What are the six key elements of entrepreneurship

and what is the importance of each?

Motivation & Commitment:
Its important to get the basic ingredients of start-up right. People
who are lending money look at the person first and foremost, so
motivation is the most critical. You need to convince your bank
manger you can make your business work because youve
researched your market, youve costed out the business and you
know where you want the business to be in 5 or 10 years time.
A means of showing your commitment to the business would be to
save and invest money.
Abilities & skill:
The second element is one of ability and skills. The individual has to
have skills appropriate to the kind of business theyre proposing to
run. And if they dont have them, they should have a reliable person
who can.
It could be that one person knows how to run a business from an
operational and management perspective, whereas another person
has the technical skills to develop the product or service.
Resources:
The third element is resources. Thats not purely about money and
equipment; its also about intellectual capability. (The ability to
persuade others is important. Many entrepreneurs have been able
to negotiate very favourable deals against the odds, when
establishing their business).
Strategy & vision:
The fourth element is strategy and vision in terms of thinking four
or five years ahead and having some idea of where that business
might be in the future and putting in place a plan to achieve that
goal.
Planning & organisation:
The fifth element is planning and organisation. Without planning,
organisation, coordination and administration, the product wont get
to market nor will it satisfactorily meet demand. You need to think
about systems, job roles, and quality issues, which if handed
effectively, will ensure you, can satisfy the market by delivering on
time and to the right place.

The idea in relation to the market:

The sixth element is the idea and more specifically, the idea in
relation to the market place. What we are trying to do is to make
certain that we are customer focussed, ensuring that the individual
is satisfied in their requirements.
When we look at the six elements it becomes evident that you can
have a bad product with a highly motivated individual, which will
produce an acceptable business. But what you cannot have is a
really good product with a de-motivated individual. The business will
not succeed because the product will not reach the market at the
right time, at the right place, or at the right price.
Motivation & commitment
1. How does the motivation of an owner affect the
business?
The motivation of the entrepreneur is driven by their type, of which
there are three.
The craftsman entrepreneurs are focused on quality of life and are
therefore seeking to satisfy themselves and to satisfy just one or
two customers.
The classical entrepreneur is driven by profit. Their main driving
force is to maximise returns from the market place.
The third area is one of a manager entrepreneur. They are
strongly orientated and have a personal need to prove their worth
through business success. They are likely to be in a mature market.
A mature market is one where the customers know the product or
service offering and do not need to be educated about. (where they
can succeed.)
2. How do (push and pull) factors affect motivation to
start a business?
Motivations to start a business
push or pull

Be my own boss
Control over my life/independence
Better financial prospects
Spotted a market opportunity
To make a lot of money
6%

25%
17%
13%
14%

 To have a more balanced lifestyle

No real alternative
To do what I enjoy
Source: Barclays Bank Survey (1992)

5%
12%
5%

Push: factors are those that propel one into their own business,
perhaps involuntarily at first e.g. redundancy.
Pull: factors are positive factors in the marketplace and in an
individuals character which makes them want to succeed e.g.
market opportunity and the drive to succeed.
There are both positive and negative features of setting up a
business. On the positive side an individual has found an idea. From
a negative perspective, an individual may have been made
redundant or be unhappy in their current role. The most successful
entrepreneur is more likely to be the person who is pulled into it by
the market place. They recognise that they want to do something
different and that they are more highly motivated in satisfying their
own aspirations and also those of the market place.
Those who are pushed are reluctant entrepreneurs who may be
running their business as well as being employed. Alternatively,
they feel they have no choice.
3. What can put an individual off starting?
Reasons for not starting a business are often surrounded by
elements of fear. The fear of failure, of not having enough cash to
be able to continue their quality of life and what other people will
think about them.
In the UK we have a negative view of what its like to run a
business. Even now when culture is changing it is still a different
culture that exists compared to that of the American culture. In
America, fear of failure, liquidation, and bankruptcy isnt seen as a
major inhibitor in terms of starting a business.
4. What are the three main factors to consider when
setting-up in business?
There are three factors that have to come into play when offering
advice to people setting up and running a business. Those of 1)
risk, 2) reward and 3) timing.

