to maintain a desired level of excellence.
2. Quality of Products or Services: It includes the determination of a quality policy, creating and
implementing quality planning and assurance, and quality control and quality improvement.
3. Ability to Attract, Develop, and Keep Talented People: Organization should have ability to
manage the skilled workers.
4. Use of Corporate Assets: Assets are important for any kind of business as it allows businesses
to gain profit, improve the business' value and keep the business up and running.
 5. Financial Soundness: The main areas of financial soundness that should be examined are
liquidity, solvency, profitability, and operating efficiency of a company.
6. Capacity to Innovate: Innovation capacity refers to produce and exploit new products,
services or processes over long periods of time.
Create an Enterprise Model
Creating an enterprise model involves structured steps for venture establishment. This section outlines
the process from opportunity identification to launch, mirroring project management’s lifecycle. It
ensures a robust foundation for entrepreneurial projects.
1. Identification of Business Opportunity: The process of identifying opportunity involves
identifying the needs and wants of the customers, scanning the environment, understanding the
competitor's policy etc.
2. Generation of Business Idea: The ideas that provide value for the customer, profit for the
entrepreneur and benefit for society and can be transformed into products or services are called
business ideas.
3. Feasibility Study: Feasibility study is a detailed investigation of the proposed project to
determine whether the project is financially, economically and technically viable or not.
4. Preparation of a Business Plan: In this step an entrepreneur prepares a good business plan,
designs and creates the organisational structure for implementation of the plan.
5. Launching the Enterprise: At this step the entrepreneur hunts for suitable location, designs
the premises and installs machinery and fulfils some legal formalities like:
o Acquiring license.
o Permission from local authorities.
o Approvals from banks and financial institution.
o Registration etc.
Strategies to Grow an Enterprise
Growth strategies propel enterprises forward strategically. This section lists approaches like hiring and
adaptability, aligning with project management’s scaling tactics. These methods ensure sustained
enterprise development.
1. Hire the Right People: With hardworking employees dedicated to your company's success,
your business will be better equipped for continued growth.
2. Focus on Established Revenue Sources: Rather than trying to acquire new customers, direct
your attention to the core customers you already have.
3. Reduce Your Risks: Risk is an inevitable part of starting and growing a business, but there are
many ways to limit internal and external threats to your company and its growth.
4. Be Adaptable: One trait that many successful startups have in common is the ability to switch
directions quickly in response to changes in the market.
5. Boost Your Customer Service: Another great method of growing your business is to focus on
providing superior customer service.
 6. Research Your Competitors: While this might not result in immediate growth, researching
your competitors is one of the most important steps in launching your business.
7. Invest in Yourself: In the early stages of your business, you'll likely see a very lean profit
margin (or no profit at all), so any money you do make should go directly to helping you grow.
8. Always Think Ahead: Thinking ahead helps in reviewing all ongoing contracts, like
comparing rates and seeing if you can negotiate a better deal.
Organisational Effectiveness
Organisational effectiveness ensures efficient project and enterprise operations. This section details
factors like leadership and strategy, crucial for project management success. These elements maintain
high performance levels.
1. Clear Decision Rights: Organizational effectiveness requires real decision rights and resources
to prioritize and implement changes to avoid becoming stuck in a cycle of risks while being
unable to effect change.
2. Strong Leadership Commitment: Transformations with strong leader involvement are more
likely to succeed, and if decisions are right roles and responsibilities are clear.
3. Strategy First: Strategy sets out the workforce capabilities, skills and competencies that
organization needs, and how they can be developed to ensure a sustainable, successful
organization.
4. Business-Unit Involvement: Leaders should align to relevant initiatives to enable seamless
implementation and ensure the organization is not operating inefficiently.
5. Holistic Approach: The leaders should address a holistic set of actions to ensure the desired
outcomes are actually achieved. These actions include topics like process redesign, re-skilling,
workforce planning, and decision making.
6. Balance Authority and Responsibility: No matter where the employees fit within the
organizational structure, they should be given equal measures of authority and responsibility.
Sustainable Enterprise Model
Sustainability drives long-term enterprise success. This section outlines strategies like resource
efficiency and stewardship, aligning with project management’s focus on enduring impact. These
approaches ensure eco-friendly growth.
1. Maximise Material and Energy Efficiency: Aims at less material energy input through more
efficient processes.
2. Control Resource Wastage: Aims at controlling resources wastages through reuse,
remanufacturing, and recycling.
3. Deliver Functionality Rather Than Ownership: Aims at providing the user with the
functionality requires without owning the product that delivers the service.
4. Adopt a Stewardship Role: Aims to take the responsibility that company have to understand
and manage their impacts on the environment in any of ways.
5. Encourage Sufficiency: Aims at providing information and incentives that encourage less
consumption of resources.
 6. Inclusive Value Creation: Aims at delivering value to older stakeholders or including them
into the value creation process.
7. Develop Sustainable Scale-Up Solutions: Aims at scaling sustainable solutions and
technologies.

Conclusion
This chapter bridges entrepreneurial ideas and innovation with project management, emphasizing
practical implementation and value creation. By exploring innovation types, idea generation, business
opportunities, and sustainable models, it equips readers to manage projects and enterprises effectively,
fostering growth and societal impact.
 Unit 3
Project Management: Meaning, Scope and
Importance
Project Management
Project management orchestrates resources to achieve specific goals efficiently. This section
defines it as a scientific approach to planning and controlling time, cost, and quality, vital for
entrepreneurial ventures. It ensures projects align with strategic objectives through structured
coordination.
1. It is a scientific way of planning, implementing, monitoring and controlling the various
aspects of project such as time, money, material, manpower and other resources with
the intention of achieving the basic objectives or goals including technical, cost and
time schedule.
2. It also involves coordination of group activity where the manager plans, organizes staff
and other resources, directs and controls to execute the project within constraints of
time, cost and performance.
3. Project management is an investment of resources to produce goods and services for
consumption.
4. The elements of project management control include program objectives, policy
restrictions, resources constraints, government regulations, process implications,
review of outputs and revision of objectives.
Phases of Project Management
Project management unfolds through distinct phases, guiding entrepreneurial projects to
completion. This section outlines six broad stages from identification to management,
mirroring entrepreneurial development cycles. Each phase ensures systematic progress toward
project goals.

1. The process of project management may be divided into six broad phases as shown in
Fig 3.1

Identificatio Implementat Managemen

Start Formulation Apparaisal Selection
n ion t

Fig 3.1: Phases of Project Management

o Identification: Selection of a project after sound scanning of the environment

of investment opportunity and potential returns.
o Formulation: Translation of the project idea into a concrete project by analysis
of important parameters. Preparation of feasibility report.
 o Appraisal: Analysis and evaluation of market, technology, financial and
economic parameters, break-even analysis, rate of return and profitability
assessment.
o Selection: Project selection based on objectives and constraints.
o Implementation: Project completion within allotted resources.
o Management: Operation of enterprise with maximization of returns.
Importance of Project Management
Effective project management is crucial for entrepreneurial success. This section highlights its
benefits, from clear planning to quality control, essential for managing ventures. It ensures
resources are optimized and objectives met efficiently.
1. Clear Project Plan and Process: The primary function of project management is to
avoid confusion by outlining a clear plan and a process from the beginning to the end.
2. To Establish Plan and Schedule: Having agreed on a project schedule, sticking to it
inculcates discipline required to avoid delays. A pre-determined process through the
project lifecycle gives the project a clear path.
3. Teamwork: People are made to work in a team on a project, due to the benefits that
accrue through sharing and knowledge of skills. It inspires team members to collaborate
on a project.
4. To Maximize Resources: Project risk tracking with regular reporting ensures
economical and efficient use of all the resources.
5. To Keep Control of Costs: Based on the project scope, some projects may incur high
costs. So, it is essential to keep track of the budget. Incorporating project management
strategies eases the budget overrun risks.
6. To Build on Knowledge: Project management serves as a knowledge asset to a
company and helps to build on both experience and knowledge.
7. To Manage Quality: It is crucial to ensure top-quality results. Project management
identifies, controls, and manages standards. This results in a high-quality
product/service and a satisfied client.
8. Continuous Oversight: Project management methods ensure that organizations gain
control over ongoing projects and make sure they are on the right track and within the
stipulated budget.
Scope in Project Management
Scope defines a project’s boundaries and deliverables, critical for entrepreneurial execution.
This section explores its role in gathering requirements and managing tasks, aligning with
project management’s focus on precision. It ensures clarity in work and outcomes.
1. In project management, scope is the defined features and functions of a product, or the
scope of work needed to finish a project.
 2. Scope involves getting information required to start a project, including the features the
product needs to meet its owner's requirements.
3. Project scope is oriented towards the work required and methods needed, while product
scope is more oriented toward functional requirements.
4. If requirements are not completely defined and described and if there is no effective
change control in a project, scope or requirement, then result may not be favorable.
5. Scope management in a project includes:
o Listing the items to be produced or tasks to be done.
o Their required quantity, quality, and variety.
o The time and resources available and agreed upon.
o Modifying the variable constraints by dynamic flexible juggling in the event of
changed circumstances.
Work Involved in Project Scope Management
Scope management involves structured tasks to define and control project deliverables. This
section details processes like planning and validation, essential for entrepreneurial projects.
These steps ensure alignment with goals and resources.
1. Planning Scope Management: A scope management plan is created based on input
from the project plan, the project charter, and consultation with stakeholders.
2. Collecting Requirements: A requirements management plan is created based on the
scope management plan plus stakeholder input. Interviews, focus group discussions,
surveys, etc., are used to understand requirements. This will all be documented.
3. Defining Scope: A project scope statement is produced based on all the requirements
documentation plus the project charter and the scope management plan. This definition
will be the basis for all project activity.
4. Creating the Work Breakdown Structure: A Work Breakdown Structure (WBS) is
built after analyzing the project scope statement and the requirements of
documentation. The WBS is basically the entire project broken down into individual
tasks, and deliverables that are clearly defined.
5. Validating Scope: Here, deliverables are inspected and reviewed. Either they are
accepted as complete or further revisions are requested.
6. Controlling Scope: As the project is executed, scope must be controlled. Performance
reports are compared against project requirements to see where gaps exist, which may
result in changes to the project plan.
Project Management as Conversion Process
Projects convert inputs into outputs under constraints, a key entrepreneurial concept. This
section views project management as a transformation process, linking it to resource utilization.
It defines inputs, outputs, and mechanisms driving success.
 1. The project is viewed as a conversion or transformation of some form of input into an
output under a set of constraints and utilizing a set of mechanisms to make the project
happen.
2. Inputs: Any project is started with a want or need to develop a product. There are two
types of need:
o Original Need: Nature of work to be undertaken before the start of project.
o Emergent Need: Customer's changing need during the course of project.
3. Output: This will usually be in the form of:
o Converted information e.g., a set of specifications for new product.
o A tangible product e.g., housing colony.
o Changed people e.g., through a training project participants have received new
knowledge.
4. Constraints:
o Time: All projects by definition have a time constant.
o Cost: The value and timing of financial resources required to carry out the
project.
o Quality: The standard by which both the product and the process itself will be
judged.
o Legal: Statutory requirement.
o Ethical: Ethics of organization policies.
o Environmental: Environment control legislation.
o Logic: The need for certain activities to have been completed before a project
can start.
o Activation: Action of show when a project or activity can begin.
o Indirect Effects: The reactive effect of the project to be taken care.
5. Mechanism:
o People: Involved directly or indirectly.
o Knowledge and Expertise: Technical specialization and management
processes.
o Tools and Techniques: The method for organizing the potential work with
available resources.
o Technology: The available physical assets that will be performing the
conversion process.
Key Skills of Project Manager
Project managers require diverse skills to lead entrepreneurial ventures. This section lists
essential abilities like planning and problem-solving, critical for effective project execution.
These skills ensure project alignment with strategic goals.
1. Planning and organizational skill,
2. Personnel management skill,
3. Communication skill,
4. Flexibility,
5. Problem solving capability,
6. High energy level,
7. Ability to take suggestion,
8. Ambition for achievement,
9. Ability to develop alternative options,
10. Ability of self-evaluation,
11. Knowledge of project management tools and techniques,
12. Capability to relate present events to project management,
13. Entrepreneurial skills, initiative and risk-taking ability.
Roles of Project Manager in a Project
Project managers play pivotal roles in driving project success. This section outlines
responsibilities like planning and execution, vital for entrepreneurial project management.
These roles ensure efficient resource use and goal attainment.
1. Planning: A project manager is responsible for formulating a plan to meet the project's
objectives while adhering to an approved budget and timeline.
2. Leading: An essential part of any project manager's role is to assemble and lead the
project team. This requires excellent communication, people, and leadership skills, as
well as a keen eye for others' strengths and weaknesses.
3. Execution: The project manager participates in and supervises the successful execution
of each stage of the project. This requires frequent, open communication with the
project team members and stakeholders.
4. Time Management: Staying on schedule is crucial to completing any project, and time
management is one of the key responsibilities of a project manager. Project managers
should be experts at risk management and planning.
5. Budget: Project managers devise a budget for a project and stick to it as closely as
possible. If certain parts of the project end up costing more than anticipated, project
managers moderate the spend and reallocate funds when necessary.
 6. Documentation: A project manager must develop effective ways to measure and
analyze the project's progress. It's also a project manager's job to ensure that all relevant
actions are approved and that these documents will be available for future reference.
7. Maintenance: The work doesn't end once a project has been completed. There needs
to be a plan for ongoing maintenance and troubleshooting in the project.
Traits of a Good Project Manager
Effective project managers exhibit traits that enhance entrepreneurial outcomes. This section
details qualities like leadership and empathy, essential for managing projects successfully.
These traits foster team cohesion and project excellence.
1. Effective Communication Skills: One of the qualities of a good manager is being a
good communicator so that he can connect with people at all levels. The project
manager must clearly explain the project goals as well as each member's tasks,
responsibilities, expectations and feedback.
2. Strong Leadership Skills: Effective project manager means having strong leadership
qualities such as being able to motivate his team and drive them to maximum
performance so that they can achieve their goals.
3. Good Decision Maker: An effective project manager needs to have decision-making
skills because there will always be decisions that need to be acted on.
4. Technical Expertise: Since project management software and other related programs
are essential in accomplishing the project goals, an effective project manager needs to
have sound technical knowledge to understand the issues that are related to the technical
aspect.
5. Inspires a Shared Vision: An effective project manager can articulate the vision to his
team members very well. A visionary person can lead his people to the right direction
as well as easily adapt to the changes that come in the way.
6. Team-Building Skills: It is necessary that a team works in unity otherwise the project
will undergo various relationship challenges that might hinder its success. Project
managers need to know how to give each of them the importance they need by focusing
on their positive traits.
7. Good Negotiation Skills: One of the qualities needed for effective project management
is the ability to negotiate. In times that conflict arise due to differences in opinion,
project managers need sheer negotiating skills to settle the issue and maintain harmony
in the team.
8. Empathetic: Understanding and caring for people as well as being grateful for their
help are a few of the things that an empathetic leader shows to his members. It includes
understanding the needs of the project and its stakeholders.
9. Competence: A good manager knows what he is doing, can initiate new projects as
well as face the challenges that come with them.
Project Life Cycle
The project life cycle maps a project’s evolution, crucial for entrepreneurial planning. This
section defines its phases from start-up to termination, providing a structured framework. It
ensures projects progress systematically to completion.
1. The sequence of phases through which the project will evolve is known as project life
cycle.
2. In simple words, a project life cycle is basically defined by its phases, according to
which a project swims through and finally reaches to handover stage.
3. The phases in project life cycle are as:
o Phase 1: Start-up/Conceptualization of Project: Purpose, Strategic fit,
Objective, Scope, Terms of reference, Draft schedule.
o Phase 2: Planning of Project Activities and Resources: Scope, Select team
members, Plan delivery, Quality plan, Baseline schedule, Baseline budget, Risk
analysis, Issue register, Approvals, Communication plan.
o Phase 3: Execution of Project: Production of key deliverables,
Monitor/control, Quality management, Cost management, Issue resolution,
Risk management, Change control reporting.
o Phase 4: Termination of Project: Contract close out, Team feedback,
Recommendation for further action, Post implementation review.
4. The level of activity required during project life cycle will vary with time. This can be
illustrated by project life cycle curve as shown in Fig. 3.2

