Unit 2

Entrepreneurship
Introduction
Entrepreneurship is to a large degree a mind-set, always striving to do
new things in an innovative and better way. The meaning of
entrepreneurship is derived from the French seventeenth-century term
for someone who “undertakes” and more specifically someone who
undertakes a specific project or activity. In the nineteenth century, the
French economist Jean Baptiste Say refined the meaning of
entrepreneurship to individuals who create value by shifting resources
from lower- to higher-valued activities. The higher value activities can
be activities that bring value to both individuals and society.

Upon completion of this unit you will be able to:

 Define entrepreneurship
Describe psychological or traits that distinguish entrepreneurs
Describe the skills required for entrepreneurship
Objectives
Identify the resources needed to start a business
Identify new business opportunities


Cronje .Gj de et al (2012) 7th edition impression: Introduction to
Business Management, Oxford University Press. Cape Town.

Prescribed reading

 Surridge, M and Andren, G, (2014). Business Studies, Philip Allan

Publishers

Additional reading

Defining entrepreneurship
Entrepreneurship is to a large degree a mind-set, always striving to do new things in an
innovative and better way. The meaning of entrepreneurship is derived from the French
seventeenth-century term for someone who “undertakes” and more specifically someone
who undertakes a specific project or activity. In the nineteenth century, the French
economist Jean Baptiste Say refined the meaning of entrepreneurship to individuals who
create value by shifting resources from lower- to higher-valued activities. The higher value
activities can be activities that bring value to both individuals and society.
Psychological or traits that distinguish entrepreneurs
1. Passion
Entrepreneurs aren’t in it for the money. While that may be an added
bonus, the true benefit is doing what they love. Building a business
takes a lot of time and effort. It means putting in longer hours and
doing extra work. If you don’t love what you do, you're not going to
want to do what it takes to achieve success.

Entrepreneurs aren’t afraid of hard work because they are so focused

on their dream and their vision. They don’t give up when a challenge
arises. They stick with their passion and see it through. As Steve Jobs
once said, according to the Smithsonian Institution, “I'm convinced that
about half of what separates the successful entrepreneurs from the
non-successful ones is pure perseverance.”

Related: As Steve Jobs Once Said, 'People With Passion Can Change The
World'

2. Motivation
Entrepreneurs are dedicated to their work. They aren’t reliant on a
manager or colleague to push them toward their goals or to get their
work done. Their drive comes from within and allows them to motivate
others in turn.

In his book, “Leaders Eat Last: Why Some Teams Pull Together and
Others Don’t,” motivational speaker Simon Sinek writes, “If your
actions inspire others to dream more, learn more, do more and become
more, you are a leader.”

Entrepreneurs know how to communicate their dream and inspire

others to join them on their journey to achieving it.

Related: An Inspiring Discussion With Simon Sinek About Learning Your

'Why'

3. Optimism
When you’re just starting out, it can seem like getting your business off
the ground will never happen. But entrepreneurs don’t think like that.
They are optimistic about the future and are always looking ahead.

In his essay “Thoughts on Various Subjects,” Jonathan Swift wrote,

“Vision is the art of seeing things invisible.” Entrepreneurs have a vision
they share with others. Their team understands why they do what they
do, what the goal is and what their role is on the path to success.

To be a successful entrepreneur, you must be goal-oriented. But it’s not

enough to just set goals. You must make a plan and do everything you
can to reach those goals. Everything you do must have a purpose.
Related: 5 Ways to Keep Your Eyes on Your Goals

4. Creativity
Entrepreneurs don’t think the same way as everyone else. They see the
world differently and think outside the box. Businesses are built on big
ideas, and those big ideas need to come from a place of creativity,
from a way of thinking that differs from everyone else’s thinking.

In “Conversations with Maya Angelou,” Jeffrey M. Elliot quoted Maya

Angelou as saying, “You can’t use up creativity. The more you use, the
more you have.”

Entrepreneurs are always looking for new ways of doing things and how
they can make them better. They aren’t satisfied with the status quo.
By being creative, they come up with ideas that change the world.

Related: 10 Inspirational Quotes From Literary Legend Maya Angelou

5. Risk-Takers
Risk taking is par for the course when you’re starting a new business.
But taking risks shouldn’t scare you. It’s necessary to achieve your
goals, and successful entrepreneurs understand this.

In his book “The Four-Hour Workweek” entrepreneur and author Tim

Ferriss writes, “What we fear doing most is usually what we most need
to do.”

If you’re afraid to take the leap, you’ll never get anywhere. Staying
complacent will never allow you to achieve greatness. Entrepreneurs
don’t let uncertainty and potential failure stop them from doing what
needs to be done. Instead, entrepreneurs look at challenges and risks as
opportunities, not as problems.

As businessman Robert Kiyosaki wrote on Twitter, “Everyone can tell

you the risk. An entrepreneur can see the reward.”
The role of entrepreneurs in society
Entrepreneurs Are Innovators

Technology is rapidly changing the fabric of the nation's workforce. Old, blue-collar
manufacturing jobs are declining, and other occupations simply don't exist anymore.
Remember telephone switchboard operators, movie film projectionists or elevator
attendants?

