Resource Mobilization

When we consider the following factors it is said to be an ‘efficient utilization of human resources’?

1. Managerial Staff: The managerial staff forms the core of the enterprise. They formulate the goals, objects and policies to be implemented in the enterprise and get the work done through the workers.

2. Non-managerial staff: They are the workers who help in converting the raw materials into the finished goods. Depending on the type of work their quality and quantity varies.

3. Trained Technical staff: These are technical experts who help in

4. Administrative staff: They provide support services to all the above namely the managerial, non-managerial and technical staff. They’re not directly involved in production. They role is to help and maintain the business operations..

5. Professional staff: They are professionals like

who are available for consultation. As these professional services are expensive, they are only consulted if required and may not be part of regular staff.

As the enterprise comprise all the above staff, the efficient utilization of the human resources is possible only if

Entrepreneurs should ensure that there is a “right individual at the right job” due to the following reasons:

Human resources are the most important assets of any organization because they are the ones who put all the non-living resources(tools, machinery, digital equipment etc) into best use. The quality and quantity of the human resources has a significant direct impact on the performance and productivity of any enterprise. Having a Right human resource working on the right job at the right time helps in benefiting from

Due to these reasons the entrepreneurs strive to put the Right person in the right job at the right time

Definition of Intangible resources: The resources that are neither seen nor felt nor can be touched nor can be preserved but at the same time for a strong base for the existence of an enterprise are known as intangible resources. These resources help the business to gain profits in addition to the normal profits earned by any other similar enterprise. These are critical resources of an organization.

The intangible resources generally comprise of the following:

1. Brands: The success or failure of a business depends on how strong is the brand it is associated with. The worth of the brand need to be computed. A strong brand often brings in higher margins easily.

2. Intellectual Property: Intellectual property comprises the critical commercial rights protected by trademarks and patents. These are very important and should be given due consideration.

3. Goodwill: The value of the business will be much more than the total value of all the tangible assets it possesses. In other-words when someone want to buy a business they will be willing to pay more than the total value of the tangible assets. This additional value is known as the goodwill. A startup enterprise may not have earned any goodwill yet. But if an entrepreneur is acquiring an already existing enterprise or forming a partnership or a joint alliance, the he will be able to earn the goodwill.

4. Reputation: Reputation is associated when the strategic objectives of a business are continually met. A reputed business have the advantage of gathering the necessary support from the employees and the suppliers.

With reference to utilization of resources, the entrepreneurs should ensure that they follow the following moral responsibilities.

Definition of material resources: The materials required to arrive at the final product or service offered by an organization are called as material resources. The raw materials, machines, tools, power, processing and assembling need to be combined to perform the essential operations to arrive at the finished product or service. These are known as material resources. In short any material that is found in nature and can be utilized in the product or manufacturing process is known as raw material.

While planning, the important decisions to be made by the entrepreneur are as follows:

Procurement of physical resources is not easy due to the reasons specified below:

Acquiring the physical resources is a difficult task as it requires the following issues to be minimized by a very careful selection of the place. If the place is not properly selected these issues will be intensified.

The issues that are likely to be taken into consideration are

The following aspects need to be planned for procuring the physical resources.

Definition of Capitalisation: The long-term funds contributed by the shareholders and creditors to a business is called as capitalization.

The funds are invested in the form of

Business finance refers to the process where in the capital funds are acquired and utilized so that the financial requirements are met and the overall business objectives are attained.

Capital structure refers to the long term funds that include different types of funds like

These funds are borrowed or invested by the entrepreneur himself/herself

Financial plan is the one that depicts that flow of funds into the business and their efficient utilization to meet the goals of the organization.

Finance is required for the business as it plays critical role to bring the various resources like human resources, machinery, raw material, methods and processes, land etc to realize the business goal. It is due to this critical role played by the finance that the following proverbs came into place.

The following is the list of the major areas of financial decision-making by the entrepreneur.

1. Amount of finance needed: The finance raised should neither be excessive nor it should be insufficient.

2. Term: The term could be

3. Sources from where finance is procured: The various funds are:

The nature of business like whether it is trading or manufacturing or services affects the requirement of fixed capital required.

For example in case of a manufacturing business like car manufacturing, huge investment is required to procure the land, building, equipment, hiring highly skilled technical human resources etc. Thus the investment required would be more.