1) Risk: The risk may be too great in a volatile, changing market

place, where the product requires constant changes and
updates and where ownership of intellectual property rights
(IPR) may cause problems. If you dont have the resources in
place to cover these problems, you risk will be higher.
2) Reward: Whilst the risk might be acceptable, the return or
reward might not be adequate. The individual should be
looking for a reasonable return for efforts in running that
business.
3) Timing: Timing is crucial to the success of a business. Never
enter a saturated market unless you have powerful point of
difference or unique selling point. Early entrance to market
should be the most successful strategy; satisfying initial
demand and getting established as a recognised provider for
future demand. Timing applies equally to resources. If you set
up a market proposition but cannot produce the goods in time
you will rapidly lose credibility and hence market share.
Abilities and skills
Can anyone set up in business or do you have any special
skills and characteristics?
The requirement for specialist skills and characteristics will depend
on the industry. Some, not all, businesses require technical skills.
Management skills are critical to all business.
Negotiating skills, selling skills, administrative skills, along with the
ability to be able to identify target markets and customers are all
required when setting up and running a business.
One way to work out whether you have the appropriate skills or
attributes to set up and run a business is to undertake a quiz. The
quiz will identify individual strengths and weaknesses, together with
areas for development.
The idea in relation to the market
How do you choose a profit making idea?
The business idea is key to success. The idea itself might come
about by friends and so forth.
To validate the idea it is a good idea to check with people who know
about that particular industry. Do they think there is a gap on the
marketplace and that the product could be serviced?

It is also a good idea to use the internet, to see if the idea has been
done anywhere else in the world before.
Following discovery and validation of the idea, you must consider
profitability. Can the product be sold at a profit and therefore
generate the income stream that is required to run a successful
business.
Resources
1. How do you identify your resources and which is the
most important one?
What is my starting point?

Contacts- who do you know? In what way might they help

you?

Money- cash and realisable assets

Equipment- car? Computer? Spare room? Etc

Other resources- land? Hobbies? Spare time? Family &

friends?
Ohp 2/1/8

If you have got the motivation, the skill, the idea and the market
place, resources is the next issue.
You need to think through how that business is going to operate, to
walk yourself through the business. By doing this you will identify
the type of people you require, the jobs that are going to be
undertaken, the equipment, the finance, the customers and other
resources particular to your business.
The resources have to be used in the most effective manner to be
able to maximise the returns from the business. You need to
develop the networks and the contacts which enable access to the
appropriate resources at the right time. In this way you will
continually add value to the business.

Planning and Organisation

1. What kind of planning and organisation is required
when setting-up and running a business?
When you are planning and organising the business its like painting
a house; its 80% preparation and 20% application. There is never
enough time when you are running a business to be able to plan
and organise that particular business, so you must do your
preparation, your plan, at the beginning.
What kind of business are you going to run? Is the organisation
going to be a sole trader, a partnership or is it going to be a limited
company? How many people are going to be needed? At what
stages will these individuals come into place? What systems will be
required?
Equally as important as the form of the business is the type of tax
structure the individual is proposing to have. For instance, will the
business need to be registered for VAT?
A whole series of developments are now taking place. How is the
individual going to be able cope with the suppliers? How will the
negotiation with the suppliers be done? What are the legal
requirements behind that when it comes to the customers? What
are the payment dates and terms? How has the businesss bank
account been organised?
The planning and organisation related to the setting up and running
of the business is crucial. If it hasnt been thought through in
advance then the business will start in a mess and it may never
recover.

How should one plan?

The Classic Planning Cycle

Measure
results

Define
problem/issue

Collect relevant
data

Implement
chosen solution

Develop
alternative
solutions

Select optimum
solution

Assess
consequences

The Non-Planning Cycle

No time

Unpredictable
consequences

S
T
R
E
S
S

Fire fighting

Unplanned
development

The classical planning cycle is a logical flow of information from

defining the problem or issue, collecting information, developing,
selecting and implementing the solution through to measuring
outputs. Stress is the direct result of a lack of business planning. If
an individual is unclear where he or she is going, that person will
end up fighting and fending off problems rather than making
meaningful responses.
Strategy and vision
What is the importance of strategy and vision, when starting
a business?
You should be able to envisage what the business will look like in3,
5 and 10 years time. Equally you should be able to anticipate how
you are likely to retain that position. It is through:

Developing the existing market or product

New products or markets

Developing a particular aim of the business, e.g. interests

overseas