Related General Topics of Entrepreneurship

ENTREPRENEURS IN PAKISTAN:
Salient Features of Entrepreneurs in Pakistan are: Age Pattern: The mean age of entrepreneur was found to be 42 years and of their enterprises 12 years !t is "omparable to the #orean age pattern $4%&' Corporate status: Sole owner: (e works with his own hands "ombines the entrepreneur fun"tion of initiating the business making in)estments* taking de"isions and performing managerial fun"tions' Heritage: +aste played an important role in "ertain industries and on the other hand heritage is dominant ,ut o)erall it is mu"h di)ersified ' Educational Le el: -iffering from industry to industry %./ ha)e s"hool edu"ation and 0./ ha)e "ollege or better edu"ation only 1./ ha)e professional or graduation le)el' S!ills Le el: 1a2ority is skilled in family business 1ost of training is as a family member Te"hni"ally they are )ery skilled in heredity business 3ew generation has professional edu"ation Si"es and In est#ent: 1a2ority started in a small way with less than 1. workers and 142 to 240 of the firms started with less than 5.*... in)estments' Gro$th: The growth was fast in "ase of small firms than in large firms' Profita%ilit&: 6ate of profit is higher in "ase of small industries in "omparison with the large industries '

The Industrial 'istor& of Pa!istan:

Pakistan7s industrial history has been dominated by a single8minded emphasis on industry and that is of large8s"ale enterprises The fall out of that de)elopment strategy was formally adopted in the %.7s as "ons"ious poli"y step in the start of se"ond poli"y plan period $19%.819%5& has been large s"ale industrial holdings* a""ounting for mu"h of the "ountry7s assets and "apital The feeling among the masses is that a few families "ontrol :. to ;. per"ent of the "ountry7s assets* led to politi"al rebellion That rebellion also "ulminated in the dismemberment of the eastern part of the "ountry The primary "auses for that tragedy* were basi"ally e"onomi" in nature The uphea)al also generated a parallel e"onomi" thought* e<"lusi)e to the pe"uliarities of Pakistan7s e"onomy That e"onomi" thought ad)o"ated a"ross the board nationali=ation of e"onomi" assets as a )ehi"le for ensuring so"ial 2usti"e in the so"iety The fall out of that strategy was two pronged: 1 !neffi"ient labor 2 Shaken ,usiness +onfiden"e The rea"tion to that poli"y mi< in the early 19;.7s was re)ert ba"k to the >yubian model of e"onomi" de)elopment The model was "hara"teri=ed by : 1& Promotion of large8s"ale units 2& E<pansion of large8s"ale enterprises 0& ,anking se"tor turned to "ater to large loans The !1F "onditions and poor re"o)ery rate of huge borrowings played a ma2or role in "reating a negati)e point for the progress "ur)e These "onstraints further pushed the e"onomy towards re"ession* industry towards si"kness and indi)idual units towards default >ll these fa"tors
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pre"ipitated the rethinking of a strategy to re)i)e the growth of e"onomy !t was due to non8 in)ol)ement of banks that medium s"ale and small8s"ale enterprises has got the attention of the stakeholders i e the e"onomi" managers and the pri)ate se"tor The de)elopment of Small to 1edium Enterprise $S1Es& suits the "urrent situation on a""ount of the following fa"tors 1& 2& 0& 4& 5& %& :& ?ow o)erhead "ost* low le)el of finan"ing ?esser pressure on the banking system Employment generation Entrepreneurial de)elopments @endor based de)elopment -e)elopment of large8s"ale industry on firm basis > more 2ust distribution of resour"es and profits

The pre8reAuisites for the de)elopment of S1E se"tor rest hea)ily on an infrastru"ture tuned to support su"h de)elopments that in"lude: > banking system "ustomi=ed for S1E de)elopment Bne window operation