Another example is a trading business where in the finished goods are brought purchased from the suppliers and sold to the customers or retailers. In this case there is no need of huge land, building, equipment or highly skilled human resources. And hence the investment required would be less.

Defferentiation of “Capitalisation” from “Capital Structure” is as follows:

The following are the objectives of the financial planning.

The following is the differentiation between the fixed capital requirement and working capital requirement on the basis of parameters given.

Working capital is that part of the capital which is needed for running working or current requirement of the enterprises and also for taking care of the day-to-day operational expenses. It varies among different enterprises. The following factors determine the amount of working capital required by an enterprise.

1. Nature and size of business: A business that has a production process requires more working capital compared to a business that deals with the trade services. Also, large scale units require large working capital and small scale units require small working capital.

2. Business Cycle: When the demand for the business varies, the business needs more working capital during the boom period and less working capital during depression.

3. Gestation Period: When there is large time gap between the beginning and ending of a manufacturing process, more working capital is required. A smaller gestation period requires comparatively small working capital.

4. Volume and procurement of raw material: If the nature of the business is such that more capital need to be invested on the raw materials, it requires huge capital amount. When the cost of raw material is low, it requires small amount of working capital.

5. Manual v/s Automation: Compared to an automated business, a business where in more man power is needed requires more working capital.

6. Need to stock up inventories: When the nature of the business requires more amount of raw materials/stock to be maintained in inventory, it requires more working capital. If the inventory is low, the working capital is also low.

7. Turnover of working capital: When the turn over is more, the working capital is recovered at a faster rate from the sale of finished goods. So, it requires less working capital compared to the business where in the turnover is less.

8. Terms of Credit: When the business has to sell the goods on credit, the investments are locked up in the form credit with the buyers(clients or customers). Hence it requires more working capital compared to a business that sells on cash.

Definition of Fixed Capital Requirement: Fixed capital refers to the capital that is required for meeting the permanent or long term needs of the business. Fixed capital exists in the form of investment made in fixed assets like land, building, plant and machinery etc.

The following are the factors that should be kept in mind while planning for fixed capital.

1. Nature of the business: The amount of fixed capital depends on whether the business is trading or manufacturing or service oriented.

2. Size of the business: Large business requires large fixed capital and small business requires small fixed capital.

3. Technology used in the production: The more the sophisticated the technology, the more the requirement for the fixed capital. On the otherhand if the business is labour intensive, then the amount of fixed capital required might be less.

4. Range of production: If the business deals with diversified range of products (the number of products is more), then more fixed capital is needed. On the otherhand if the business deals with a single or less number of products, less fixed capital is needed.

5. Type of product manufactured: If the product is more complex (like a car or computer), it requires more complicated machinery and hence more is the fixed cost. On the otherhand, if the product manufacture is simple (like a mobile phone case), the fixed capital required is less.

6. Method of acquisition of fixed assets: When the business decides to buy the fixed assets, the fixed capital required is more. On the other hand, if the business decides to hire or lease the fixed assets, the fixed capital requirement is comparatively lesser.

The following are the factors that are required to be planned and paid attention for an ideal capital structure.

The financial planning entails the policies and procedures for proper coordination between the various functional areas of business, requiring effective allocation of resources across the different departments. It enables smooth functioning of the enterprise.

So, we can conclude that an ideal capital structure is the result of great planning and team work.

Working capital is that part of the capital which is needed for running working or current requirement of the enterprises and also for taking care of the day-to-day operational expenses. It varies among different enterprises.

The following factors help in determining the working capital required of a company.

1. Nature and size of business: A business that has a production process requires more working capital compared to a business that deals with the trade services. Also, large scale units require large working capital and small scale units require small working capital.

2. Business Cycle: When the demand for the business varies, the business needs more working capital during the boom period and less working capital during depression.

3. Gestation Period: When there is large time gap between the beginning and ending of a manufacturing process, more working capital is required. A smaller gestation period requires comparatively small working capital.

4. Volume and procurement of raw material: If the nature of the business is such that more capital need to be invested on the raw materials, it requires huge capital amount. When the cost of raw material is low, it requires small amount of working capital.

5. Manual v/s Automation: Compared to an automated business, a business where in more man power is needed requires more working capital.