Fig. 3.2: Product life cycle

5. The level of activity is relatively low during the early phases, increases through the
implementation stage where the major volume of work is done. This pattern is shown
as a group of cumulative expenditure against time in Fig. 3.3
 Fig. 3.2: Graph of cumulative expenditure againt time
Importance of Project Life Cycle
The project life cycle enhances management efficiency in entrepreneurial ventures. This
section outlines its benefits, from structuring to cost control, vital for successful execution. It
ensures clarity and progress tracking throughout.
1. Structure a Project: Better structuring of a project helps in better monitoring and
better results. With a project life cycle, one can divide the project into several stages,
making the structure easier to understand and monitor.
2. Better Communication: With the better structuring and planning of a project, the
project life cycle helps in better communication between employees and management.
The employees know in advance which tasks to perform on which date and when to
complete them.
3. Helps in Tracking Progress: Finalization of schedule and cost, the project life cycle
helps evaluate how competitive project work has been going with planning and where
the pace is required or cost-cutting is essential.
4. Helps in Better Project Management: The project life cycle has great importance in
terms of managing a project. It helps in managing the project time, cost, resources, and
efforts of employees. With the use of the project life cycle, each aspect of a project is
identified and planned initially, which helps strategize each sub-task at a low cost.
5. Helps in Cost Controlling: The project life cycle holds great importance as it makes
sure that the project is completed as strategized by the management that helps in cost
controlling as the project is completed within the decided resources.
6. Better Results: The project life cycle is of great importance for project management
and better project results. The life cycle has been used widely for project planning and
completing a project because of its colossal significance.
Project Appraisal
Project appraisal evaluates feasibility before entrepreneurial investment. This section defines
it as a detailed examination of multiple aspects, ensuring viable returns. It aligns with project
management’s rigorous assessment processes.
 1. Project appraisal is a process of detailed examination of several aspects of a given
project before recommending of same projects.
2. Project appraisal is a scientific tool and follows a specific pattern.
3. The group who has promoted the project, has to satisfy in all respect before taking step
ahead in the starting of project.
4. The group or institution has to ensure that investment on the proposed project will
generate sufficient return on the investment made and that loan amount disbursed for
the implementation of the project will be recovered along with interest within a
reasonable period of time.
5. The various factors considered for project appraisal are shown in Fig. 3.10.1 and
include technical, financial, commercial, economic, ecological, social and managerial
aspects.
6. The main stages of the system of project appraisal are given in Table 3.10.1:
o Economic: Indicates priority use.
o Technical: Involves scale of the project and the process adopted.
o Organizational: Suitability is examined.
o Managerial: Adequacy and competence are critically scrutinized.
o Operational: Capacity of the project.
o Financial: Determines the financial viability for sound implementation and
efficient operation.

Fig. 3.3: Various aspects of project appraisal

Procedure of Project Appraisal
Appraisal procedures ensure project viability for entrepreneurial pursuits. This section lists
reasons like profitability and resource assessment, critical for decision-making. These steps
guide project selection and planning.
1. For selecting the best project;
2. To assess projects credit-worthiness,
 3. To assess the profitability of the project;
4. To assess the probable cost and benefit;
5. To assess the requirements of raw material;
6. To assess the fixed and working capital;
7. To anticipate a possible market of the product;
8. To assess the management's competence,
9. To find out whether the various factors of production are available,
10. For the fulfillment of social objectives such as employment generation, development of
backward areas, etc.
Technical Appraisal
Technical appraisal verifies a project’s feasibility, key for entrepreneurial execution. This
section defines its role in assessing technology and resources, ensuring robust project
foundations. It aligns with technical planning in project management.
1. Technical Appraisal is the technical review to ascertain that the project is sound with
respect to various parameters such as technology, plant capacity, raw material
availability, location, manpower availability, etc.
2. Technical appraisal is important as:
o It ensures that the project is technically feasible - all the inputs required to set
up the project are available.
o It facilitates the optimal project formulations in terms of capacity, technology,
location, size, etc.
3. Usually, technical appraisal is carried out by independent agencies carrying out
technical studies or by the institution by their in-house technical experts.
Aspects of Technical Appraisal
Technical appraisal examines critical project components for success. This section details
aspects like manufacturing and location, vital for entrepreneurial projects. These factors ensure
technical viability and efficiency.
1. Manufacturing Process/Technology: Often two or more alternative technologies
available. The choice of technology is influenced by a variety of considerations: plant
capacity, principal units, investment outlay, production cost, use by other up product
mix, latest developments, and ease of absorption.
2. Technical Arrangements: Having a good technical collaborator or a good consultant
is very important.
3. Material Inputs and Utilities: It categorized into:
o Raw materials
 o Processed industrial material and components
o Auxiliary materials and factory supplies
o Utilities
4. Product Mix: It is important for the unit to have flexibility to alter its product mix to
survive in changing market conditions.
5. Plant Capacity: Number of units or volume that can be produced during a given period.
6. Location and Site: Location should be close to sources of raw material or to the
consumption markets. Power should be available - cost effective, cheap, uninterrupted.
Water availability is also crucial. Accessibility by transportation is also important.
7. Machineries and Equipments: Smooth flow of production can be achieved if the
various stages are matched well. External consultants must be employed for proper
selection of machineries and equipments.
8. Structures and Civil Works: It comprises of:
o Site preparation & development
o Buildings and structures
o Outdoor works
9. Environmental Aspects: Polluting units should be set-up in approved industrial zones
and where permission from Pollution Control Board is easily available. Effluent
Treatment Plants (ETPs) should be available to neutralize the output waste.
10 Step Procedure for Technical Appraisal

