The steps for starting an enterprise includes the following.

1.Idea Generation

Initiating an MSME venture commences with the germination of an idea,
emphasizing the inherent prospect to deliver a product or service capable of
generating substantial surplus.

Motivation: Assess if the idea ignites your motivation and aligns with your vision.
Local Viability: Evaluate its feasibility as a business proposition within your geographical area.
Clientele Alignment: Scrutinize whether the idea aligns with the needs of your target clientele.
Basic Market Research: Conduct preliminary market research to gauge potential demand.
Marketplace Testing: Validate the idea by testing it in the actual marketplace.
Expert Consultation: Seek insights from industry experts to refine and validate the concept.
Competitive Analysis: Investigate the existing competition in the field.
Sunrise Industry Potential: Assess if the idea aligns with emerging trends or constitutes a sunrise industry.

2.Project Conceptualization:

Once a viable business opportunity is identified, transition to a holistic
conceptualization of the project, encapsulated by the 4 Ps of Project Conception:

PRODUCT (Shape, Size, and Nature): Define the distinct characteristics of the product, encompassing its form, dimensions, and inherent nature.
PROCESS (Technology to Produce the Product): Outline the technological processes integral to the production of the identified product.
PLACE (Location of Plant): Strategically determine the optimal location for the manufacturing plant, considering factors such as accessibility and resource availability.
PARTNER (Technological or Financial Collaborator): Deliberate on potential collaborations, whether technological or financial, that can enhance the project’s success.

2.Making a Product Choice

Product selection process involves a comprehensive assessment of internal and
external factors, market dynamics, and global considerations, leading to a well-

informed and strategic decision-making process. During the project
conceptualization phase, the selection of a product is a pivotal decision that
demands careful consideration of various factors:

1.Product Line – Depth, Width

Evaluate the range and variety within the product line.
Consider the breadth of product categories to be offered.

2.Packaging

Assess packaging requirements for protection and market appeal.
Recognize the role of packaging in conveying product quality.

3.Branding

Deliberate on establishing a strong brand identity.
Consider how the brand will resonate with the target market.

4.Warranties

Decide on warranty policies for products.
Assess the impact of warranties on customer satisfaction.

5.After Sales Service

Plan for effective after-sales service.
Evaluate its significance in building customer loyalty.

Additional factors for product finalization include:

Raw Material Availability
Consider the ease of sourcing raw materials.
Assess the impact on production costs and supply chain efficiency.

Process Technology
Evaluate the technological requirements for product manufacturing.
Consider whether specialized know-how is needed.

Accessibility to the Market
Analyze how easily the product can reach the target market.
Consider distribution channels and logistics.

Government Incentives and Support
Explore potential incentives and support from government initiatives.
Assess the impact on overall business viability.

Market information is crucial in guiding product selection, with a cautionary approach
to products with an oversaturated market. Examples include plastic footwear, audio
cassettes, disposable gloves, and bulk drugs.

For products with export potential, additional considerations include:

Export-Product Portfolio Contents
Define the composition of the export-product portfolio.
Consider diversification and market suitability.

Packaging Requirements for Export
Address special packaging needs for international shipments.
Comply with destination country laws and regulations.

Product Adaptations for Export
Assess modifications needed for specific foreign markets.
Consider factors like voltage supply and drive preferences.

WTO Conditionalities
Understand WTO requirements such as “child labour-free,” ISO 9000 certification, and GMP adherence.

Special attention is necessary for adhering to destination country laws, such as
restrictions on wooden packaging when exporting to Australia.

3.Process Selection

A. Process Selection and Technology Transfer

The choice of process technology is crucial after finalizing the product design.
For complex products, technology may need to be imported, necessitating careful agreements for technology transfer to safeguard interests.
Indigenously developed process know-how from R&D institutions offers benefits such as appropriateness and cost-effectiveness.

B. Considerations in Process Technology Selection

Evaluation of the process’s requirements for skilled labour or complex machinery.
Assessment of resource consumption, including water and power requirements.
Checking for any process or product patents that need to be honoured.
Compliance with pollution and environmental regulations.
Appropriateness to the Indian environment and conditions.

4.Arranging Finance for MSME Units in India

1.Types of Finance:

Long and Medium-Term Loans: Provided by institutions like SFCs, SIDBI, SIDCs, and banks. Used for land purchase, construction, and machinery/equipment.
Short-Term or Working Capital: Serves immediate needs like raw materials, wages, and administrative expenses. Generally available from commercial banks.
Risk Capital: Essential for ventures involving higher risks.
Seed Capital/Marginal Money: Initial funding for starting operations.
Bridge Loans: Temporary financing until a more permanent solution is secured.

2.Key Financial Institutions in India

(i) Commercial/Regional Rural/Co-operative Banks: Provide various financial services.
(ii) SIDBI (Small Industries Development Bank of India): Offers refinance and direct lending to MSMEs.
(iii) SFCs/SIDCs: State Financial Corporations and State Industrial Development Corporations are regional financial entities supporting MSMEs.

3.Loan Application Documentation:

Balance Sheet and Profit Loss Statement: Last three years’ records of firms owned by promoters.
Income Tax Assessment Certificates: for Partners/Directors.
Proof of Possession of Land/Building: Essential for collateral.
Architect’s Estimate: Details of construction costs.
Partnership Deed/Memorandum and Articles of Associations: Legal documentation.
Project Report: Detailed plan outlining the project’s scope, viability, and financial requirements.
Budgetary Quotations: Estimates for plant and machinery costs.

