ENTERPRENEURSHIP

WHAT IS AN ENTERPRENEUR?

An entrepreneur is an individual who make the business idea happen either by their own
efforts or by organizing other people to do it.

Self-
confidence:
They are people
Creative: who believe that
comes with think they are
new and going to succeed
unique ideas. and have the
abulity to
persuade others
as well.

Take initiative:
Resilient:able seizing
to withstand opportunities, they
or recover are able to change
quickly from and be proactive as
difficult events don't allow
them to overwhelm
conditions. them.

WHY PEOPLE SET UP BUSINESSES?

 FINANCIAL INCENTIVE: To earn more money and profit is the driving force behind many
entrepreneurs.

Profit maximization: Make as much as profit as they possibly can in a given period.
Key focus  FINANCIAL RETURN ON THEIR EFFORTS.

Profit satisficing: Aim to make enough profit to maintain their interest in the business.
A business that generate enough profit to provide the flexibility needed to sustain a
particular lifestyle. Making enough profit to satisfy the needs of the business owner.
 NON-FINANCIAL INCENTIVE: -

Organizations that These entrepreneurs are People who set up their

A minority of people
trade with the aim of driven by the desire to be businesses from home.
would set up a business
improving human and independent. They may be trade
in support of a moral
environmental The freedom to make all people like plumber,
belief they possess.
wellbeing. the decisions when decorators that use
(For example, setting
- Known as non-profit running a business is very their home as a base for
up a vegetarian
organizations appealing. their business.
restaurant to encourage
- Social enterprises
more people to become
have a clear social
vegetarians so less
and/or environmental
animals are
mission and generate
slaughtered).
most of their income
through trade or
donations.
(For example, Fairtrade
markets products
produced by small scale
farmers who are
marginalized from
trade in a variety of
ways.)

THE INITIAL IDEA.

 Business experience. For most people starting a small business, the business idea comes from their
existing job. A plumber might work for a plumbing company and decide to set up on her own. A
marketing consultant working for an advertising agency sets up his own marketing agency. This is likely
to be the most risk-free way of setting up a business because the would-be entrepreneur already has
knowledge of the market.

 Personal experience. Some people draw on their personal experience outside of work to find a
business idea. Some turn a hobby into a job. An amateur cyclist might buy a cycle shop. A keen
gardener might set up a nursery. Some use their customer experience to spot a gap in the market. A
mother might find it difficult to find a baby product and so set up a business to provide it.

 Skills. Some entrepreneurs draw on their broad skills base to start a business. A person with an
administration job might judge that they have good ‘people skills’ and decide to set up a business in
selling. A plumber might judge that in his area electricians can charge more for their work. So he gets
training as an electrician and sets himself up as a self-employed electrician.

 Lifestyle choices. Some business areas attract people who want to make a lifestyle change. They
might want to move to the country and invest in a small holding.

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 CREATING AND SETTING UP A BUSINESS.

1) IDEA

2) RESEARCH – The viability of the business idea has to be research – may involve carrying out market research
and analyzing the competition to decide whether the idea is likely to work.

3) PLANNING

4) FINANCING – Entrepreneurs have to decide how much finance they will need and which sources they will use to
obtain it.

5) LOCATION – The location an entrepreneur chooses will depend on the nature of the business. Certain types of
business activity may need planning permission.

6) RESOURCES – The business plan will contain a list of the resources need to set up and run the business.
Entrepreneurs will need to find suppliers of materials, utilities and other day to day resources.

7) LAUNCH

RUNNING A BUSINESS.

Developing a business

Purchasing: Production: The

Administration: Business will have enterpreneur will need
Financial The business needs to to buy resources to monitor product
managment: The record all of its Managing People: quality and
all time.
business needs transactions so that Marketing spending time on consistency,consider
Enterpreneurs recruitment,selecti
enough money to profit and tax liabilities health and safety
can be calculated. need to get the on and training. issues in the factory,
fund its operation.
//Accurate record best quality and ensure that
keeping resources at the production levels
lowest price. match orders.

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Different ways of structuring a business, including:

SOLE TRADER

Sole trader is an individual who owns and operates his or her own business.
A sole trader is the only one who benefits financially from success, but must face the burden of any failure.

The business and the individual are the same, as the owner has unlimited liability for any debts that result from running
the firm.

- If a sole trader is unable to pay his or her bills, the court can allow personal assets to be seized by creditors in
order to meet outstanding debts.
- If insufficient funds can be raised in this way, then the person will be declared bankrupt.

 There are no formal rules to follow when establishing the business or administrative costs to pay.
 Complete confidence can be maintained because accounts are not published.

 Sole trader is the limited sources of finance available, long working hours of work involved.

PARTNERSHIP

Partnership exist when two or more people start a business without forming a company.

They have unlimited liability so it is vital that the partners trust each other.

ADVANTAGES
Additional skills: a new partner may have abilities which
the sole trader does not possess. These can help to
strengthen the business, perhaps allowing new products.
DISADVANTAGES
Sharing profit: the financial benefits derived from
running the business will have to be divided up between
the partners according to the partnership agreement
made on formation.

More capital: A number of people together can inject Loss of control: Decision making has to be shared as no
more finance into the business than one person alone individual can force an action on the business.
which makes expansion easier.

Shared strain: The new partner will help to share the Unlimited liability  where owners share several
worry of running the business, as well as taking on a share responsibility for the entire amount of debt by the
of workload. business.

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  Limited liability: The legal duty to pay debts run up by a business stays with the business itself, not its
owners.

LIMITED COMPANY

To gain the benefits of limited liability, the business must go through a legal process to become a limited company.
The process of incorporation creates a separate legal identity for the organization.

The Articles of
The Memorandum Association
of Association
•Outline the internal
manament of the
company. THis
• The document includes the rights of
that sets up the shareholders,the
role of directors and
company. frequency of
shareholder
meetings.

ADVANTAGE OF FORMING A LIMITED COMPANY

1. Shareholders experience the benefits of limited liability including the

confidence to expand.
2. A limited company is able to gain access to a wider range of borrowing opportunities
than a sole trader or partnership. This makes funding the growth of the business
potentially easier.

DISADVANTAGE OF FORMING A LIMITED COMPANY

1. Limited companies have to follow more, and more expensive, rules than unlimited liability businesses.

PRIVATE LIMITED COMPANY

PUBLIC LIMITED COMPANY

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CO-OPERATIVE.

1.3.2 Researching a business opportunity

1. Market research

2. The market

3. Positioning

4. Product trial

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1.3.3 Supply and demand

1. Demand

2. Supply

3. Interaction of supply and demand

1.3.4 Finance

1. Sources of finance