Technical appraisal follows a structured process for thorough evaluation. This section outlines
ten steps, from process selection to scheduling, essential for entrepreneurial project planning.
These ensure technical soundness and feasibility.
1. Step 1. Selection of Process: For manufacturing a product, more than one technology
is available. It will depend upon the product type, quantity and quality of product that
which technology should be adopted for manufacturing the product. Sometimes, we
have to take license for using the technology due to the patent of that technology.
Sometimes, available resources like skilled and unskilled worker, material etc. are key
factors for adaptation of technology.
2. Step 2. Scale of Operation: Scale of operation is signified by the size of plant. Plant
size mainly depends upon the market for the output of the project. Economic size of
plant varies from project to project. The plant size mainly depends upon the promoter's
ability to raise the funds required to implement the project. If the funds required to
implement the project at its economic size is beyond the promoter's capacity to arrange
for and if the economic size is too big a size for the promoter to manage, the promoter
is bound to limit the size of the project that will limit his finance and managerial
 capabilities. Whenever a project is proposed to be set up at a size below its economic
size, it must be analysed to whether the project will survive at the proposed size.
3. Step 3. Raw Material: Selection of raw material has great impact on the technical
appraisal of the project. For a given project, if there is a raw material that should be
used, then quality of raw material has greater importance. The grade and quality of raw
material further decided that what type of equipment and technology must be used and
what is the transportation cost of the raw material. Hence, the cost of capital investment
required on the plant and machinery should also be studied before arriving at a decision
on the choice of raw material.
4. Step 4. Technical Know-how: Technical know-how means that full knowledge about
the technology and procedure involved in the project. When the technical know-how is
provided by the expert consultant, it must be made sure that consultant has the requisite
knowledge and experience about the project.
5. Step 5. Collaboration Agreement: If the project promoters have entered into
agreement with foreign collaborators, the terms and conditions of agreement should be
understood by both parties. In this regard, following points should be considered:
o The technology proposed to be imported should suit to the local conditions.
o The collaboration agreement should have necessary approval of the government
of India.
o The competence and reputation of the collaborators needs to be ascertained
through possible senses including the Indian embassies abroad and the
collaborator's bankers.
o There should not be any restrictive clause in the agreement that import of
equipment/machinery required for the project should be channelised through the
collaborator.
o It must be ensured that the collaboration agreement does not infringe upon any
patent rights.
o If there is financial participation in the project by the collaborator, its effect on
the management of the unit and transfer of payment/payment of interest to the
collaborator may be studied.
6. Step 6. Product Mix: Customer's needs and preferences have been varying with
products therefore, a vast product range has to introduce in the market in order to satisfy
the customer's needs and preferences. For this, variation in size and quality of product
is necessary to satisfy the choice of customers.
7. Step 7. Selection and Procurement of Plant and Machinery: The machinery and
equipment required for a project depends upon the production technology proposed to
be adopted and size of the plant proposed. Before selection of the machinery, following
points should be discussed for rough estimate:
o Take into consideration output planned.
 o Machining time at each work station.
o Machine capacity after giving all necessary allowances.
o Survey of market for availability of different types of machinery.
8. Step 8. Plant Layout: The efficiency of manufacturing operation depends upon plant
layout and layout for machinery. The following factors should be considered while
deciding plant layout:
o The layout should be such that future expansion of the plant can be done without
much change in the existing plant.
o It should have smooth flow of material and semi-finished work.
o There should be provision of quality check at various points.
o It should offer the safety of the workers.
o There should be proper lighting and ventilation.
o The layout should facilitate effective supervision of work.
9. Step 9. Location of Project: To decide the plant location, there are various factors that
should be considered:
o Availability of raw material,
o Proximity to market,
o Availability of labour,
o Availability of infrastructural facilities,
o Availability of power and water,
o Good transport facilities,
o Climate of the site.
10. Step 10. Project Scheduling: Project scheduling is nothing but arrangement of all
facilities in time phase. Scheduling will decide in order of time in which activities to be
performed. The logical sequence of activities according to project schedule can be given
as:
o Land acquisition,
o Site development,
o Preparing plan for building,
o Construction of building,
o Placing order for machinery,
o Receipt of machinery at site,
o Erection of machinery,
 o Project Management,
o Commissioning of plant,
o Commencement of regular commercial production.
Environmental Appraisal
Environmental appraisal assesses external factors impacting entrepreneurial projects. This
section explores its stages, from identifying risks to structuring analysis, crucial for strategic
planning. It ensures projects adapt to business environments effectively.
1. For finding business's available opportunities and risks, environmental appraisal is
needed. Environmental appraisal means to analyze all the factors of business
environments. Following are the main stages involved in environment appraisal:
2. 1st Stage: Factors Affecting Environmental Appraisal:
o Factors Relating to Environment: We cannot evaluate equally two
organizations in same environment. We have to study every organization's
complexity and flexibility.
o Factors Relating to Organization: Age of organization will affect our
environmental appraisal. We also see the organization's size for doing business
and its market type. What are the services and products, it is providing?
o Factors Relating to Strategies: Policy makers play important role in appraisal.
Age, education and experience of policy maker will affect the environmental
appraisal.
3. 2nd Stage: Identification of Environmental Factors: In second stage we have to
identification of environmental factors on the basis of following issue:
o Critical Issues
o High Priority Issues
o Low Priority Issues
4. 3rd Stage: Structuring the Environmental Appraisal: This is the third stage of
environmental appraisal. In this stage, we create the structure of environmental
appraisal. One side of structure will be our strengths and other side will be our
weaknesses. By comparing both, we estimate our surviving power in the environment
of business.
Importance of Environmental Appraisal
Environmental appraisal enhances project resilience and strategy. This section outlines its
benefits, like identifying strengths and opportunities, vital for entrepreneurial success. It
supports informed decision-making and resource use.
1. Identification of Strength: Analysis of internal environment helps to identify strength
of the project. After identifying the strength, the project must try to consolidate or
 maximise its strength by further improvement in its existing plans, policies and
resources.
2. Identification of Weakness: Monitoring internal environment helps to identify not
only the strength but also the weakness of the project. A project may be strong in certain
areas but may be weak in some other areas. For further growth and expansion, the
weakness should be identified so as to correct them as soon as possible.
3. Identification of Opportunities: Environmental analyses helps to identify the
opportunities in the market. The firm acquiring a project should make every possible
effort to grab the opportunities as and when they come.
4. Identification of Threat: Project is subject to threat from competitors and various
factors. Environmental analyses help them to identify threat from the external
environment. Early identification of threat is always beneficial as it helps to diffuse off
some threat.
5. Optimum Use of Resources: Systematic analyses of environment helps to reduce
wastage and make optimum use of available resources in a project, without
understanding the internal and external environment resources cannot be used in an
effective manner.
6. Survival and Growth: Systematic analyses of business environment help the firm to
maximise their strength, minimise the weakness, grab the opportunities and diffuse
threats.
7. To Plan Long-term Strategy: Proper analyses of environmental factors help in project
to frame plans and policies that could help in easy accomplishment of the objectives.
8. Environmental Scanning Aids Decision-making: Decision-making is a process of
selecting the best alternative from among various available alternatives. An
environmental analysis is an extremely important tool in understanding and decision-
making in all situations.
Market Appraisal
Market appraisal evaluates commercial viability for entrepreneurial products. This section
defines its focus on demand and strategy, essential for market entry. It ensures projects align
with consumer needs and profitability.
1. The market appraisal deals with the market for the promotion of a product or services.
2. The main idea of a project is to produce same product or service and introduce it in
market for earning a profit.
3. The success of any product depends upon the question as to whether the product and
service offered by the project is successful commercially.
4. Market appraisal of a product is done studying the commercial successfulness of the
product or service offered by the project from the following angles:
o Demand for the product,
 o Supply position for the product,
o Distribution channels,
o Pricing of the product,
o Government policies.
5. Market appraisal consists of two aspects:
o Market opportunity for the product expressed in terms of demand forecast and
market shares.
o Marketing strategy and marketing process is the design of blueprint consisting
of a set of inputs including product quality, price, design, agency discounts,
distribution network/channels, packaging, etc.
6. Market analysis should cover the following:
o Analysis of market opportunity and specifying marketing objectives.
o Planning the process of marketing the product.
o Organization of the marketing process.
o Control of the implementation of the marketing plan and taking corrective
action when the actual results deviate from the estimates or expectations.
Objectives and Scope of Market Research
Market research informs entrepreneurial market strategies. This section outlines its objectives,
like identifying customer needs, and scope, such as market share analysis. These insights drive
effective project commercialization.
1. Objectives of Market Research:
o Market research determines who and where the customer is, what are his needs
and wants, what will he buy, where and how he will buy, and how much he will
pay.
o Market research measures sales, trends and sales potential.
o Market research analyses distribution, economic trends and profitability.
o Market research determines advertisement effectiveness, consumer reaction and
dealer reaction.
o Market research studies market potential and market share.
o Market research conducts demand and price studies.
o Market research popularizes the company products and makes them acceptable
to consumers.
o Market research keeps a business in touch with its markets.
o Market research explores new markets and helps developing new products.
 o Market research safeguards company's interest against unforeseen changes in
the market.
o Market research guides sales promotion efforts.
o Market research analyses user characteristics, attitudes, opinions with particular
emphasis on any shift in market composition or personal preferences.
2. Scope of Market Research:
o Measurement of market potential.
o Determination of market characteristics.
o Market share analysis.
o Competitive products studies.
o New products acceptance and potential.
o Share and long range forecasting.
o Studies of business trends.
o Establishment of sales quotas and territories.
o Studies of advertisement effectiveness.
o Plant and warehouse location studies.
Demand Forecasting Techniques to Predict Market Appraisal
Demand forecasting predicts market potential for entrepreneurial projects. This section
explores qualitative and quantitative techniques, like moving averages, vital for planning.
These methods ensure accurate market assessments.
1. Forecasting methods can be classified as 'qualitative' or 'quantitative'.
2. The qualitative methods use personal judgment and involve qualities like intuition and
experience as the basis of forecasts, and are subjective by their varying nature.
3. Quantitative methods are objective in nature and they employ numerical information as
the basis of making forecasts.
 Fig. 3.3: An overview of forecasting methods
4. Some techniques for demand forecasting of product in commercial appraisal are given
as:
o A Moving Average Method: This method uses the average of the most recent
n data values in the time series as the forecast for the next period. Moving
average = [Σ (most recent n data values)/n]. The term moving indicates that, as
a new observation becomes available for the time series, it replaces the oldest
observation in the above expression, and a new average is computed. As a result,
the average will change, or move, as new observations become available. After
calculating the moving average forecast, we compute forecast error. For this, we
compute the difference between the observed value of the time series and the
forecast value. This forecast error may be positive or negative, depending on
whether the forecast is too low or too high.
o Weighted Moving Averages: In this method, each observation in the
calculation receives the same weight. One variation, known as weighted moving
averages, involves selecting different weights for each data value and then
computing a weighted average of the most recent n data values as the forecast.
In most of the cases, the most recent observation receives the most weight, and
the weight decreases for older observations. It may be noted that the weights
used for the three weeks are, respectively 3/6, 2/6 and 1/6, such that the sum of
weights is equal to 1. For a four week average, the weights would be 4/10, 3/10,
2/10 and 1/10.
o Exponential Smoothing: It is a special case of the weighted moving averages
method, where the forecast for the next period is calculated as weighted average
of all the previous observations. It is based on the premise that the most recent
observation is the most important for predicting the future value. The basic
exponential smoothing model is: [Formula not fully provided in original;
typically Ft+1 = αAt + (1-α)Ft, where Ft+1 is the forecast, At is actual value, Ft
is previous forecast, α is smoothing constant]. The above equation is rewritten
as, represents the error in the previous forecast.
Managerial Appraisal
Managerial appraisal assesses leadership capacity for entrepreneurial projects. This section
defines its focus on management competence, crucial for success. It ensures effective human
resource utilization and project viability.
1. The managerial appraisal is done to find out whether management is capable enough to
make the project successful with considerable margin of profit.
2. Basically, management is the most important factor that can either make a project a
success or a failure.
3. Sometimes it is very common to observe that a good project at the hand of a poor
management may fail while a not so good project at the hand of an effective
management may succeed.
 4. Hence, banks and financial institutions that lend money for financing projects lay more
emphasis on managerial appraisal.
5. The morale of employees, the prevailing superior-subordinate relationship, labour
turnover, labour unrest, productivity of employees, are some key factors on which
managerial capabilities of person concerned.
6. Nowadays, managerial appraisal has become so common because number of sick units
has been increasing considerably due to mismanagement.
7. In managerial appraisal, we have to analyse the performances of top level in a unit.
8. This is because management appraisal is concerned with the appraisal of human
qualities.
Qualities
Managerial qualities determine project leadership effectiveness. This section lists traits like
integrity and foresight, vital for entrepreneurial management. These attributes ensure robust
project oversight and success.
1. Integrity
2. Foresightedness,
3. Leadership qualities,
4. Interpersonal relationship,
5. Technical and financial skills,
6. Commitment,
7. Perseverance.
Scope of Managerial Appraisal
Managerial appraisal’s scope varies by project structure. This section explores its application
across sole promoters to corporate leaders, critical for entrepreneurial ventures. It ensures
competent management drives success.
1. The management appraisal is done on the sole promoter of a small project.
2. In case of partnership firm, the management appraisal is done on managing partner.
However, mutual understanding among all the partners is a key factor for the success
of the enterprise.
3. In private limited companies, the promoter director or managing director or executive
director is responsible for running the enterprise. The management appraisal is done on
him.
4. Management appraisal technique is purely subjective and qualitative in nature unlike
other appraisal techniques.
5. In public limited companies, the management appraisal is done on board of directors
and chief executive officer of the company.
 6. The technical and management qualifications of the person being appraised are
important in managerial appraisal.
7. The present and past experience of the person being appraised for managing other
enterprise is very important feedback of his past performance can be effectively used
for managerial appraisal.