+urrently* our banking system "ontinues to be the large se"tor banker -espite talk of S1E de)elopment under the auspi"es of S1E-> and de)elopment of S1E ,ank and #hushali ,ank* the finan"ial se"tor7s general response has been influen"ed by the se"urity issue* i e against whi"h asset the bank would be ad)an"ing loans to the small and medium s"ale business entity !n the absen"e of a "ustomi=ed banking setup* the de)elopment in the S1E se"tor so far has been e)olutionary and not the result of any "ons"ious a"ti)ities The growth of Pakistani entrepreneurship in good in region and "an be "ompared with !3-!>* Sri ?anka and 1alaysia ! respe"t of following: Countr& Pakistan Sri ?anka !nida 1alaysia Rising Stars * %. 4 5: 1 52 0 59 % Lost opportunit& * 1. . 0; : 29 0 2: :

+continued,--. GEN/ER /E0EL1P2ENT STATUS 312AN AS AN ENTREPRENEUR IN PAKISTAN:

Ea"h of the two genders of any so"iety "onstitutes roughly half of the population* and Pakistan is no e<"eption People of both genders embody not only labor for"e* but also knowledge and "reati)ity* whi"h may be mobili=ed* to a"hie)e e"onomi" ends -is"arding either of the genders* therefore* implies foregoing the potential benefits* whi"h arise from mobili=ing the respe"ti)e human resour"es for de)elopment Pakistani women ha)e been engaged in the produ"tion pro"ess for ages Their parti"ipation in the e"onomi" a"ti)ities in the modern so"iety has also progressed beyond agri"ulture into the lo"al market e"onomy Comen are in"reasingly migrating to urban areas for employment in a range of "ottage industries* su"h as "arpet wea)ing* te<tiles and handi"rafts !n sear"h for wage employment* women are mo)ing into small business and self8employment )entures thereby "reating many formal and informal opportunities for work Comen entrepreneurship in the formali=ed sense* howe)er* remains a new "on"ept Bur "urrent strategies also tend to fo"us on in"reasing women7s parti"ipation in the labor for"e The business en)ironment for women in Pakistan refle"ts a "omple< interplay of many fa"tors made up of
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so"ial* "ultural* traditional and religious elements These ha)e taken shape o)er many "enturiesD are an"hored in patriar"hal system and are "learly manifested in the lower of women The form of "onstitutional stru"tures* poli"y do"uments* regulatory arrangements and institutional me"hanisms is "ontemporary rather than traditional* so it is "osmeti"ally impartial Eet the gender bias is rigid and deep8rooted as it draws legitima"y from the perpetuation of a traditional mind8set* established rituals and a firm belief system !t has "on"lusi)ely been shown that women business owners en"ounter more obsta"les* and fa"e more risks* finan"ially* so"ially* e"onomi"ally* "ulturally and legally than male business owners fa"e The Fo)ernment of Pakistan is well aware of the potential of the women in our so"iety and the "ontribution they "an make towards e"onomi" de)elopment Comen are "ontinuously being en"ouraged to enter the business stream of the "ountry and are being pro)ided in"enti)es (owe)er* there still is a strong dearth of fo"used initiati)es that need to be taken by e<isting business fa"ilitation institutions The new s"enario is gi)ing rise to woman as entrepreneur as they ha)e opened their own "hamber of "ommer"e The woman bank is in Pla"e and we "an see lot of women "oming up in8ser)i"es se"tor* apparel* edu"ation and many su"h o""upation

R1LE 15 ENTREPRENEURS'IP IN EC1N12IC /E0EL1P2ENT:

The role of entrepreneurship in e"onomi" de)elopment in)ol)es initiating "hange in the stru"ture of business and so"iety Bne theory of e"onomi" growth depi"ts inno)ation as the key* not only in de)eloping new produ"ts* but also in stimulating in)estment interest The new "apital "reated e<pands the "apa"ity for growth $supply side&* and new spending utili=es the new "apa"ity and output $demand side & !n spite of the importan"e of in)estment and inno)ation in the e"onomi" de)elopment of an area* there is still a la"k of understanding of few fa"tors whi"h are as follows: G The product6e olution process is the pro"ess through whi"h inno)ation de)elops and "ommer"iali=es through entrepreneurial a"ti)ity* whi"h in turn stimulates e"onomi" growth !t begins with knowledge in the base te"hnology and ends with produ"ts or ser)i"es a)ailable in the marketpla"e G The "riti"al point in the pro"ess is the interse"tion of knowledge and a re"ogni=ed so"ial need* "alled the iterati e s&nthesis- This point often fails to e)ol)e into a marketable inno)ation G 1ost inno)ations introdu"ed in the market are ordinar& inno ations* with little uniAueness G Technological inno ations refer to new produ"ts with signifi"ant te"hnologi"al ad)an"ements G 7rea!through inno ations mean the de)elopment of new produ"ts with some te"hnologi"al "hange 6egardless of the le)el of uniAueness or te"hnology* ea"h inno)ation e)ol)es into and de)elops towards "ommer"iali=ation through one of three me"hanisms: the go)ernment* entrepreneurship* or entrepreneurship Entrepreneurship has assisted in re)itali=ing areas of the inner "ity !ndi)iduals in inner8"ity areas "an relate to the "on"ept and see it as a possibility for "hanging their present situation

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Entrepreneurial 7usiness Plan:

> "omprehensi)e business plan is "ru"ial for a start8up business !t defines the entrepreneur7s )ision and ser)es as the firm7s resume Reasons for $riting a %usiness plan: The main reasons for writing business plan are as:
1. 2. 3. 4. 5.

To "on)in"e oneself that the new )enture is worthwhile before making a signifi"ant finan"ial and personal "ommitment To assist management in goal8setting and long8range planning. To attra"t in)estors and get finan"ing To e<plain the business to other "ompanies with whi"h it would be useful to "reate an allian"e or "ontra"t To attra"t employees

> business plan "an help an entrepreneur to allo"ate resour"es appropriately* handle une<pe"ted problems* and make good business de"isions > well8organi=ed plan is an essential part of any loan appli"ation !t should spe"ify how the business would repay any borrowed money The entrepreneur also should take into a""ount all startup e<penses and potential risks so as not to appear nai)e (owe)er* a""ording to >ndrew Ha"harakis* a "ommon misper"eption is that a business plan is primarily used for raising "apital Ha"harakis* a professor of entrepreneurship at ,abson +ollege* suggests that the primary purpose of a business plan is to help entrepreneurs gain a deeper understanding of the opportunity they en)ision (e e<plains: The business plan pro"ess helps the entrepreneur shape her original )ision into a better opportunity by raising "riti"al Auestions* resear"hing answers for those Auestions* and then answering them ' Some entrepreneurs "reate two plans: a planning do"ument for internal use and a marketing do"ument for attra"ting outside in)estment !n this situation* the information in ea"h plan is essentially the same* but the emphasis is somewhat different For e<ample* an internal do"ument intended to guide the business does not need detailed biographies of the management (owe)er* in a plan intended for marketing* the ba"kground and e<perien"e of management may be the most important feature > standard business plan is usually about 4. pages in length !t should use good )isual formatting* su"h as bulleted lists and short paragraphs The language should be free of 2argon and easy to understand The tone should be business8like and enthusiasti" !t should be strong on fa"ts in order to "on)in"e people to in)est money or time in the new )enture The %asic ele#ents of a standard %usiness plan include:
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Title Page Table of +ontents E<e"uti)e Summary +ompany -es"ription Produ"t4Ser)i"e 1arket and +ompetition 1arketing and Selling Strategy Bperating Plan 1anagement4Brgani=ation Finan"ing 11& Supporting -o"uments
1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

The e<e"uti)e summary is the "ornerstone of a good plan This is the se"tion that people read in order to de"ide whether to read the rest !t should "on"isely summari=e the te"hni"al* marketing* finan"ial* and managerial details 1ore importantly* it needs to "on)in"e the reader that the new )enture is a worthy in)estment The "ompany des"ription highlights the entrepreneur7s dream* strategy* and goals The produ"t4ser)i"e se"tion should stress the "hara"teristi"s and benefits of the new )enture Chat differentiates it from its "ompetitionI !s it inno)ati)eI The finan"ial "omponents of a new )enture7s business plan typi"ally in"lude three pro2e"tions: a balan"e sheet* an in"ome statement* and a "ash8flow analysis These reAuire detailed estimates of e<penses and sales E<penses are relati)ely easy to estimate Sales pro2e"tions are usually based on market resear"h* and often utili=e sales data for similar produ"ts and ser)i"es produ"ed by "ompetitors Criting a business plan may seem o)erwhelming (owe)er* there are ways to make the pro"ess more manageable First* there are many "omputer software pa"kages for produ"ing a standard business plan 3umerous books on entrepreneurship ha)e detailed instru"tions* and many uni)ersities sponsor programs for new businesses

