Entrepreneurship and Self-Employment
What this domain tests
This domain tests whether you can turn a trade skill into a viable enterprise: spotting an opportunity, surveying the market, planning, costing, pricing, registering the business and managing risk.
Core ideas
- Enterprise types: sole proprietorship, partnership, company and cooperative. A sole proprietor has full control and unlimited liability; a partnership shares capital and liability.
- Market survey: before starting, check demand, competitors, the price customers pay, location and your own capacity.
- Business plan: what you will sell, to whom, how, at what cost, with what capital, and what profit is expected.
- Costs: fixed costs do not change with output, such as rent; variable costs rise with each unit, such as material and piece-rate labour.
- The 4 Ps: product, price, place and promotion.
- Registration and records: MSME/Udyam registration gives formal identity and access to schemes; keep invoices, purchase bills, wage records and a cash book from day one.
- Risk: insurance, written agreements, staged investment and a cash reserve reduce exposure.
Worked example
A fabrication unit makes a stool. Material costs ₹120, direct labour ₹30, and allocated overhead ₹20, so unit cost is ₹170. The owner wants a 20% margin on cost: 170 × 1.20 = ₹204. Local competitors sell at ₹190. Reasoning: pricing at ₹204 without differentiation risks losing sales, while selling below ₹170 destroys the business. Options are to reduce material waste, buy in bulk, or add a feature customers value so the higher price is justified. Never ignore the owner's own labour when costing.
Mark-losing traps
- Confusing profit with cash in hand.
- Forgetting the owner's labour in unit cost.
- Pricing below cost to win a first order.
- Starting without a written record of sales and purchases.
- Assuming a good product sells itself without promotion or location planning.