Conclusion
This chapter integrates project management with entrepreneurship, detailing its phases, scope,
and appraisal processes. By emphasizing planning, execution, and managerial competence, it
equips readers to lead projects effectively, ensuring technical feasibility, market success, and
sustainable growth in entrepreneurial endeavors.
 Unit 4
Project Financing
Project Cost Estimation
Cost estimation forecasts resources needed for project success, vital for entrepreneurial
budgeting. This section defines it as a process calculating financial commitments, ensuring
projects stay within scope. Accurate estimates drive effective cost control and project viability.
1. Cost estimation in project management is the process of forecasting the financial and
other resources needed to complete a project within a defined scope.
2. Cost estimation is the process that takes various factors into account, and calculates a
budget that meets the financial commitment necessary for a successful project.
3. Estimating cost is an important process in project management as it is the basis for
determining and controlling the project budget.
4. Cost estimation accounts for each element required for the project from materials to
labour and calculates a total amount that determines a project's budget.
5. Once the project is in motion, the cost estimate is used to manage all of its affiliated
costs in order to keep the project on budget.
6. Good cost estimation is essential for keeping a project under budget. Many costs can
appear over the life cycle of a project, and an accurate estimation method can be the
difference between a successful plan and a failed one.
The Elements of Cost Estimation in Project Management
Cost estimation comprises key elements shaping entrepreneurial budgets. This section lists
components like labour and risk, critical for comprehensive financial planning. These factors
ensure all project needs are accounted for accurately.
1. Labour: The cost of team members working on the project, both in terms of wages and
time.
2. Materials and Equipment: The cost of resources required for the project, from
physical tools to software to legal permits.
3. Facilities: The cost of using any working spaces not owned by the organization.
4. Vendors: The cost of hiring third-party vendors or contractors.
5. Risk: The cost of any contingency plans implemented to reduce risk.
Importance of Cost Estimation
Cost estimation underpins project success and entrepreneurial efficiency. This section
highlights its benefits, from accurate planning to stronger client ties, ensuring resource
optimization. It fosters trust and profitability in ventures.
 1. More Accurate Planning: By accurately predicting what tasks and resources are
required to complete work, Estimator will be able to efficiently produce a work
breakdown schedule, assign work to staff, and adhere to projected timelines.
2. Improved Profit Margins: Accurate estimating accounts for expected and unexpected
costs and helps protect the profit margins.
3. Improved Resource Management: With greater insight into the tasks and timelines
required to complete work. One can manage the capital and resources required in the
project in the efficient way that helps the project to move forward efficiently at low
cost.
4. Stronger Client Relationships: When clients understand the 'why' behind a project's
cost, they are more likely to trust your expertise and expect changes to the cost estimate
as the project progresses, resulting in better working relationships.
5. Better Reputation and Repeat Business: When projects are delivered on time and on
budget, it will likely to create happy customers, win repeat business, and gain more
referrals.
Developing Cost Estimation
Developing cost estimates involves structured steps for entrepreneurial precision. This section
outlines the process, from defining purpose to updating estimates, ensuring robust financial
planning. It aligns resources with project goals effectively.
1. Define Estimate's Purpose: Determine the purpose of the estimate, the level of detail
which is required, who receives the estimate and the overall scope of the estimate.
2. Develop Estimating Plan: Assemble a cost-estimating team, and outline their
approach. Develop a timeline, and determine who will do the independent cost estimate.
Finally, create the team's schedule.
3. Define Characteristics: Create a baseline description of the purpose, system and
performance characteristics. This includes any technology implications, system
configurations, schedules, strategies and relations to existing systems.
4. Determine Estimating Approach: Define a work breakdown structure (WBS), and
choose an estimating method that is best suited for each element in the WBS. Cross-
check for cost and schedule drivers; then create a checklist.
5. Identify Rule and Assumptions: Clearly define what is included and excluded from
the estimate, and identify specific assumptions.
6. Obtain Data: Create a data collection plan, and analyze data to find cost drivers.
7. Develop Point Estimate: Develop a cost model by estimating each WBS element.
8. Conduct Sensitivity Analysis: Test sensitivity of costs to changes in estimating input
values and key assumptions, and determine key cost drivers.
9. Conduct Risk and Uncertainty Analysis: Determine the cost, schedule and technical
risks inherent with each item on the WBS and how to manage them.
 10. Document the Estimate: Have documentation for each step in the process to keep
everyone on the same page with the cost estimate.
11. Present Estimate to Management: Brief stakeholders on cost estimates to get
approval.
12. Update Estimate: Any changes must be updated and reported on the estimate
accordingly.
Types of Project Cost Estimation Techniques
Various techniques enhance cost estimation accuracy in entrepreneurial projects. This section
explores methods like analogous and bottom-up estimating, tailoring approaches to project
needs. These ensure precise budgeting and control.
1. Analogous Estimating: It assumes using the actual cost of previous or analogous
projects as the foundation for estimating the cost of the current project. This technique
is usually applied to separate segments of the project and in combination with other
methods and tools.
2. Statistical Modeling: It allows using historical and statistical data to make a model of
activity parameters (like scope, budget and duration). It may provide a higher degree of
accuracy depending on the data included in the statistical model. The technique can be
used separately as well as in combination with other approaches and tools.
3. Bottom-Up Estimating: This analysis supports the idea that the individual cost of each
activity or entire work package is of prime importance. By using the method, individual
scheduled activities, or a work package, can be estimated to the smallest detail.
4. Top-Down Estimating: This technique is opposite to Bottom-up Analysis. It assumes
that the overall budget is determined at the project's beginning and the expert team
needs to identify the costs of each work item.
5. Three Point Estimate: The three point estimation technique is used in management
and information systems applications for the construction of an approximate probability
distribution representing the outcome of future events, based on very limited
information. It comes up with three scenarios, most likely, optimistic and pessimistic
ranges. These are then put into an equation to develop estimation.
6. Reserve Analysis: Since Quality Assurance and Quality Control are integrated parts of
the cost estimation process, this technique is used to deal with uncertainties by making
review.
Working Capital
Working capital sustains daily entrepreneurial operations, ensuring liquidity. This section
defines it as short-term, recurring funds for routine expenses, distinguishing gross and net
concepts. It balances profitability and operational needs effectively.
1. Working capital is a part of the capital which is needed for meeting day-to-day
requirements of the business concern. For example, payment to creditors, salary paid to
workers, purchase of raw materials, etc.
 2. Normally, it consists of capital which is recurring in nature.
3. It can be easily converted into cash.
4. Hence, it is also known as short-term capital.
5. Working capital is described as the capital which is not fixed.
6. Working capital is considered as the difference between the book value of current assets
and current liabilities.
7. Working capital management is one of the important parts of financial management.
8. It is concerned with short-term finance of the business concern, which is a closely
related trade between profitability and liquidity.
9. Working capital is related to short-term assets and short-term sources of financing.
10. Hence, it deals with both assets and liabilities.
11. Efficient working capital management leads to improved operating performance of the
business concern and it helps to meet the short-term liquidity.
12. Concept of Working Capital: Working capital can be classified or understood with
the help of the following two important concepts.
o Gross Working Capital: Gross Working Capital is the general concept which
determines the working capital concept. Thus, the gross working capital is the
capital invested in total current assets of the business concern. Gross Working
Capital is simply called the total current assets of the concern. Gross Working
Capital = Current Assets.
o Net Working Capital: Net Working Capital is the difference between current
assets and current liabilities of the business concern. Net Working Capital is the
specific concept which considers both current assets and current liability of the
concern. Net Working Capital is the excess of current assets over the current
liability of the concern during a particular period. If the current assets exceed
the current liabilities it is said to be positive working capital; if it is reverse, it
is said to be Negative working capital. Net Working Capital = Current Assets -
Current Liabilities.
Types of Working Capital
Working capital varies by type, impacting entrepreneurial fluidity. This section categorizes it
into gross, net, and temporary forms, each serving distinct operational needs. These
classifications optimize financial management strategies.
1. Gross Working Capital: Gross working capital refers to the amount of funds invested
in various components of current assets. It consists of raw materials, work in progress,
debtors, finished goods, etc.
2. Net Working Capital: The excess of current assets over current liabilities is known as
Net working capital. The principal objective here is to learn the composition and
magnitude of current assets required to meet current liabilities.
 3. Positive Working Capital: This refers to the surplus of current assets over current
liabilities.
4. Negative Working Capital: Negative working capital refers to the excess of current
liabilities over current assets.
5. Permanent Working Capital: The minimum amount of working capital which even
required during the dullest season of the year is known as Permanent working capital.
6. Temporary or Variable Working Capital: It represents the additional current assets
required at different times during the operating year to meet additional inventory, extra
cash, etc.
Requirements of Working Capital
Working capital meets essential entrepreneurial operational demands. This section lists its
requirements, from raw materials to goodwill, ensuring smooth business continuity. Adequate
levels enhance efficiency and reputation.
1. Adequate working capital is needed to maintain a regular supply of raw materials,
which in turn facilitates smoother running of production process.
2. Working capital ensures the regular and timely payment of wages and salaries, thereby
improving the morale and efficiency of employees.
3. Working capital is needed for the efficient use of fixed assets.
4. In order to enhance goodwill a healthy level of working capital is needed. It is necessary
to build a good reputation and to make payments to creditors in time.
5. Working capital helps avoid the possibility of under-capitalization.
6. It is needed to pick up stock of raw materials even during economic depression.
7. Working capital is needed in order to pay fair rate of dividend and interest in time,
which increases the confidence of the investors in the firm.
Fund
Funds fuel entrepreneurial projects, supporting start-up and growth. This section defines
funding as financial investments from various sources, crucial for scaling operations. It
explores diverse funding types for project viability.
1. Funding refers to the money required to start and run a business.
2. Funding for projects may be via a single source or through multiple investors. The
governance of the project will vary to meet the needs of the investors in the project and
the life cycle option chosen.
3. It is a financial investment in a company for product development, manufacturing,
expansion, sales and marketing, office spaces, and inventory.
4. Many startups choose to not raise funding from third parties and are funded by their
founders to prevent debts and equity dilution.
 5. However, most startups do raise funding, especially as they grow larger and scale their
operations.
6. Different Types of Funds for Starting a Project Are:
o Governmental Grant: A grant is a sum of money given by a government or
other organisation for a particular purpose.
o Fund by Partners: Partnerships can help manage costs by sharing buildings,
equipment, expertise and workloads.
o Borrowed Money: Borrowing money can be an option if your project can repay
the loan.
o Donation: If a project is appealing to the community people like to show
support for a good cause by giving a donation.
o Investor Funds: Investors are looking for opportunities to put their funds into,
providing this private equity returns a profit.
o Crowd Funding: Crowd funding uses the internet to connect with potential
funders.
o Revenue Fund: Growing revenue and conserving cash are effective ways to
improve a bank balance that support the project financially.
o Selling Up: Selling up a project might sound drastic, but when the time is right
sometimes it is better to let go of a project and allow someone else to take
control.
Source of Funds (SOF)
Sources of funds define financial origins for entrepreneurial ventures. This section classifies
them by period, ownership, and generation, ensuring tailored financing strategies. These
sources support project sustainability and growth.
1. Source of Funds refers to the origin of the particular funds or any other monetary
instrument which are the subject of the transaction between a Financial Institution and
the customer.
2. Classification of Sources of Funds:
 Fig 4.1: Source of funds classification
o On the Basis of the Period, Sources of Funds Can Be Classified Into Three
Types:
▪ Long-term Sources: These sources fulfill the financial requirements of
a business for a period more than 5 years. Such financing is generally
required for the procurement of fixed assets such as plant, equipment,
machinery etc.
▪ Medium-term Sources: These are the sources where the funds are
required for a period of more than one year but less than five years.
▪ Short-term Sources: Funds which are required for a period not
exceeding one year are called short-term sources.
o On the Basis of Ownership, the Sources Can Be Classified Into Two Types:
▪ Owner's Funds: Funds which are procured by the owners of a business,
which may be a sole entrepreneur or partners or shareholders of a
business. It also includes profits which are reinvested in the business.
▪ Borrowed Funds: The funds raised with the help of loans or
borrowings. This is the most common type of source of funds and is used
the majority of the time.
o On Generation Basis Sources Funds Are of Two Types:
▪ Internal Sources of Funds: These are type of funds that are generated
inside the business.
▪ External Sources of Funds: These are the sources that lie outside an
organization, such as suppliers, lenders, and investors.
Capital Budgeting
Capital budgeting guides long-term investment decisions in entrepreneurial projects. This
section defines it as a process evaluating asset purchases, optimizing resource allocation. It
ensures profitability and strategic financial planning.
1. It is the process of making investment decisions in long term assets. It is the process of
deciding whether or not to invest in a particular project as all the investment
possibilities may not be rewarding.
2. Process of capital budgeting ensure optimal allocation of resources and helps
management work towards the goal of investor profit maximization.
3. Capital budgeting also refers to the total process of generating, evaluating, selecting
and following up on capital expenditure alternatives.
4. Thus, capital budgeting is a decision-making process through which a business concern
evaluates the purchases of various fixed assets for expansion and replacement.
 5. Capital budgeting is also known as investment decision making, capital expenditure
decisions, planning capital expenditure and analysis of capital expenditure.
6. Capital budgeting techniques are invariably used in all types of investment
opportunities from the purchase of a new piece of machinery to whole factory.
Objectives of Capital Budgeting