Sources of 5inance or Capital for Entrepreneurship:Entrepreneur:

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1any entrepreneurs struggle to find the "apital to start a new business There are many sour"es to "onsider* so it is important for an entrepreneur to fully e<plore all finan"ing options (e also should apply for funds from a wide )ariety of sour"es

1 2 0 4 5 %

Personal Sa)ings: ,anks +redit +ards Friends and Family @enture !n)estors Fo)ernment Programmes

4- Personal Sa ings: Experts agree that the best source of capital for any new business is the
entrepreneurs own money. It is easy to use, quick to access, has no payback terms, and requires no transfer of equity ownership!. "lso, it demonstrates to potential in#estors that the entrepreneur is willing to risk his own funds and will perse#ere during hard times.

4- 7an!s: $anks are #ery conser#ati#e lenders. "s successful entrepreneur %hil &olland
explains, '(any prospecti#e business owners are disappointed to learn that banks do not make loans to start)up businesses unless there are outside assets to pledge against borrowing.* (any entrepreneurs simply do not ha#e enough assets to get a secured loan from a lending institution.

8- Credit Cards: The entrepreneurs personal credit cards are an easy source of funds to access,
especially for acquiring business equipment such as photocopiers, personal computers, and printers. These items can usually be obtained with little or no money paid up front and with small monthly payments. The main disad#antage is the high rate of interest charged on credit card balances that are not paid off in full each month.

9- 5riends and fa#il&: These people belie#e in the entrepreneur, and they are the second
easiest source of funds to access. They do not usually require the paperwork that other lenders require. &owe#er, these funds should be documented and treated like loans. +either part ownership nor a decision)making position should be gi#en to these lenders, unless they ha#e expertise to pro#ide. The main disad#antage of these funds is that, if the business fails and money goes lost, a #aluable relationship may be ,eopardi-ed. (owe)er* if an entrepreneur has money in a bank sa)ings a""ount* she "an usually borrow against that money !f an entrepreneur has good "redit* it is also relati)ely easy to get a personal loan from a bank These loans tend to be short8term and not as large as business loans

;- 0enture in estors: This is a ma,or source of funding for start)ups that ha#e a strong
potential for growth. &owe#er, #enture in#estors insist on retaining part ownership in new businesses that they fund. .ollowing are the three types of /enture in#estors as:

5or#al institutional enture funds are usually limited partnerships in which passi#e limited partners, such as retirement funds, supply most of the money. These funds ha#e large amounts of money to in#est. &owe#er, the process of obtaining #enture capital is #ery slow. 0e#eral books, such as 1alantes /enture 2apital 3 %ri#ate Equity 4irectory, gi#e detailed information on these funds. Corporate enture funds are large corporations with funds for in#esting in new #entures. These often pro#ide technical and management expertise in addition to large monetary in#estments. &owe#er, these funds are slow to access compared to other sources of funds. "lso, they often seek to gain control of new businesses.
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Angel in estors tend to be successful entrepreneurs G who ha#e capital that they are willing to risk. They often insist on being acti#e ad#isers to businesses they support. "ngel funds are quicker to access than corporate #enture funds, and they are more likely to be in#ested in a start)up operation. $ut they may make smaller indi#idual in#estments and ha#e fewer contacts in the banking community.

<- Go ern#ent progra#s: (any national and regional go#ernments offer programs to
encourage small) and medium)si-ed businesses. In the 5nited 0tates, the 0mall $usiness "dministration 0$"! assists small firms by acting as a guarantor of loans made by pri#ate institutions for borrowers who may not otherwise qualify for a commercial loan.