6. Need to stock up inventories: When the nature of the business requires more amount of raw materials/stock to be maintained in inventory, it requires more working capital. If the inventory is low, the working capital is also low.

7. Turnover of working capital: When the turn over is more, the working capital is recovered at a faster rate from the sale of finished goods. So, it requires less working capital compared to the business where in the turnover is less.

8. Terms of Credit: When the business has to sell the goods on credit, the investments are locked up in the form credit with the buyers(clients or customers). Hence it requires more working capital compared to a business that sells on cash.

Public Financing: The process of procuring the finance from the public, in the form of shares and debentures is known as public financing.

Debenture is document issued by a company under its seal to acknowledge the debt that need to be paid pack after the completion of prescribed period. Debentures thus act as a source of raising long term finance from outside.

Equity shares are the ones that are not preference shares. The company does not bear any obligation to pay them either principal amount or dividend and there by making the equity share holders the true risk bearers. Due to this reason the equity share capital is also termed as risk capital from the equity shareholder’s perspective.

Raw materials are procured as part of the day-to-day operations of the business and hence working capital is used to purchase the raw materials.

Based on the duration, the sources of finance are classified as follows:

1. Long term finance: Capital financed for more than 5 years. This includes

2. Medium term finance: Capital financed for a duration of more than one year and below 5 years. This includes

3. Short term finance: Capital financed for a duration of less than one year. This includes

The following are the major sources of finance available for a public limited company.

1. Equity shares: The company issues shares to the public and provide the equity shares to them. The equity share holders become the virtual owners of the company. The company will however will be under no obligation to pay the equity share holders the principal amount or dividend.

2. Preference shares: These shares will have a priority regarding

Among shares of debentures, debentures will be preferred by the organisation, in terms of tax benefits. The reason is that when the companies prefer debentures, it yields tax benefit to them. When debentures are issued, the company is liable to pay interest on the amount borrowed under debentures. This interest can be claimed under tax deduction as it fall under tax deductible expense. So, the companies prefer the debentures.

Personal financing refers to the initial investment capital arranged by the entrepreneur himself/herself. Entrepreneurs use either their personal cash or they convert their assets into cash and use it.

Entrepreneurs use their personal resources for making the initial investment in the enterprise. They also use other options like their private assets, cash from the members of the family, near and dear relatives and friends. The friends and relatives who helped in the investment may not have any legal hold on the business. They remain as silent partners and extend their informal assistance.

All these sources of personal finance may be classified as below:

1. Personal Savings: Entrepreneurs usually invest their own personal savings as these are readily available and also as they do not have to undergo any liability. The savings could be small or large and become as internal sources. These can easily meet small, short term requirements.

Friends and Relatives: Entrepreneurs can also procure finance from

This form of procurement is informal but one of the popular.

2. Chit Funds: Chit fund is a kind of customary source of finance. In this few members form into a club or committee or party or association. Each member contribute a monthly deposit. If someone is in sudden need of money they can claim the chit. This premature en-cashing of the deposited amount will act as a personal finance source.

3. Deposits from Dealers: The enterprise can collect security deposits from the dealers selected. The security deposit collected depends on the credibility, reputation and goodwill of the enterprise. This security deposit collected becomes a short term source of financing. However, this source is applicable only for businesses which need dealers or distributors.

The following are the differences between Equity Shares and Preference Shares

The following are the differences between Owner’s fund and Borrower’s fund

Public deposits are a good source of raising medium term finance due to the following reasons.

It is appropriate to use financial institutions as a source of financing under the following conditions.

Venture Capital: Venture capital is investment financed by a venture capitalist company in entrepreneurial ventures which are in second or third stage of development. In the event when the ventures have high potential prospects or where in high returns are expected, the venture capital can be financed as the initial equity investment too.

The following are the modes of raising finance.

The following are the various sources of financing capital through ownership.

1. Retained Profits/Sloughing back of profits: Instead of distributing all the profits to the shareholders in the form of dividend, it is partly retained and reinvested into the business. This is usually used by already established enterprises that are making profits. Not possible for a new venture.

2. Equity Shares: Equity shares are issued to give away part of the ownership to the equity shareholders. Equity shareholders are like virtual owners of the business. However, the business is under no obligation to pay back to them. Thus equity shareholders bear high risk. However, they possess the voting rights.