Capital budgeting aims to maximize entrepreneurial returns strategically. This section lists
objectives like selecting profitable projects and controlling expenditure, ensuring financial
efficiency. These goals align resources with investor benefits.
1. To ensure the selection of the possible profitable capital projects.
2. To guarantee the effective control of capital expenditure in order to achieve by
forecasting the long-term financial requirements.
3. To make estimation of capital expenditure during the budget period and to see that the
benefits and costs may be measured in terms of cash flow.
4. Determining the required quantum takes place as per authorization and sanctions.
5. To expedite co-ordination of inter-departmental project funds among the competing
capital projects.
6. To guarantee maximization of profit by allocating the available budget.
Process of Capital Budgeting
Capital budgeting follows a phased approach for entrepreneurial investments. This section
outlines stages from planning to review, ensuring thorough evaluation and execution. These
steps optimize long-term asset decisions.
1. Capital Budgeting process is the process of planning which is used to evaluate the
potential investments or expenditures whose amount is significant.
2. It helps in determining the company's investment in the long term fixed assets such as
investment in the addition or replacement of the plant & machinery, new equipment,
research & development, etc.
3. It is the process of deciding whether or not to invest in a particular project as all the
investment possibilities may not be rewarding.
4. While capital budgeting several phases are involved in the process. These processes are
given below in sequence.
5. Phases of Capital Budgeting:
 Fig 4.2: Phases of Capital Budgeting
o Planning: The planning phase encompasses investment strategy and the
generation and preliminary screening of project proposals. The investment
strategy offers the framework that shapes and guides the identification of
individual project opportunities.
o Analysis: If the preliminary screening proposes that the project is worth
investing, a detailed analysis of the marketing, technical, financial, economic,
and ecological aspects is conducted.
o Selection: The selection process addresses the matter whether the project is
worth investing. Several appraisal criteria are used to judge the value of a
project.
o Financing: After choosing a project, proper financing must be made.
Flexibility, risk, income, control and taxes are the vital business considerations
that influence the capital structure decision and the choice of specific
instruments of Financing.
o Implementation: The implementation phase has following stages: Project and
engineering designs, Negotiations and contracting, Construction, Training,
Plant commissioning.
o Review: Once the project is commissioned, a review phase has to be done.
Performance review should be done occasionally to compare the actual
performance with the projected performance.
Advantages/Importance of Capital Budgeting
Capital budgeting offers significant benefits for entrepreneurial growth. This section highlights
advantages like risk identification and wealth maximization, ensuring informed investment
choices. It enhances project profitability and control.
1. Evaluates Investment Plans: Capital budgeting is a key tool used by management for
the evaluation of investment projects. It assists in taking decisions regarding long-term
investments by properly analyzing investment opportunities.
 2. Identify Risk: Capital budgeting examines the project from different aspects to find
out all possible losses and risks. It studies how these risks affect the return and growth
of the business which are helpful in making an appropriate decision.
3. Chooses Investment Wisely: Capital budgeting plays an effective role in selecting a
profitable investment project for the business. This technique considers cash flows of
investment proposals during its entire life for finding out its profitability.
4. Avoid Over and Under Investment: The right amount of investment is a must for
every business for earning better returns and avoiding losses. Capital budgeting
analyzes the firm's capability and objectives for determining the right investment
accordingly.
5. Maximize Shareholder's Wealth: Capital budgeting assists in maximizing the overall
value of shareholders. It is a tool that enables companies to deploy their funds in the
most effective way possible thereby earning huge profits.
6. Control Project Expenditure: Capital budgeting focuses on minimizing the
expenditure of investment projects. It ensures that the project has an adequate amount
of inflows for meeting its expenses and provides an anticipated return.
Disadvantages/Limitations of Capital Budgeting
Capital budgeting has limitations impacting entrepreneurial decisions. This section lists
drawbacks like irreversible choices and reliance on assumptions, highlighting challenges.
These constraints require careful consideration in planning.
1. Irreversible Decisions: The major limitation with capital budgeting is that the
decisions taken through this process are long-term and irreversible in nature.
2. Rely on Assumptions and Estimations: Capital budgeting techniques rely on different
assumptions and estimations for analyzing investment projects. Annual cash flow and
life of project estimated is not always true and may increase or decrease than the
anticipated values.
3. Higher Risk: Capital budgeting decisions are riskier in nature as it involves a large
amount of capital expenditure. These decisions require the utmost care as it affects the
success or failure of every business.
4. Uncertainty: This process is dependent upon futuristic data which is uncertain for
analyzing the investment proposals.
5. Ignores Non-Financial Aspects: Capital budgeting technique considers only financial
aspects and ignores non-financial factors.
Risks and Uncertainty in a Project
Risks and uncertainties challenge entrepreneurial project outcomes. This section defines them
as unpredictable events and unknowns, distinguishing their manageability. Understanding
these aids in robust project planning and execution.
1. Risk:
 o A risk is an unplanned event that may affect one or some of the project
objectives if it occurs.
o The risk is positive if it affects the project positively, and it is negative if it
affects the project negatively.
o Risk is any unexpected event that can affect the project for better or for worse.
o Risk can affect anything including people, processes, technology, and resources
involved in a project.
2. Uncertainty:
o Uncertainty is a lack of complete certainty. In uncertainty, the outcome of any
event is entirely unknown, and it cannot be measured or guessed.
o Uncertainty is ability to predict outcome of parameters or foresee events that
may impact the project.
o Uncertainties have a defined range of possible outcomes described by functions
reflecting the probability for each outcome.
o In uncertainty, you completely lack the background information of an event,
even though it has been identified.
3. The Following Are Differences Between Risk and Uncertainty:
o In risk, you can predict the possibility of a future outcome. In uncertainty, you
cannot predict the possibility of a future outcome.
o Risks can be managed by several tools and techniques. Uncertainty cannot be
controlled by any means.
o Risks can be measured and quantified. Uncertainty cannot be measured and
quantified.
o Probability can be assigned to risks events. Probability cannot be assigned on
any type of uncertainty.
Types of Risks and Uncertainty
Projects face diverse risks and uncertainties affecting entrepreneurial success. This section
categorizes them, from operational risks to chaotic uncertainties, aiding risk management.
These distinctions guide mitigation strategies effectively.
1. Different Types of Risks in a Project Are:
o Operational Risks: These types of risks involve making the right processes and
then technologies and handling the production, procurement, and distribution of
the products or services, etc.
o Security Risks: These risks are very important that is the product developed is
secure and does not allow unauthorized access, unintentional/intentional
modifications, and is available when required.
 o Legal Risks: These risks are also about the contractual obligations and handling
or avoiding any lawsuits against the company. The customer contracts must be
read and understood properly to avoid these types of risks.
o Strategic Risks: The strategic risks consist of choosing the right project,
selecting the right people for the work, selecting the right tools, and selecting
the right technology for the realization of the products or the services in the
project management.
o Performance Risks: These risks are about the performance of the products as
well as the project. The specifications maintained in the project ensure that the
product is as per the requirements and performs satisfactorily.
o Market Risks: These risks are pertaining to the market capture, brand image of
the organization and the products, and how to hold on to the older market and
expand the market in the future.
2. Different Types of Uncertainty in a Project Are:
o Variation: This refers to a range of possible values over which a certain variable
characterizing the information can vary.
o Foreseen Uncertainty: This refers to all previously identified uncertainties
which may or may not occur during the course of a project.
o Unforeseen Uncertainty: This refers to uncertainties which are not identifiable
during project planning. In this case, the project team is unaware of the
possibility of the occurrence of this uncertain event, and as such there is no
alternative plan of action.
o Chaos: In this case, the project itself lacks stable descriptions of objectives,
assumptions, and goals.
Risk Management Process
Risk management safeguards entrepreneurial projects from threats. This section defines it as a
process of identifying and responding to risks, ensuring project stability. Its steps enhance
adaptability and success rates.
 Fig 4.3: Risk Management Process
1. Risk Management: Risk management is the act of identifying, evaluating, planning
for, and then ultimately responding to threats to the business or a project.
2. Process of Risk Management Involves Following Given Steps:
o Identify the Risks: Being able to identify the type of risk is vital to the risk
management process. Organizations can identify their risk through experience
and internal history, consulting with an industry professional and external
research. Risks management is an important process because it empowers a
business with the necessary tools so that it can adequately identify and deal with
potential risks.
o Analyze the Risk: To determine the severity and seriousness of the risk it is
necessary to see how many business functions the risk affects. When a risk
management solution is implemented one of the most important basic steps is
to map risks to different policies, procedures, and project processes. This means
that we already have a mapped risk framework that will evaluate risks and let
us know the far-reaching effects of each risk.
o Evaluate or Rank the Risk: Risks need to be ranked and prioritized from most
severe to lowest level of risk. Risks that can be catastrophic to the organization
are ranked highest while risks that cause an inconvenience are ranked lower on
the list. By knowing the level of the risk and the impact will have on the project,
management knows how best to intervene if a risk occurs.
o Treat the Risk: When the organization has identified the risks and ranked them
in order of high to low, each risk needs to be eliminated or contained as much
as possible. This is usually done by connecting with the experts in each
department or field to which the risk belong, to discuss the risk and solution is
the key to understanding how to eliminate or contain the risk.
o Monitor and Review the Risk: There are some risks that cannot be completely
eliminated and risk management isn't something that has a start and finish, or
end result. It is an ongoing process within a project that is constantly changing.
The project, its environment, and its risks are constantly changing, so the
process should be consistently revisited. If an organization gradually formalizes
its risk management process and develops a risk culture, it will become more
adaptable in the face of change.
Techniques for Managing Risks
Risk management techniques bolster entrepreneurial project resilience. This section explores
methods like brainstorming and SWOT analysis, enhancing risk mitigation. These tools ensure
proactive threat handling and project success.
1. Brainstorming: To begin the brainstorming process, we must assess the risks that could
impact the project. This starts with reviewing the project documentation, looking over
historic data and lessons learned from similar projects, reading over articles and
organizational process assets.
 2. Root Cause Analysis: This is a technique to help project members identify all the risks
that are embedded in the project itself. Conducting a root cause analysis shows the
responsiveness of the team members in risk management. It is normally used once a
problem arises so that the project members can address the root cause of the issue and
resolve it instead of just treating its symptoms.
3. SWOT Analysis: SWOT is an analysis to measure the strengths, weaknesses,
opportunities, and threats to a project. This tool can be used to identify risks as well.
The first step is to start with the strengths of the project. Then team members need to
list out all the weaknesses and other aspects of the project that could be improved. Here
is where the risks of the project will surface. Opportunities and threats can also be used
to identify positive risks and negative risks respectively.
4. Risk Assessment Template for IT: A risk assessment template is usually made for IT
processes in an organization, but it can be implemented in any project in the company.
This assessment gives a list of risks in an orderly fashion. It is a space where all the
risks can be collected in one place. This is helpful when it comes to project execution
and tracking risks that become crises. The risk assessment template comes with figures
and probabilities of any risk occurring, along with the impact it will have on the project.
This way the project manager and the team members are fully aware of the potential
harm of any risk and the likelihood of it occurring.
5. Probability and Impact Matrix: Project managers can also use the probability and
impact matrix to help in prioritizing risks based on the impact they will have. It helps
with resource allocation for risk management. This technique is a combination of the
probability scores and impact scores of individual risks. After all the calculations are
over; the risks are ranked based on how serious they are. This technique helps put the
risk in context with the project and helps in creating plans for mitigating it.
6. Risk Data Quality Assessment: This method utilizes all the collected data for
identified risks and finds details about the risks that could impact the project. This helps
project managers and team members understand the accuracy and quality of the risk
based on the data collected. The data quality assessment is used to improve the project
manager's understanding of the risks the project could face as well as collect all the
information about the risk possible. By examining these parameters, project manager
can come up with an accurate assessment of the risk.
7. Variance and Trend Analysis: It helps when project managers look for variances that
exist between the schedule of the project and cost and compare them with the actual
results to see if they are aligned or not. If the variances rise, uncertainty and risk also
rise simultaneously. This is a good way of monitoring risks while the project is
underway. It becomes easy to tackle problems if project members watch trends
regularly to look for variances.
8. Reserve Analysis: While planning the budget for the project, contingency measures
and some reserves should be in place as a part of the budget. This is to keep a safeguard
if risks occur while the project is ongoing. These financial reserves are a backup that
can be used to mitigate risks during the project.
Process of Mitigating the Risk Associated
Mitigating risks enhances entrepreneurial project success rates. This section details risk
analysis processes and techniques like break-even analysis, managing uncertainties. These
steps ensure proactive risk reduction and control.
1. Project Risk Analysis: Project risk analysis is a process which enables the analysis of
risk associated with a project. Properly undertaken it will increase the likelihood to
successful completion of a project to cost, time and performance objective. All projects
are prone to some kind of risk or the other. All projects are appraised making certain
assumptions.
2. Assumptions in Project Appraisal Are Unavoidable Since No Two Projects Are
Unique in All Respects and Hence a New Project Cannot Be Compared with Old
One. The Assumptions Being Made Can Be Listed As:
o Project cost estimates.
o Life of project.
o Estimate of demand, production, sales and prices.
o Political and social development.
o Change in technology, price and productivity.