5ranchising:
Definition: Fran"hising is the pra"ti"e of using another firmJs su""essful business model The word Jfran"hiseJ is of anglo8Fren"h deri)ation 8 from fran"8 meaning free* and is used both as a noun and as a )erb For the fran"hisor* the fran"hise is an alternati)e to building J"hain storesJ to distribute goods and a)oid in)estment and liability o)er a "hain The fran"hisorJs su""ess is the su""ess of the fran"hisees The fran"hisee is said to ha)e a greater in"enti)e than a dire"t employee be"ause he or she has a dire"t stake in the business

Characteristics of 5ranchising:

,usinesses for whi"h fran"hising work best ha)e one or se)eral of the following "hara"teristi"s:
1& 2& 0& 4& 5& %& :& > good tra"k re"ord of profitability Easily dupli"ated -etailed systems* pro"esses and pro"edures >round a uniAue or unusual "on"ept ,road geographi" appeal 6elati)ely easy to operate 6elati)ely ine<pensi)e to operate
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>s pra"ti"ed in retailing* fran"hising offers fran"hisees the ad)antage of starting up Aui"kly based on a pro)en trademark* and the tooling and infrastru"ture as opposed to de)eloping them 5ranchise agree#ent: > Fran"hise >greement is a legal* binding "ontra"t between a fran"hisor and fran"hisee* enfor"ed in the Knited States at the State le)el Prior to a fran"hisee signing a "ontra"t* the Trade +ommission regulates information dis"losures under the authority of The Fran"hise 6ule The Fran"hise 6ule reAuires a fran"hisee be supplied a Kniform Fran"hise Bffering +ir"ular $KFB+ & or Fran"hise -is"losure -o"ument $F-- & prior to signing a fran"hise agreement* a minimum of ten days before signing a fran"hise agreement > typi"al fran"hise agreement "ontains: Kniform Fran"hise Bffering +ir"ular $KFB+&or F-- Fran"hise -is"losure -o"ument $F--& -is"losures reAuired by state laws Parties defined in the agreement 6e"itals* su"h as Bwnership of System* and Bb2e"ti)es of Parties -efinitions* su"h as: >greement* Territory >rea* >rea ?i"ensee* >uthori=ed dedu"tions* Fross 6e"eipts* ?i"ense 3etwork* The System 1anual* Trademarks* Start -ate* Trade name* Termination* Transfer of li"ense ?i"ensed 6ights* su"h as: Territory* 6ights 6eser)ed* Term and 6enewal* 1inimum Performan"e Standard Fran"hisor7s Ser)i"es* su"h as: >dministration* +olle"tions and ,illing* +onsultation* 1arketing* 1anual* Training Fran"hisee Payments* su"h as: !nitial ?i"ense Fee* Training Fees* 1arketing Fund* 6oyalties* 6enewal fee L Transfer fee Fran"hisee Bbligations* su"h as Kse of Trademarks* Finan"ial !nformation* !nsuran"e* Finan"ial and ?egal responsibility 6elationship of Parties* su"h as +onfidentiality* !ndemnifi"ation* 3on8+ompete Transfer of ?i"ense* su"h as: +onsent of fran"hisor* Termination of li"ense* Termination by li"ensee Bther pro)isions Fo)erning law >mendments Cai)ers >rbitration Se)erability The following KS8listing tabulates the early 2.1. ranking of ma2or fran"hises along with the number of sub8fran"hisees $or partners& from data a)ailable for 2..4 These in"lues 1 Subway $Sandwi"hes and Salads& M Startup "osts N;4*0.. O N25;*0.. $22... partners worldwide in 2..4& 2 McDonald's M Startup "osts in 2.1.* N995*9.. O N1*;42*:.. $0:*0.. partners in 2.1.&

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3. 7-Eleven Inc. $+on)enien"e Stores& MStartup +osts N4.*5..8 ::5*0.. in 2.1.*$2;*2.. partners in 2..4& 4 Hampton Inns & Suites $1idpri"e (otels& MStartup "osts N0*:1%*... O N15*14;*;.. in 2.1. >lso gi)e e<amples of fran"hises in Pakistan

Entrepreneurial 2ar!eting Plan:

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