3. Preference Shares: Under preference shares the shareholders gets priority to receive the dividend before any dividend is paid to the equity shareholders. There is also preference for these shareholders to regain their capital if the company is likely to wind up. These shares can be

4. Seed Capital: Seed capital is procured for funding the initial investment to develop a prototype or to prove the feasibility of the capital.

The equity/ownership finance can be procured by

Debt financing: Debt financing refers to the finance procured by the entrepreneur from the bank in the form of interest-bearing instrument. This is usually in the form of loan against a collateral like a car or house etc. Due to this reason it is also known as asset-bearing finance. The payment is indirectly related to the sales and profits of the venture.

Banks act as an important source of ‘debt financing’ as described below.

Commercial banks provide short or medium term loans to firms of all sizes through the following various options and thus act as important sources of debt financing.

1. Overdraft: This is a temporary provision allowing the entrepreneur to withdraw more than the amount available in his account. This works as follows:

2. Cash Credit: This is similar to overdraft. Its features are

3. Discounting of bills/Factoring: In this mode the bank encashes customer’s bills before they become due. For providing this facility there will be nominal charges. The entrepreneur is liable to pay the amount if the bill is dishonoured.

Factoring is a financial service rendered by a specialized person called as Factor. This person deals in realizing book debts, bills receivable, managing sundry debtors and sales registers of the commercial and trading firms. This person acts as an agent and charges a commission known as commercial charges or discount. Thus it is the sale of accounts receivable to the bank or finance company or others involved.

4. Loans and Advances: In this case the entire loan amount is arranged to the entrepreneur either in cash or through wire-transfer. In this case

5. Term loan: These loans are granted to the entrepreneur by the bank for a fixed period to buy

This loan amount should be repaid in monthly/quarterly/half yearly/annual installments.

6. Demand Loans: To procure these loans, the entrepreneur has to furnish security of Fixed Deposit Receipts (FDR), Government securities, Life Insurance Policies etc. The name demand loan implies that the bank has the authority to demand the loan at any time by issuing a notice to the entrepreneur.

A mentor is

who uses their mind creatively, especially in occupational settings, and advises the others to achive their goals.

A business mentor is a person who has the experience of successfully establishing and running a business and is capable and willing to offer invaluable

to a new entrepreneur.

Group mentoring is the one in which the mentor mentors a group of 4 to 6 people in one go where as peer mentoring is the one where in the mentor maintains the mentoring relations with their peers either formally or informally.

Informal mentoring is the type of mentoring where in

Mentors play a critical role to provide support, recognize the strengths and weaknesses of the entrepreneur and guide them to take corrective measures. Their role involves helping the entrepreneur in

Mentor gains the following benefits by mentoring others.

A mentor is

who uses their mind creatively, especially in occupational settings, and advises the others to achieve their goals.

Everyone has a learning need. Learning through a mentor will play a critical role in the overall development in specific area. As mentors have already have practical knowledge, they will be able to mentor others to achieve systematic results by applying their expertise.

Mentors will usually

Examples include:

The following are the different types of mentoring.

1. Mode of construction: This is based on the way the mentor-ship is structured.

2. Mode of delivering: This is based on the way the mentor-ship is rendered. This is further classified as

Mentor-ship benefits not just the entrepreneur but the whole organization in the following ways:

The following is the role and importance of mentoring.

Mentors play a critical role to provide support, recognize the strengths and weaknesses of the entrepreneur and guide them to take corrective measures. The role and importance of the mentoring is summarized below.

Definition of Mentoring: Mentoring is the process of a person helping other person to realize their goals. Mentoring involves a mentor and a mentee. A mentor is

who uses their mind creatively, especially in occupational settings, and advises the others to achieve their goals. The mentor creates an informal environment where in the mentee feels comfortable to express their needs openly by confiding in the mentor. Organizations view this as a very powerful personal development and empowerment tool.

The mentor provides help and support in a non-threatening manner which is received by the mentee in an appreciating and valuable pattern. Mentoring involves supporting and encouraging people so that they can manage their own learning in the most efficient manner, acquire or improve the skills, improve their performance and realize their goals.

The following are the characteristics of mentoring.