3. Techniques of Project Risk Analysis:
o Break even analysis,
o Sensitivity analysis,
o Decision tree analysis,
o Monte-Carlo analysis,
o Game theory.
4. Types of Project Risk:
o Project Completion Risk: Completing the project in time and within estimated
cost is a major achievement. Project time overrun results in cost overrun. If
additional funds are not pumped in, the project may come to grinding halt.
Project overrun can be due to bad management or technological obsolescence
during implementation of project of long gestation period.
o Resource Risk: Shortage of raw material, power fuel, skilled manpower will
jeopardize all profitability calculation as there will be reduction in capacity
utilization, increase in production cost and reduction in estimated return.
o Price Risk: Price fluctuation of both input and output can have adverse effect
on performance of the project. The government intervention in price fixation
and capability of competitors to sell the product at a lower price will affect the
project performance.
o Technology Risk: Use of non-proven technology. Obsolescence of technology
due to larger time spent on project.
 o Political Risk: Levying and regulating taxes. Regulating monopolistic trade
practices. Imposing import duties. Promoting export. Price control.
Nationalization. Prohibiting export of certain products.
o Interest Rate Risk: Fluctuation of interest rate on long term borrowing can
adversely affect the project.
o Exchange Rate Risk: Company exposed to international economy is adversely
affected by volatile exchange rate.
5. Break Even Analysis in Project Risk Analysis: The cost of inputs and price of output
are decided by influence of market forces. The only thing that is under the control of
project promoter is the level of output. It is very essential to know the level of operation
below which the project will incur losses. Breakeven point (BEP) refers the level of
operation at which the project neither earn profit nor incur losses. Therefore, analysis
of BEP becomes important to decide the level of operation to avoid the possibility of
loss.
Projected Financial Statements
Projected financial statements forecast entrepreneurial financial futures. This section defines
them as tools summarizing income, balance, and cash flow, aiding strategic planning. They
attract investors and guide decisions effectively.
1. Projection of the financial statement means to estimate the statements like Income
statement, balance sheet, and statement of cash flow.
2. The projection of financial statements emphasizes the current trends and expectations
to arrive at the perfect financial picture that management wants to attain in the future.
3. Projected financial statements show the summary of the statement of income, balance
sheet, and cash flow statement which helps the managers to take future decisions
accordingly.
4. It plays a big role in the business planning process as it forecasts the future financial
position of the company.
5. Projected statements are also known as "pro forma financial statements" which means
"as a matter of form".
6. The financial projection is all related to the assumptions taken for forecasting the data
of financial statements. Mostly, assumptions are made based on past data and
knowledge.
7. All businesses require projected financial data to present to their investors and creditors.
For managing the business properly, financial projections play a vital role.
8. It is a very important part while preparing a business plan for a new business or making
strategic plans for ongoing business.
9. It is also useful to attract investors.
Types of Projections on Basis of Duration
Financial projections vary by duration, suiting entrepreneurial needs. This section classifies
them into short-term and long-term, each serving distinct planning purposes. These types
ensure tailored financial foresight.
1. Short Term Projections: Short term projections mainly cover one year and breaks into
monthly projections. This type of projection is mostly useful for small businesses where
the only plans related to increasing sales and revenue are considered.
2. Long Term Projections: Long term projections cover mainly the next three to five
years and are used in large businesses for creating strategic plans for expansion and
development.
Importance of Projected Financial Statements
Projected financial statements enhance entrepreneurial planning and credibility. This section
outlines their significance, from funding needs to growth, ensuring financial preparedness.
They bolster stakeholder confidence and loan applications.
1. It helps to find out the additional requirement, which is there for assets to support
increased revenue and also create a positive impact on the financial statement.
2. It helps in predicting the future outcomes of any business.
3. It supports the business planning process.
4. Business growth becomes easy as financial projections help to measure how much debt
or equity will be required for the business in the future.
5. Businesses never run out of cash as it generates additional cash and revenue whenever
required.
6. For applying for a loan from banks or any other institution, projected financial
statements are very much important.
7. Creditors also ask for projected statements to know the capability of the business to
reimburse the debts.
Preparation of a Projected Financial Statement of a Business
Preparing projected financial statements ensures entrepreneurial financial clarity. This section
details a twelve-step process, from verifying invoices to issuing statements, aligning with
planning needs. It ensures accurate forecasting.
1. Step 1: Verify Receipt of Supplier Invoices: Compare the receiving log to accounts
payable to ensure that all supplier invoices have been received. Receive the expense for
any invoices that have not been received.
2. Step 2: Verify Issuance of Customer Invoices: Compare the shipping log to accounts
receivable to ensure that all customer invoices have been issued. Issue any invoices that
have not yet been prepared.
3. Step 3: Accrue Unpaid Wages: Receive an expense for any wages earned but not yet
paid as of the end of the reporting period.
 4. Step 4: Calculate Depreciation: Calculate depreciation and amortization expense for
all fixed assets in the accounting records.
5. Step 5: Value Inventory: Conduct an ending physical inventory count, or use an
alternative method to estimate the ending inventory balance. Use this information to
derive the cost of goods sold, and record the amount in the accounting records.
6. Step 6: Reconcile Bank Accounts: Conduct bank reconciliation, and create journal
entries to record all adjustments required to match the accounting records to the bank
statement.
7. Step 7: Post Account Balances: Post all subsidiary ledger balances to the general
ledger.
8. Step 8: Review Accounts: Review the balance sheet accounts, and use journal entries
to adjust account balances to match the supporting detail.
9. Step 9: Review Financials: Print a preliminary version of the financial statements and
review them for errors. There will likely be several errors, so create journal entries to
correct them, and print the financial statements again. Repeat until all errors have been
corrected.
10. Step 10: Accrue Income Taxes: Receive an income tax expense, based on the corrected
income statement.
11. Step 11: Close Accounts: Close all subsidiary ledgers for the period, and open them
for the following reporting period.
12. Step 12: Issue Financial Statements: Print a final version of the financial statements.
Based on this write footnotes information to accompany the statements. Finally, prepare
a cover letter that explains key points in the financial statements. Then assemble this
information into packets and distribute them to the standard list of recipients.
Limitations of Financial Statements
Financial statements have inherent limits affecting entrepreneurial insights. This section lists
constraints like historical focus and lack of predictive value, highlighting challenges. These
limitations necessitate cautious interpretation.
1. Financial Statements Are Derived from Historical Costs.
2. Financial Statements Are Not Adjusted for Inflation.
3. Financial Statements Do Not Contain Intangible Assets.
4. Financial Statements Only Cover a Specific Period of Time.
5. Financial Statements May Not Be Comparable.
6. Financial Statements Could Be Biased.
7. Financial Statements Do Not Cover Non-Financial Issues.
8. Financial Statements May Not Have Been Verified.
 9. Financial Statements Have No Predictive Value.
Importance of a Balance Sheet
Balance sheets provide a financial snapshot for entrepreneurial evaluation. This section defines
their role in reporting assets and liabilities, aiding stakeholder decisions. They reflect fiscal
health and growth potential.
1. A balance sheet is a financial statement that reports a company's assets, liabilities, and
shareholder equity.
2. The balance sheet is one of the three core financial statements that are used to evaluate
a business.
3. It provides a snapshot of a company's finances as of the date of publication.
4. The balance sheet adheres to an equation that equates assets with the sum of liabilities
and shareholder equity.
5. Fundamental analysts use balance sheets to calculate financial ratios.
6. The balance sheet adheres to the following accounting equation: Assets = Liabilities +
Shareholders' Equity.
7. The Three Important Components of Any Balance Sheet Are:
o Assets: This is a resource owned by an entity to produce positive economic
value.
o Liabilities: This provides a list of debts an entity owes to others.
o Capital or Equity: This is the amount invested by the shareholders.
8. Importance of Balance Sheet:
o It is an important tool used by outsiders such as investors, creditors, and other
stakeholders to understand the financial health of an entity.
o It is a tool to measure the growth of an entity. This can be done by comparing
the balance sheet of different years.
o It is an essential document that must be submitted to the bank or investors to
obtain a business loan.
o It helps stakeholders to understand the business performance and liquidity
position of the entity.
o It enables decision making regarding expansion projects and meet unforeseen
expenses.
o If the entity is funding its operations with profit or debt, it can be known by
analysing the balance sheet.
Preparation of Projected Balance Sheet
Preparing a projected balance sheet forecasts entrepreneurial financial positions. This section
outlines an eight-step process, from selecting dates to balancing figures, ensuring accuracy. It
supports strategic financial planning.
1. Step 1: Pick the Balance Sheet Date: A balance sheet is meant to show all of your
business assets, liabilities, and shareholders' equity on a specific day of the year, or
within a given period of time.
2. Step 2: List All of the Assets: Once the date is set, the next task is to list out all of the
current asset items in separate line items. More liquid items like cash and accounts
receivable go first, whereas illiquid assets like inventory will go last.
3. Step 3: Add Up All of the Assets: After detailing the various asset categories, add them
all up. The final tally will then go under the total assets category.
4. Step 4: Determine Current Liabilities: List the current liabilities that are due within
a year of the balance sheet date. These include accounts payable, short-term notes
payable, and accrued liabilities.
5. Step 5: Calculate Long-term Liabilities: List the liabilities that won't be settled within
the year. These include long-term notes, bonds payable, pension plans, and mortgages.
6. Step 6: Add Up Liabilities: Add up the current liabilities subtotal with the long-term
liabilities subtotal to find total liabilities.
7. Step 7: Calculate Owner's Equity: Determine the business' retained earnings and
working capital, as well as the total shareholders' equity.
8. Step 8: Add Up Liabilities and Owners' Equity: If the liabilities + equity = assets,
you've performed the balance correctly. If it doesn't, you may have to go back and
review your work.
Income Statement
Income statements reveal entrepreneurial financial performance over time. This section defines
them as key reports calculating net income, guiding operational insights. They assess revenue
strategies and efficiency effectively.
1. An income statement is one of the three (along with balance sheet and statement of cash
flows) major financial statements that reports a company's financial performance over
a specific accounting period.
2. Net Income = (Total Revenue + Gains) - (Total Expenses + Losses).
3. Total revenue is the sum of both operating and non-operating revenues while total
expenses include those incurred by primary and secondary activities.
4. Revenues are not receipts. Revenue is earned and reported on the income statement.
Receipts (cash received or paid out) are not.
5. An income statement provides valuable insights into a company's operations, the
efficiency of its management, under-performing sectors and its performance relative to
industry peers.
Income Statement Components
Income statements break down financial elements for entrepreneurial analysis. This section
lists components like revenue and profits, detailing income calculation. These parts highlight
operational and financial health.
1. Revenue: Revenue is the money an entity receives from the sale of goods or services.
Other terms frequently used for revenue are sales, net sales, or sale revenue.
2. Cost of Goods Sold: Cost of goods sold are the direct costs of producing the goods
being offered by the entity. This would include the materials, labor, and other resources
required for production.
3. Gross Profit: Gross profit is the difference between the revenue received for the
product less the cost of goods sold.
4. Operating Expenses: Operating expenses are the amount an entity expends to maintain
and operate the general business. Operating expenses include research and
development, marketing, general and administrative, amortization of intangible assets
etc.
5. Operating Income: Operating income is equal to revenues minus cost of goods sold
and operating expenses.
6. Other Income/Expenses: To obtain net income, further adjustments must be made to
account for interest income and expense, income tax expenses, and other extraordinary
and miscellaneous items.
7. Profits: Revenues minus all expenses equal net income (profits or losses).
Importance of an Income Statement
Income statements guide entrepreneurial profit strategies. This section emphasizes their role in
assessing revenue and cost tactics, ensuring effective management. They drive decisions for
enhanced profitability.
1. An income statement helps business owners decide whether they can generate profit by
increasing revenues, by decreasing costs, or both.
2. It also shows the effectiveness of the strategies that the business set at the beginning of
a financial period.
3. The business owners can refer to this document to see if the strategies have paid off.
Based on their analysis, they can come up with the best solutions to yield more profit.
Preparation of Income Statement
Preparing an income statement ensures entrepreneurial financial clarity. This section outlines a
nine-step process, from selecting periods to calculating net income, aligning with performance
tracking. It ensures accurate profit reporting.
1. Select a Reporting Period: Firstly, select the period you want the income statement to
cover.
 2. Produce a Trial Balance Report: Next, prepare a trial balance report an internal
document listing all the account balances in your general ledger.
3. Work Out Revenue: Now, it's time to work out business's revenues. To do this, add up
the revenues from trial balance report and enter the final amount in the revenue line
item.
4. Calculate the Cost of Goods Sold: It's also essential to determine the cost of goods
sold, a figure which includes materials, direct labor, overheads, and so on.
5. Work Out Gross Margin: Subtract the cost of goods sold from revenue to work out
gross margin.
6. Add Your Operating Expenses: Add up all the operating costs included in trial balance
report. This item is usually split up into selling and operating expenses and general and
administrative expenses.
7. Calculate Income: Work out income by subtracting operating expenses from gross
margin.
8. Add Income Taxes: After factoring with any other income streams, it's important to
apply income tax to find out how much money will actually be left.
9. Determine Net Income: Finally, determine net income by income tax from pre-tax
income.
Funds Flow Statement
Funds flow statements track entrepreneurial cash movements over time. This section defines
them as tools analyzing financial position changes, focusing on inflows and outflows. They aid
in strategic resource management.
1. Funds Flow Statement is a method financial by which we study changes in the position
of a business enterprise between beginning and ending financial statements dates. It is
a statement showing sources and uses of funds for a period of time.
2. Fund flows are a reflection of all the cash that is flowing in and out of a variety of
financial assets.
3. Fund flow is usually measured on a monthly or quarterly basis.
4. The performance of an asset or fund is not taken into account; only share redemptions,