4.Loan Approval and Disbursement:

Sanction or Rejection Letter: Issued after the bank’s assessment of the application.
Acceptance of Terms: Applicants need to confirm their acceptance of the terms and conditions.
Disbursement: Loans are provided in phases based on the project’s implementation.

5.Alternative Financing Options

Venture Capital Funds: Offer funding in exchange for equity, suitable for high-growth potential ventures.
Non-Government Finance Companies: Provide financial services outside the traditional banking sector.

5.Filing of Entrepreneurs Memorandum under MSMED Act, 2006

1.Legal Framework

Section 8 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, governs the filing of the Entrepreneurs Memorandum.

2.Categories and Filing Location

Micro, Small, and Medium Enterprises can file the memorandum with the District Industries Centre where the enterprise is located or proposed to be located.

3.Procedure and Format

The Central Government notifies the form, filing procedure, and related matters.
The Entrepreneurs Memorandum format is outlined in Schedule II of the notification.
Forms can be downloaded from authorized websites or obtained in hard copies from District Industries Centres.

4.Filing Process

Any person intending to establish an enterprise can file the memorandum with the District Industries Centre.
The District Industries Centre verifies completeness, signs, and issues an acknowledgment within five days of receipt.
An EM number, date of issue, and unit category are allotted.

5.Documentation and Undertaking

The form must be complete, signed, and accompanied by a prescribed undertaking.
District Industries Centre maintains records of filed memoranda for micro/small and medium enterprises providing services or engaged in manufacturing.

6.Part I and Part II of Memorandum

Part I filed for establishing the enterprise.
Part II filed once production/services commence.
Non-filing of Part II within two years invalidates Part I.

7.Changes and Updates

Changes in investment, products, or services must be reported to the District Industries Centre within one month.
Failure to report changes within the stipulated time may result in consequences.

8.Electronic Record Keeping

District Industries Centre maintains both physical and electronic records.

9.Basis of Evaluation

Compliance with necessary clearances and regulations.
Adherence to locational restrictions.
Plant and machinery value within prescribed limits.
Independence from ownership or control by other industrial undertakings.

10.Compliance and Reporting

Continuous compliance with legal and administrative requirements is essential.
Timely reporting of changes and updates is crucial to maintain the validity of the Entrepreneurs Memorandum.

6.Securing Industrial Plot:

The first step in building construction is securing an industrial plot suitable for the intended unit.
Location, accessibility, and zoning regulations must be considered during plot selection.
The chosen plot should align with the nature and requirements of the industry to be established.

Finding a Suitable Architect:

Once the industrial plot is secured, the next crucial step is to find a qualified and experienced architect.
The architect plays a pivotal role in designing a factory building that meets the specific needs of the industry.
The architect should understand the type of industry, its processes, and design a building with an appropriate plant layout.

Importance of Design and Plant Layout:

The design of the factory building should align with the type of industry it will house.
A well-thought-out plant layout is essential for optimizing workflow, efficiency, and safety within the facility.
The architect’s expertise in designing a functional and ergonomic layout is critical for the success of the industrial unit.

Architect’s Estimate for Loan Applications:

An architect’s estimate of building construction costs is crucial for loan applications.
This estimate provides financial institutions with a comprehensive understanding of the investment required for the construction project.
It helps in securing loans by demonstrating the financial viability and feasibility of the building construction.

Architect’s Certificate for Loan Disbursement:

Once the construction is underway, an architect’s certificate becomes necessary for loan disbursement.
This certificate verifies the amount spent on the building construction and ensures that it aligns with the initially estimated costs.
Financial institutions rely on this certification before releasing funds to ensure that the construction progress is in line with the approved plan.

7.Utility Connections: Power and Water

Power Connection

Importance: Power and water are vital utilities for industrial plants. Delays in
obtaining a power connection can hinder the setup process, making it crucial
to prioritize and initiate the process promptly.
Types of Power Connections

LT (Low Tension): Provided for connected loads up to 75 HP.
HT (High Tension): Offered for connected loads of 130 HP or higher.

3.Application Process

A formal application must be submitted to the state electricity board.
The application is evaluated by an electrical inspector, who visits the factory site.
Following the inspection, the connected load is sanctioned.

4.Load Thresholds

LT connection for loads up to 75 HP.
HT connection for loads of 130 HP or more.

5.Power Shortage Considerations

In areas facing power shortages, it is advisable to consider a captive generating set to augment the power supply.

Water Connection
Application Process
Similar to power, obtaining a water connection involves submitting a formal
application in advance using specified forms.

1.Augmenting Water Supply

Installation of a tubewell can be considered to enhance water supply capabilities.

2.Parallel Processes

The processes for obtaining power and water connections should run in parallel to expedite the setup of the plant.

8.Manpower:
In the project report, projections for manpower and staffing are essential. However, a key
factor is timing the induction of manpower in a systematic manner. Engineers and operatives
must be available before machinery installation, ensuring a smooth transition into operations.

9.Materials:
Materials procurement and planning play a pivotal role in the success of an MSME.
Efficient inventory management is essential for maintaining manageable cash flow.
Over-ordering can tie up significant working capital, while under-ordering may lead to
production delays. Proper planning, especially for essential imported raw materials
with long lead times, is critical to prevent production interruptions.

10.Regulatory Compliance:
Compliance with various regulations, including regulatory, taxation, environmental,
and product-specific clearances, is mandatory for every Small-Scale Industry (SSI)
unit. This section emphasizes the methodology for obtaining these approvals. This
involves navigating through regulatory frameworks, ensuring adherence to tax
obligations, and obtaining environmental clearances. Additionally, understanding and
fulfilling product-specific requirements contribute to the overall compliance of the
startup.