Census Method is a method of collecting data where in all the units associated with a particular problem are studied. It is also called as Enumeration Survey Method.

The following are the main producers or originators of information.

For the entrepreneur seeking information regarding plant and machinery, the following sources are available.

The following are few of the major small scale industry groups in India.

Information serves the following purposes for the entrepreneur.

The following are the information resource centres at the State and Central levels avilable in India for the entrepreur regarding:

The following are the differences between primary, secondary and tertiary sources of information.

Primary sources are original materials, usually collected by the investigator in-person, and becomes the reference for other research studies. It reports a discovery or share new information. This information is first hand accounts and is relevant to an event.

The following are the methods used in collecting primary data.

1. Direct personal investigation: The investigator directly approaches the source and personally collects the information.

2. Indirect oral investigation: The investigator approaches certain sources who are connected with the information directly or indirectly and personally collects the information.

3. Local Correspondents: The investigator appoints local agents or correspondents in different parts of the area under investigation and collects the information through them.

4. Mailed questionnaire:The investigator prepares a questionnaire with questions related to the objective of the inquiry and send it to informants by post and collects the information through them.

5. Questionnaire through Enumerators: In this case the investigators appoints enumeratorsⓘ. The enumerators visit the informants along with the questionnaire. The informants fill the questionnaire which will be helpful to fulfill the investigators answers.

The Tiny enterprise is a business enterprise that falls under the tiny sector where in the total amount invested in plant and machinery does not exceed ₹ 25 lakhs at present and is likely to increase in future.

The industrial units whose investment in plants and machinery exceeds ₹ 10 crores is known as large scale enterprise.

A medium scale enterprise is one in which the investment in plant and machinery is more than ₹ 5 crores and less than ₹ 10 crores.

The following are the differences between an ancillary unit and a tiny unit.

The pre-requisite to call any activity as business activity is that the activity should be undertaken in connection with the place of the business to the place of consumption

The basis of classification of the business activities is different in different countries.

In addition to the above, the business activities can also be classified base on

The business enterprise is classified as follows on the basis of the size.

In India, it is adjusted on the basis of the volume of the capital invested whether the enterprise is large or small. Based on the volume, the industries are categorized as follows.

1. Small Scale: Small scale industries are the ones in which the investment in plant and machinery does not exceed ₹ 5 crores. They have the following features.

The following are the various types of small scale units.

2. Medium Scale: The enterprises in which the investment in plant and machinery is more than ₹ 5 crores but less than ₹ l0 crores.

3. Large Scale: The industrial units whose investment in machinery exceeds more than 10 crores.

The cottage industry is an industry which is run either as whole-time or part-time occupation with full or partial help of the family members. The following are the characteristics of cottage and rural industry.

The following are the enterprises which fall under the category of the SSI units.

1. Tiny Sector: Tine sector refers to those business enterprises whose investment in plant and machinery is less than ₹ 25 lakhs. However, this amount is likely to increase irrespective of the location of the unit. To promote these industries, the government has announced a package. This package allows these units to avail the privileges of many kinds like land allotment, electricity connection, technology etc. to continuously utilize. This package is not applicable to other small industries.

2. Ancillary/Auxiliary Small Units: This is a small-scale industry unit that manufactures components for its parent unit and supplies 50% of its production to its parent unit. These units benefit from the guaranteed demand from its parent unit. They also have technical and financial help from their respective parent units.

3. Micro-business: This is a business unit that has invested in plant and machinery not exceeding ₹ 25 lakhs.

4. Small-Scale Service and Business (Industry Related) Enterprise: These are MSME (Ministry of Micro, Small and Medium Enterprises). These are further classified as:

5. Small-Scale Industries owned and Managed by Women Entrepreneurs: These are operated individually or jointly by a group of women. Their capital share is more than 51%. The government offers them concessions.

6. Export Oriented: These are the units that export more than 50% of its production. The government offers them subsidies. The ministry of MSME & ARI will bring out a specific list of hi-tech and export oriented industries which would need the investment cap to be raised upto ₹ 5 crores to allow them to upgrade their technology and stay competitive.

7. Cottage and Rural: The cottage industry is an industry which is run either as whole-time or part-time occupation with full or partial help of the family members. The following are the characteristics of cottage and rural industry.

You might also want to refer the following pages.