or outflows, and share purchases, or inflows.
5. Net inflows create excess cash for managers to invest, which theoretically creates
demand for securities such as stocks and bonds.
Importance of Fund Flow Statements
Funds flow statements enhance entrepreneurial financial oversight. This section lists their
benefits, from revealing cash uses to guiding dividend policies, ensuring efficient capital use.
They inform strategic decisions effectively.
 1. The financial statements reveal the net effect of various transactions on the operational
and financial position of a concern.
2. It throws light on many questions of general interest which otherwise may be difficult
to be answered, such as:
o Why were the net current assets lesser in spite of higher profits and vice-versa?
o Why more dividends could not be declared in spite of available profits?
o Sometimes a firm has sufficient profits available for distribution as dividend but
yet it may not be advisable to distribute dividend for cash resources. In such
cases, a funds flow statement helps in the formation of a realistic dividend
policy.
3. The resources of a concern are always limited and it wants to make the best use of these
resources.
4. A projected funds flow statement constructed for the future helps in making managerial
decisions. A projected funds flow statement also acts as a guide for future to the
management.
5. A funds flow statement helps in explaining how efficiently the management has used
its resources to improve working capital and also suggests ways to working capital
position of the firm.
6. It Helps Knowing the Overall Creditworthiness of a Firm.
Steps for Preparing Funds Flow Statement
Preparing a funds flow statement tracks entrepreneurial financial shifts. This section outlines a
four-step process, from calculating working capital changes to analyzing non-current accounts.
It ensures accurate fund tracking.
1. Determine the Change (Increase or Decrease) in Working Capital.
2. Determine the Adjustments Account to Be Made to Net Income.
3. For Each Non-Current Account on the Balance Sheet, Establish the Increase or
Decrease in That Account. Analyze the change to decide whether it is a source
(increase) or use (decrease) of working capital.
4. Be Sure the Total of All Sources Including Those from Operations Minus the Total
of All Uses Equals the Change Found in Working Capital in Step 1.
General Rules for Preparing Funds Flow Statement
Funds flow statements follow rules for entrepreneurial financial analysis. This section lists
guidelines on how asset and liability changes affect working capital, ensuring consistency.
These rules standardize preparation processes.
1. Increase in a current asset means increase (plus) in working capital.
2. Decrease in a current asset means decrease (minus) in working capital.
 3. Increase in a current liability means decrease (minus) in working capital.
4. Decrease in a current liability means increase (plus) in working capital.
5. Increase in current asset and increase in current liability does not affect working capital.
6. Decrease in current asset and decrease in current liability does not affect working
capital.
7. Changes in fixed (non-current) assets and fixed (non-current) liabilities affect working
capital.
Cash Flow Statement
Cash flow statements monitor entrepreneurial cash dynamics. This section defines them as
summaries of cash movements, complementing other financial reports. They assess liquidity
and cash management efficacy.
1. A cash flow statement (CFS) is a financial statement that summarizes the amount of
cash and cash equivalents entering and leaving a company.
2. The CFS measures how well a company manages its cash position, meaning how well
the company generates cash.
3. The CFS complements the balance sheet and the income statement.
4. The main components of the CFS are cash from three areas: operating activities,
investing activities, and financing activities.
5. The two methods of calculating cash flow are the direct method and the indirect method.
o Direct Cash Flow Method: The direct method adds up all of the various types
of cash payments and receipts, including cash paid to suppliers, cash receipts
from customers, and cash paid out in salaries. This method of CFS is easier for
very small businesses that use the cash basis accounting method.
o Indirect Cash Flow Method: With the indirect method, cash flow is calculated
by adjusting net income by adding or subtracting differences resulting from non-
cash transactions. Non-cash items show up in the changes to a company's assets
and liabilities on the balance sheet from one period to the next.
Objectives
Cash flow statements serve key entrepreneurial financial goals. This section lists objectives
like measuring cash and predicting flows, ensuring liquidity management. They support
informed financing decisions effectively.
1. Measurement of Cash: Inflows of cash and outflows of cash can be measured annually
which arise from operating activities, investing activities and financial activities.
2. Generating Inflow of Cash: Timing and certainty of generating the inflow of cash can
be known which directly helps the management to take financing decisions in future.
 3. Classification of Activities: All the activities are classified into operating activities,
investing activities and financial activities which help a firm to analyse and interpret its
various inflows and outflows of cash.
4. Prediction of Future: A cash flow statement, no doubt, forecasts the future cash flows
which helps the management to take various financing decisions since synchronisation
of cash is possible.
5. Assessing Liquidity and Solvency Position: Both the inflows and outflows of cash
and cash equivalent can be known, and as such, liquidity and solvency position of a
firm can also be maintained as timing and certainty of cash generation is known i.e. it
helps to assess the ability of a firm to generate cash.
6. Evaluation of Future Cash Flows: Whether the cash flow from operating activities
are sufficient in future to meet the various payments (e.g. payment of
expense/debts/dividends/taxes).
7. Supply Necessary Information to the Users: A cash flow statement supplies various
information relating to inflows and outflows of cash to the users of accounting
information in the following ways:
o To assess the ability of a firm to pay its obligations as soon as it becomes due;
o To analyse and interpret the various transactions for future courses of action;
o To see the cash generation ability of a firm;
Preparation of Cash Flow Statements
Preparing cash flow statements tracks entrepreneurial cash movements. This section outlines a
six-step process, from collecting data to final checks, ensuring accuracy. It supports liquidity
and financial oversight.
1. Start by Collecting Basic Documents and Data for the Financial Statements such
as balance sheet, income statement, statement of equity changes.
2. In the Second Step of Preparing a Cash Flow Statement, You Have to Generate a
Table with Three Columns from the closing and opening balance sheet.
3. Now, You Have to Take a Look at Each One of the Changes in Your Balance Sheet
and then note each amount of cash in the new cash flow statement.
4. Adjust the Non-Cash Expenses from the Profit and Loss Statement.
5. This Step Is Similar to the One Above, Now You Have to Adjust All the Non-Cash
Transactions based on other data. If you want to ensure that you have included all non-
cash adjustments to the cash flow statement without missing anything important, it is
recommended to perform this step.
6. Do the Final Check - Check Over the Last Vertical Line and Verify the Total. If it's
zero, your cash flow statement is fully ready.
Difference Between Fund Flow and Cash Flow Statements
Fund flow and cash flow statements differ in entrepreneurial analysis. This section contrasts
their bases, sources, and uses, clarifying their roles. These distinctions guide financial strategy
selection effectively.
1. Basis of Difference:
o Funds Flow Statement: Funds flow statement is based on broader concept i.e.,
working capital.
o Cash Flow Statement: Cash flow statement is based on narrow concept i.e.,
cash which is only one of the elements of working capital.
2. Sources:
o Funds Flow Statement: Funds flow statement tells about the various sources
from where the funds generated with various uses to which they are put.
o Cash Flow Statement: Cash flow statement starts with the opening balance of
cash and reaches to the closing balance of cash by proceeding through Sources
and uses.
3. Usage:
o Funds Flow Statement: Funds flow statement is more useful in assessing the
long range financial strategy.
o Cash Flow Statement: Cash flow statement is useful in understanding the
short-term phenomena affecting the liquidity of the business.
4. Schedule of Changes in Working Capital:
o Funds Flow Statement: In funds flow statement changes in current assets and
current liabilities are shown through the schedule of changes in working capital.
o Cash Flow Statement: In cash flow statement changes in current assets and
current liabilities are shown in the cash flow statement itself.
5. End Result:
o Funds Flow Statement: Funds flow statement shows the cause of change in
net working capital.
o Cash Flow Statement: Cash flow statement shows the causes the changes in
cash.
6. Principal of Accounting:
o Funds Flow Statement: Funds flow statement is in alignment with actual basis
of accounting.
o Cash Flow Statement: In cash flow statement data obtained on accrual basis
are converted into cash basis.
Detailed Project Report
Detailed Project Reports (DPRs) outline entrepreneurial project plans comprehensively. This
section defines them as extensive documents guiding investment decisions, ensuring success.
They integrate resources and objectives effectively.
1. After the planning and the designing part of a project are completed, a detailed project
report is prepared.
2. A detailed project report is a very extensive and elaborative outline of a project, which
includes essential information such as the resources and tasks to be carried out in order
to make the project turn into a success.
3. DPR (Detailed Project Report) is the primary report for the formulation of the
investment proposal. Investment decisions are taken based on the details incorporated
in the study.
4. The first step in feasibility study is the needs analysis. The purpose is to define overall
objectives of the system proposed to be designed.
5. After the preparation of feasibility study report, it is being reviewed by experts in the
concerned department. In case of any differences, the report is modified as discussed
with experts.
6. Preparation of Detailed Project Report is further step in firming up the proposal. When
an investment proposal has been approved on the basis functional report and the
proposal is a major proposal.
7. Contents of a Detailed Project Report Must Include the Following Information:
o Brief information about the project.
o Experience and skills of the people involved in the promotion of the project.
o Details and practical results of the industrial concerns of the promoters of the
project.
o Government approvals.
o Project finance and sources of financing.
o Raw material requirement.
o Details of the requisite securities to be given to various financial organizations.
o Other important details of the proffered project idea include information about
management teams for the project, details about the building, plant, machinery,
etc.
Objectives of Detailed Project Report (DPR)
DPRs aim to ensure entrepreneurial project feasibility and clarity. This section lists objectives
like addressing appraisal questions, guiding implementation. These goals enhance project
planning and execution accuracy.
1. The report should be with sufficient details to indicate the possible fate of the project
when implemented.
 2. The report should meet the questions raised during the project appraisals, i.e. the
various types of analyses - be it financial, economic, technical, social etc. - should also
be taken care of in the DPR.
Importance of DPR
DPRs are vital for entrepreneurial project management and success. This section highlights
their role in budgeting, risk reduction, and progress tracking, ensuring efficiency. They
maintain control and minimize issues.
1. Managing the Budget: Managing the budget or expenditure is not an easy task,
especially when you have to look at so many aspects of your project. Hence a DPR
comes to your rescue and helps your plan and manage your budget in such a manner
that you do not go over your set budget.
2. Minimizing Risks: Sometimes, despite giving great attention to details, risks, and
issues arise during the implementation of the project. Hence it is crucial to identify and
reduce these risks as much as possible so that the project is implemented without any
hassles. It is reporting the risks to the project manager before the implementation that
makes room for improvement.
3. Project Progress Follow-up: One of the most important aspects of a detailed project
report is to have a control on the project progress. Accordingly, one can keep track of
the schedule of the project and eliminate the problems, if any.
4. Holdover the Project: Project reporting maintains hold of the higher authority, such as
managers, over the project so that they can keep a check on progress and eliminate
factors that cause a halt in the progress of the project. The performance of the team
members and their quality of work is also checked.
Project Finance
Project finance funds long-term entrepreneurial ventures strategically. This section defines it
as a cash flow-reliant structure, attractive for off-balance-sheet funding. It supports major
infrastructure and industrial projects effectively.
1. Project finance is the funding (financing) of long-term infrastructure, industrial
projects, and public services using a non-recourse or limited recourse financial
structure.
2. The debt and equity used to finance the project are paid back from the cash flow
generated by the project.
3. Project financing is a loan structure that relies primarily on the project's cash flow for
repayment, with the project's assets, rights, and interests held as secondary collateral.
4. Project finance is especially attractive to the private sector because companies can fund
major projects off-balance sheet (OBS).
The Various Types of Sponsor in Project Financing
Sponsors drive project financing with varied entrepreneurial roles. This section categorizes
them into industrial, public, and financial types, aligning with project goals. These distinctions
optimize funding strategies.
1. Industrial Sponsor: These types of sponsors are usually aligned to an upstream or
downstream business in some way.
2. Public Sponsor: The main motive of these sponsors is public service and they are
usually associated with the government or a municipal corporation.
3. Contractual Sponsor: The sponsors who are a key player in the development and
running of plants are Contractual sponsors.
4. Financial Sponsor: These types of sponsors often partake in project finance initiatives
and invest in deals with a sizeable amount of return.
Steps for Project Financing
Project financing follows a phased approach for entrepreneurial funding. This section outlines
pre-financing, financing, and post-financing stages, ensuring structured support. These steps
align resources with project execution needs.
1. Pre-Financing Stage:
o Identification of the Project Plan: This process includes identifying the
strategic plan of the project and analysing whether it’s plausible or not. In order
to ensure that the project plan is in line with the goals of the financial services
company, it is crucial for the lender to perform this step.
o Recognising and Minimising the Risk: Risk management is one of the key
steps that should be focused on before the project financing venture begins.
Before investing, the lender has every right to check if the project has enough
available resources to avoid any future risks.
o Checking Project Feasibility: Before a lender decides to invest on a project, it
is important to check if the concerned project is financially and technically
feasible by analysing all the associated factors.
2. Financing Stage:
o Arrangement of Finances: In order to take care of the finances related to the
project, the sponsor needs to acquire equity or loan from a financial services
organisation whose goals are aligned to that of the project.
o Loan or Equity Negotiation: During this step, the borrower and lender
negotiate the loan amount and come to a unanimous decision regarding the
same.
o Documentation and Verification: In this step, the terms of the loan are
mutually decided and documented keeping the policies of the project in mind.
o Payment: Once the loan documentation is done, the borrower receives the
funds as agreed previously to carry out the operations of the project.
 3. Post-Financing Stage:
o Timely Project Monitoring: As the project commences, it is the job of the
project manager to monitor the project at regular intervals.
o Project Closure: This step signifies the end of the project.
o Loan Repayment: After the project has ended, it is imperative to keep track of
the cash flow from its operations as these funds will be, then, utilised to repay
the loan taken to finance the project.

Conclusion
This chapter links project financing with entrepreneurial success, detailing cost estimation,
funding sources, and risk management. By exploring capital budgeting, financial statements,
and detailed reports, it equips readers to secure and manage resources effectively, ensuring
sustainable project outcomes.
 Unit 5
Social Entrepreneurship
Social Sector
The social sector encompasses vital areas like education and health, shaping societal well-being. This
section explores its undefined nature and two defining approaches, highlighting their implications. It
sets the stage for understanding social entrepreneurship’s role.
1. The term social sector is often used to refer sectors of Education, Health, sanitation and
Nutrition etc.
2. The term hasn't been formally defined and thus has come to acquire several implications. Two
main approaches to the definition are identified as:
3. The Human Resource Development Approach:
o The human Resource Development Approach emphasizes investment in education,
health and nutrition as a means of enhancing the quality of human capital which may
be defined as "the stock of skills and productive knowledge embodied in people".
o An important implication of the human development approach is that it limits the role
of public intervention.
o In this approach individuals are expected to undertake investment in education, health
and nutrition on their pursuit of self reliance.
o This approach does not pay any attention to the attitudinal and institutional
characteristics that are so necessary for translating individual level skills into enhanced
productivity at the level of the Economy.
4. Human Development Approach:
o The alternative approach to social sector is that of human development.
o This term has been defined by the United Nations Development Programme (UNDP)
as the process of enlarging people's choices'.
o This concept encompasses empowerment, cooperation, equity in basic capabilities and
opportunities, sustainability and security.
o In this approach people occupy centre stage, and measures such as education, health
and nutrition are emphasized from their intrinsic value and not for their role in
enhancing their basic capabilities of people.
Social Sector Perspectives in India
India’s social sector grapples with diverse challenges and disparities. This section examines issues like
education and gender equality, underscoring the need for inclusive policies. It reflects on governmental
efforts and persistent inequities.
1. India faces a vast range of issues in the context of the social sector, including the right to
education, land rights, food security, health for all, gender equality, women's empowerment,
livelihood and employment guarantee.
 2. Successive governments have also tried to promote the idea of sustainable and equitable
economic growth and development.
3. But the reality is that high levels of economic and social disparities continue to exist.
4. In a country as diverse as India, equitable development can be brought about only through the
implementation of broad-based inclusive social policies backed by an adequate reservoir of
financial resources.
Social Entrepreneurship
Social entrepreneurship drives change by addressing societal needs innovatively. This section defines
it as a process blending profit and purpose, often within non-profits. It bridges business strategies with
social impact goals.
1. Social entrepreneurship is the process of recognizing and resourcefully pursuing opportunities
to create social value that are helpful for society.
2. Social entrepreneurship is all about recognizing the social problems and achieving a social
change by employing entrepreneurial principles, processes and operations.
3. The entrepreneurs in this field are associated with non-profit sectors and organizations. But this
does not eliminate the need of making profit. After all entrepreneurs need capital to carry on
with the process and bring a positive change in the society.
4. They draw upon the best thinking in both the business and nonprofit worlds to develop
strategies that maximize their social impact.
5. These entrepreneurial leaders operate in all kinds of organizations. These organizations
comprise the "social sector".
6. Along with social problems, social entrepreneurship also focuses on environmental problems.
Child Rights foundations, plants for treatment of waste products and women empowerment
foundations are few examples of social ventures.
Social Entrepreneurship
Social entrepreneurship manifests through diverse organizational forms. This section categorizes
ventures like community enterprises and credit unions, each serving specific social needs. These models
enhance community support and inclusion.
1. Community Enterprises: These are the enterprises which serve a specific community e.g.,
religion, groups etc. The leaders of such kind of enterprises are the representative of same
community.
2. Social Firms: These firms assist people with physical and learning disabilities and help them
to find place in the mainstream job market.
3. Credit Unions: These are the community based financial institutions which provides saving
and loan facilities to their members.
4. Development Trusts: They provide the assistance to the people in the ownership and the
management of community property.
5. Public Sector Spin-outs: These are setup to provide the services that were earlier provided by
public sector enterprises. They are also known as 'externalised services'.
Importance of Social Entrepreneurship
Social entrepreneurship significantly benefits society beyond profit motives. This section highlights its
role in employment, innovation, and equity, fostering social capital. It drives sustainable community
development effectively.
1. Employment Development: The major economic value that social entrepreneurship creates is
that it provides employment opportunities and job training to a segment of society which is at
employment disadvantage.
2. Innovation of New Goods and Services: Social enterprises develop and apply innovation
important to social and economic development and develop new goods and services. Issues
addressed under this are problems such as HIV, Mental ill health, crime and drug abuse which
are need to be confronted in innovative ways.
3. Social Capital: Next to economic capital one of the most important values created by social
entrepreneurship is social capital. Social capital is defined as "networks together with shared
norms, values and understandings that facilitate co-operation within or among groups".
4. Equity Promotion: Social entrepreneurship develops a more equitable society by addressing
social issues and trying to achieve ongoing sustainable impact through their social mission
rather than purely profit maximization.
5. Skill Development: These skills include an ability to induce behavioral change and educate
target groups; co-creation with multiple stakeholders; and developing solutions that aim to
address the root cause of a social problem.
Opportunities for Social Entrepreneurship
Social entrepreneurship offers vast opportunities for impactful ventures. This section explores fields
like waste management and green infrastructure, addressing pressing needs. These areas promise both
social and economic returns.
1. Waste Management: Entrepreneurship in solid waste can be instrumental in management
environment protection, economic restructuring and job creation. Entrepreneurial opportunities
in solid waste planning are available in the areas of waste collection, waste handling, waste
sorting, waste storage, waste transport, waste transformation and energy recovery from waste.
2. Cleaning Services: To keep the world clean and green we have to contribute ourselves towards
it. And for aspiring social entrepreneurs this a great sector to tap. Cleaning industry is still
untapped and it needs young blood to step in and change the face of the sector by using their
innovative skills and techniques.
3. Green Infrastructure: Green infrastructure is vital in providing and connecting life support
systems for urban environments. It includes parks and reserves, waterways and wetlands,
transport corridors, greenways, roof gardens and living walls. This space provides huge
opportunities for entrepreneurs to meet green infrastructure for world.
4. Water Management: In today's time, access to clean water is a tough task for any family living
in remote areas. Social entrepreneur can look into this matter and figure out the best way to
solve this problem with the help of his/her entrepreneurial skills.
5. Recycling Space: Recycling is the best way to turn waste into wealth by converting useless
products into useful ones. With growing awareness for a greener planet and eco-consciousness
among people, recycling business turns out to be one of the most creative businesses with high
returns.
Success in Social Entrepreneurship
Success in social entrepreneurship hinges on strategic skills and vision. This section outlines steps from
identifying issues to assessing impact, ensuring effective change. These elements drive sustainable
social outcomes.
1. Social entrepreneurship's success depends on the social entrepreneurship skills, talent, and
qualities present in a social entrepreneur. With their innate talents and skills, these social
entrepreneurs can bring about major positive social changes in society. To bring about this
change, they need to:
2. Identify the Social Issue/Problem: Social entrepreneurs are passionate about solving the
problem in society. They have an urge to take positive steps to resolve issues using social action
and resource development.
3. Developing a Social Mission: The focus should be on social ventures. These ventures should
attempt to improve the community infrastructure, the people's livelihood, improve the standard
of living of the individuals, and facilitate improvement in the environment.
4. Develop Support: Every social entrepreneur should develop plans and strategies which would
determine the efficient management of the problems. This may require seeking support from
like-minded people, experts in the field and funders who would support them financially to
achieve the goals and objectives.
5. Develop Sustainable Models: The entrepreneur's aim should be to develop such a business
that would bring in a profit for his organization and benefit society as a whole. They need to
develop such future strategies to provide a sustainable livelihood, income, and resources to the
community's people.
6. Impact Assessment: For successful social entrepreneurship, one needs to assess the results and
outcomes regularly. This can be done through monitoring and evaluation of the social impact
developed through the venture.
Models of Social Entrepreneurship
Successful social entrepreneurship models inspire impactful ventures. This section showcases Indian
examples like SHEF and Goonj, addressing education and relief needs. These cases highlight practical
social innovation.
1. Study Hall Education Foundation (SHEF): It is an organization dedicated to offering
education to the most disadvantaged girls in India. SHEF has worked with over 900 schools
and changed the life of 150,000 girls with the program.
2. Selco: It is a company rendering sustainable energy source to rural regions of the country. This
project was the first rural solar financing program in India.
3. Childline: It aims to provide help in form of healthcare and police assistance, especially to
street children.
4. Goonj: It is social enterprise that collects used clothing from the urban crowd, sorts them, fix
and later distribute among the poor and needy. The relief work was done by Goonj during the
times of natural calamities in Gujarat, Tamil Nadu and Kerala have been highly acknowledged.
5. Pipal Tree: It worked to create job opportunities for the unemployed youth in rural India. Pipal
Tree was started as a company that aims to impart formal training to the youth and provides
them with reputable jobs in companies across the country.
 6. Rangasutra: It aims to revive the craftsmanship and talent that is unharnessed in rural India
and aims to provide them with their deserving recognition.
7. Frontier Markets: It aims to provide the best of technological solutions to the remote villages
in India at the cheapest price possible. It supplies solar energy powered products to rural India
at an extremely affordable cost.
8. Association for Democratic Reforms (ADR): It started as a PIL against the politicians led to
the foundation of the Association for Democratic Reforms (ADR), an organization that
scrutinizes election procedure in India.
Social Innovation
Social innovation tackles complex issues with creative solutions. This section defines it as initiatives
transforming social systems, requiring multi-sector collaboration. It emphasizes durability and
transformative impact in communities.
1. Social innovation processes are designed to engage the creativity of all sectors, bringing many
perspectives and different resources to bear on a problem.
2. A social innovation is any initiative (product, process, program, policy, project, or platform)
that challenges and contributes to changing the defining routines, resource and authority beliefs
of the social system in which it is introduced.
3. Successful social innovations have durability, scale and transformative impact.
4. Solutions often require the active collaboration of constituents across government, business,
and the non-profit world.
5. Social innovation refers to the design and implementation of new solutions that imply
conceptual, process, product, or organizational change, which ultimately aim to improve the
welfare and wellbeing of individuals and communities.
6. Social innovation can be available in three forms:
o Product-based.
o Process-based.
o Socially transformative.
Types of Social Innovations
Social innovations vary widely, addressing diverse societal aspects. This section categorizes them from
ideological to political, each targeting specific frameworks. These types foster comprehensive social
progress effectively.
1. Socio-ideological Innovation: This involves innovation of ideological frameworks, mind-sets
etc.
2. Socio-ethical Innovation: This involves innovation of ethical normative frameworks, etc.
3. Socio-economic Innovation: This involves innovation of economic models, business models,
etc.
4. Socio-organisational Innovation: This involves innovation of organisational arrangements,
etc.
5. Socio-technical Innovation: This involves innovation of human technology interaction, etc.
 6. Socio-ecological Innovation: This involves innovation of human environment interaction, etc.
7. Socio-analytical Innovation: This involves innovation of analytical and sense-making
frameworks, etc.
8. Socio-juridical Innovation: This involves innovation of legal frameworks and laws, etc.
9. Socio-cultural Innovation: This involves innovation of non-formal institutions, etc.
10. Socio-political Innovation: This involves innovation of governance.
Sustainability in Social Enterprise
Sustainability ensures social enterprises thrive long-term. This section explores strategies like focus and
reinvention, balancing growth with purpose. These approaches maintain viability and social impact
effectively.
1. Growth and Comfort Can't Be Combined: Growth is exciting and challenging, but it isn't
comfortable. Growth was just as hard to achieve, but once harnessed, could quickly grow
businesses. Your social enterprise is capable of growing if you forge ahead with a renewed plan
that will dictate the sustainability of your enterprise.
2. Pick One Area - and Stick to It: Depending on the sector within which your social enterprise
operates, it might be tempting to build an arsenal of products and services, but in doing so,
you'll lose the ability to focus on one in particular. By picking one area, you can focus your
efforts on building an organization that is an expert within it.
3. Start with a Big Idea, but Scale It Down: Social enterprises are at their most effective when
they descend from a big idea. And while that big idea may be perfectly achievable, aiming for
it from the off will limit the sustainability of the organization.
4. Don't Stray from the Business Purpose: As per social enterprise, you're owner of a business,
and if you want to create a sustainable organization, you'll need to constantly remind yourself
of its business purpose. Lose touch with the business purpose of your enterprise, and its
longevity will take a significant hit.
5. Don't Be Afraid to Reinvent: Running a successful, sustainable social enterprise is all about
constant reinvention. That singular goal will only be achievable if you challenge your set ideas,
adjust the original plan and learn from the mistakes you make.
Marketing Management
Marketing management steers social enterprises toward market success. This section defines it as a
process managing marketing activities, from targeting to value creation. It aligns strategies with
customer needs effectively.
1. It means management of all the activities related to marketing.
2. It refers to planning, organizing, directing and controlling the activities which result in
exchange of goods and services.
3. Marketing management involves following activities:
o Choosing Target Market: The activities of marketing management begin by finalising
the target market.
o Growing Customers in Target Market: After choosing target market the next step in
marketing process is to take steps to increase number of customer by analysing the
 needs, wants and demand of customers and giving due importance to the satisfaction
of customers.
o Creating Superior Value: The next step in marketing management process is to create
some special values in the product to make your product better than competitor's
product.
4. Following Are the Objectives of Marketing Management:
o Attracting New Customers: The important objective of marketing management is to
attract new customers to increase the sales of products.
o Satisfying the Demands of Customers: Another important objective of marketing
management is to keep satisfied the customer who is associated with the company's
products for a long period.
o Profitability: It is necessary to earn profit for growing, diversifying a business and its
maintenance as well. For this purpose, a company must know what market management
is and how to achieve various market targets.
o Maximizing the Market Share: Another objective of marketing management is to
make maximum marketing share. For this purpose, companies use different tools to get
maximum market sales of their products by having comparison with a market economy.
o Creating a Good Public Reputation: Public reputation plays an important role in the
growth of a company. If the company has stood as a good public figure it means it has
more chances to grow and diversify but if stands with a bad reputation, it will no longer
survive.
Marketing for Social Entrepreneurship
Marketing for social entrepreneurship blends social goals with strategy. This section defines it as a
process meeting needs through exchange, facing unique challenges. It targets both customers and
impacted communities.
1. Marketing for social entrepreneurship is a social and managerial process in which individuals
and groups receive what they want and need through the exchange of products and values. The
task of marketing is to identify and define specific markets for specific products.
2. Social enterprises face unique challenges with regards to marketing.
3. A social entrepreneur creates a business to fill a gap in the market and serve a neglected
community. For this reason, tools for market research for impact products are underdeveloped.
4. When defining audience for social enterprises you have to both define your customer and the
community you impact.
Practices Used in Marketing
Effective marketing practices elevate social enterprises’ reach and impact. This section lists strategies
like storytelling and transparency, enhancing trust and engagement. These methods align with social
missions seamlessly.
1. Focus on Product or Service: This means creating a high-quality product or service,
identifying your target market, pricing it appropriately and using the best distribution and
marketing channels to reach and sell to consumers.
 2. Showcase Social Impact Story: A powerful story can create magnetic marketing that draws in
consumers to power your social enterprise for the long term.
3. Be Transparent: Being transparent builds credibility. A marketing campaign won't get a
response if nobody trusts you. If you are transparent you will build trust, and with time, a bigger
audience and group of loyal customers.
4. Utilize Digital Marketing Strategically: Digital marketing can be a very effective and cost-
efficient marketing medium. The key to choosing the best digital marketing platforms is to think
about your target audience.
5. Build a Consistent Social Enterprise Brand: Branding does not have to be an extensive or
expensive. But investing a small amount of time into developing your brand will go a long way.
Beyond the basic branding activities of choosing a name and creating a logo and color scheme,
the best thing to focus on is brand consistency.
6. Spend Money on Marketing: You need to leverage a marketing strategy to let the world know
what you're doing and how they can support your business and social mission.
Risks That Involved in a Social Enterprise
Social enterprises face unique risks impacting their missions. This section identifies challenges like
funding and backlash, threatening sustainability. These risks demand careful navigation for success.
1. Obtaining Finance:
o Most entrepreneurs require some sort of funding when they start their entrepreneurial
projects.
o The problem with social entrepreneurship is that the business models don't often turn
over massive profits.
o This, coupled with the fact that social entrepreneurship is widely misunderstood, makes
lenders wary of lending financial support to social entrepreneurs.
2. Backlash:
o If you are fighting for a certain cause, in many cases, there will be people fighting
against it.
o The more controversial your cause, the more backlash you can expect to get.
o Even though social entrepreneurs are known for being selfless and aim to help people
and communities in need, they often experience backlash and criticism.
3. Not Focusing on Profit:
o Many social entrepreneurs are so caught up in their cause that they do not focus on
creating a profit.
o However, making a profit is very important when it comes to your investors and
maintaining a satisfying successful business.
4. Burnout:
o Burnout is a genuine risk for social entrepreneurs because they work long hours.
o Like with all types of entrepreneurs, there are no set working hours, so entrepreneurs
find their personal lives and their work lives merged.
 5. Lack of Public Knowledge:
o Although social entrepreneurship is growing and expanding, the majority of the general
public does not have a clear idea of what social entrepreneurship is exactly. This makes
it difficult to gain support to.
6. Not Having a Substantial Support Structure:
o Having a support structure and entities that you can turn for help and advice is very
important for any business.
o This is because social entrepreneurship is still relatively new, there are not many
support structures that fall into the social entrepreneurship sphere.
7. Marketing:
o Marketing a social business definitely comes with its challenges.
o Many social entrepreneurs do not put enough emphasis on effective marketing and may
not have the resources, time or funds to put into marketing, which could act as a
massive risk and challenge.
Risks in Social Enterprise
Managing risks is crucial for social enterprises’ longevity. This section outlines a six-step process, from
identification to mitigation, ensuring resilience. These steps safeguard social missions effectively.
1. Steps to Manage Risks in Social Enterprise:
o Risk Identification: The critical first stage is that the social enterprise, through
environmental scanning, identifies the risk events that could potentially prevent the
realization of its objectives. These risks can arise from Government legislation,
Inadequate funding, Policies and regulations, Technological challenges, Security and
safety, Withdrawal of grants and donations, Legal restrictions, Norms and culture,
Climatic hazards, and Managerial incompetence. These and many other risk factors are
identified for impact assessment.
o Risk Impact Assessment: The social enterprise assesses the frequencies and
consequences of each identified risk. Assessment criteria are used to measure the
impact of these risks on the enterprise objectives. It can consider how the risk events
affect cost, schedule, quality, program scope or performance.
o Developing the Approach and Plan: The risk management approach determines the
processes, techniques, tools, and team roles and responsibilities for a specific project.
The risk management plan describes how risk management will be structured and
performed on the project.
o Selecting the Risk Management Tools: Risk management tools support the
implementation and execution of program risk management in systems engineering
programs. In selecting the appropriate tools, the project team considers factors such as
program complexity and available resources.
o Risk Prioritization Analysis: The identified risk events, their impact assessment,
probability of Occurrence and consequences are collated to derive a most-to least
critical rank order of risks. The main purpose of prioritizing these risks is to form a
basis for allocation of scarce resources and urgency of attention.
 o Risk Mitigation Planning, Implementation, and Progress Monitoring: At this
stage, the social enterprise develops and implements actions designed to enhance
opportunities, eliminate or mitigate threats to an acceptable level. After implementing
a plan, the result is often monitored with the view of revising any course-of-action if
needed. The risk mitigation strategy or option (i.e., accept, avoid, transfer, enhance or
reduce) will be based on the assessed combination of the probability of occurrence and
severity of the consequence for an identified risk. The iterative process continues.
Legal Framework
Legal frameworks provide structure for social enterprises’ operations. This section defines them as
systems of rules and rights, ensuring stability. They govern interactions with stakeholders effectively.
1. The rules, rights and obligations of companies, governments, and citizens are set forth in a
system of legal documents called a legal framework.
2. Documents in the legal framework include a country's constitution, legislation, policy,
regulations and contracts.
3. Laws and policy are supposed to have more authority than a contract. However, contracts can
also be written to explicitly override the laws and regulations.
4. Legal documents that cover broad principles, like constitutions, are generally more difficult to
change. More specific documents, like laws and contracts, can often be more easily amended.
5. Countries with detailed laws and policies often have more stable and predictable legal
frameworks than those that leave more aspects open for negotiation in individual contracts.
Legal Framework Necessities in Business
Legal frameworks are essential for business order and protection. This section lists necessities like
dispute resolution and rights safeguarding, ensuring smooth operations. They foster trust and efficiency.
1. Maintain Order: A better set of rules and regulations helps a business enterprise in maintaining
order within the organization.
2. Resolve Disputes: A Legal framework helps in resolving disputes within the members of same
organization and also between two co functioning organization.
3. Establish Generally Accepted Standards: Establishing generally accepted standards for the
business sector allows the groups to act more efficiently and without any collision of different
ideas.
4. Protect Rights and Liberties When It Comes to Business: Protect the general rights of the
employee and the other people working with the organization.
5. Protect Relation to Other Businesses, Government Authorities, and the Customers:
Having better rules and laws protect the relation of a business organization with the other co-
working bodies.
Legal Structures in Social Entrepreneurship
Legal structures shape social enterprises’ operational frameworks. This section categorizes them into
non-profit, for-profit, and hybrid models, each suiting different goals. These options balance impact and
profitability.
1. Non-profits or Charitable Organizations:
 o Non-profits can register as a Trust or as a Society.
o The non-profit model is best suited for start-ups that do not expect revenues from their
activities or have a long gestation period before they start to accrue revenues.
o Example: Digital Green, Teach for India, Akshaya Patra etc.
2. The For-profit Social Enterprise:
o In India there are many choices when it comes to setting up a for-profit social
enterprise. Broadly, there are five different types of for-profits: sole proprietorship,
partnership, limited liability partnership, private firm and co-operative.
o This type of legal structure is perhaps best suited for social enterprises that are looking
for growth and profitability.
o Example: Vaatsalya Healthcare, dLight etc.
3. The Hybrid Model:
o These types of social enterprises start off as a non-profit or for-profit and then launch
an exact opposite.
o This is a great model that ensures that social enterprises can both attract donations and
grants, and still be able to have access to social venture funding.
o Example: Head Held High Foundation, Fractal Foundation, etc.

Conclusion
This chapter explores social entrepreneurship as a catalyst for societal change, integrating innovation,
sustainability, and legal frameworks. By addressing risks, marketing strategies, and diverse models, it
equips entrepreneurs to create lasting impact, balancing social good with economic viability in dynamic
environments.