Entrepreneurs observe these changes and step in to fill the voids. They see the negative
consequences and the losses of some occupations caused by technology, but they sense
opportunities in the new landscape. As a result, entrepreneurs innovate. They create new
products and services that advances in technology have made possible.

Look at what Steve Jobs did. He knew that everyone liked music, and he suspected people
would like to have their own personal collection to carry around. Hence, the iPod. Apple
sold millions of iPods and went on to develop more related products.

Like Steve Jobs, entrepreneurs don't stop with just innovating one product or service. They
find related products. They grow by developing new markets. In the process, they hire
more employees.

Nobody likes to pay high hotel rates, right? Some people wouldn't mind making a little
money renting out their home, cottage or room. The founders of Airbnb saw this need and
found the opportunity to fill it. They match homeowners with people who want to rent
something short term.

Airbnb now has an inventory of over 800,000 properties located in 34,000 cities, and they
have expanded by adding experiences. Paddle down a river to local breweries in North
Carolina or take a photoshoot on the Brooklyn Bridge in New York City. Airbnb stirs the
imagination of renters and property owners in ways they had never considered.

Innovators look for consumers' needs and find ways to fulfill them. It's this innovation that
creates employment.

Entrepreneurs Create Jobs

As entrepreneurs start new businesses, they need to hire employees. These new companies
become engines of job creation. According to the Small Business Administration, small
firms have created 62 percent of new jobs since the Great Recession.
Entrepreneurs create entirely new industries and opportunities for employment. Take, for
example, a football coach in Nebraska. He noticed that young athletes received their
coaching when they were on the practice field, but after they left, they got nothing. So,
he created a business that collected videos for all types of sports training and put them on
a website. Now the aspiring athletes can get professional instructions and practice
anytime and anywhere at their convenience. This company now has over 450 employees in
the United States and six foreign countries. None of these jobs existed before this coach in
Nebraska started his business.

Entrepreneurs are at the leading edge of the economy. They are the source of the energy
that drives economic growth.

Consider the development of the internet. Most of this progress is good, but the expansion
of the internet has spawned a whole new problem: cyber-attacks by criminals looking to
steal identities and money. In response, a software company creates apps to detect and
defend against bot attacks on websites. The idea was new at the time, but it has since
spread with competitors getting into the business by creating and offering similar
products. An entire new industry has been created to defend against cyber-attacks. The
result is more new jobs for skilled software developers.

Employees of these new industries are seeds that entrepreneurs plant for growth. Workers
spend their income at other businesses, increasing employment opportunities for other
workers. Quality of life improves for the employees and the people around them.

Entrepreneurs Raise Standards of Living

Entrepreneurship is a process. Entrepreneurs see a need in the marketplace and use their
innovative talents to find a solution. They start a new business and hire employees. The
workers earn an income, which they spend in the local economy. All of this creates wealth
for the population and raises the standard of living for everyone involved.

Studies from economists show that increases in productivity improve the standard of living
for a population. The process of entrepreneurship leads to higher productivity. Innovation
applies more efficient technologies to create something new or improved. It finds more
superior ways of doing something.

The result is that employees become more efficient. Profits go up, and costs go down.
Incomes rise, and demand increases. Altogether, the economy gets stronger, creating
more jobs.

When one company comes out with a better product or service, the competition has to
improve its game or go out of business. The increased competition forces everyone to
become more efficient and better at their jobs. In other words, they become more
productive and enjoy a higher standard of living.
Entrepreneurship Creates Economic Growth

What do entrepreneurs contribute to the economy?

It starts with new businesses generating wealth for the population. New markets add
wealth to the economy when entrepreneurs invest their own money to develop innovative
products and services. Lenders and other investors contribute more capital to the new
ventures to put more funds at work.

Businesses pay taxes on their profit, and employees pay taxes on their income. The
government takes this added income and spends it to stimulate the economy.

The gross domestic product is a measure of the economic status and improvement of a
country. A stronger economy increases the gross domestic product per capita of the
country. An improving gross domestic product is an important goal for economic
development because it means that each individual is becoming more productive and
earning more money.

Benefits of Entrepreneurship to Society

Social entrepreneurs apply their innovative instincts to important societal issues. They
build profitable businesses that deal with hunger, education, health problems and
financial literacy. The early founders of the internet did not just want to make money,
they wanted to give the public more access to information, ideas and communication.

Entrepreneurs do more than form new companies. They effect social changes. Andrew
Carnegie did more than build a steel empire. He also built a system of public libraries.
Carnegie designed a formula that combined funds from his foundation with a local
commitment from the community to contribute a building site. Over 36 years of operation,
his program helped to create over 2,500 public libraries.

Innovators have a term for social-impact businesses: base of the pyramid. This refers to
creating businesses that target the most people with the lowest economic status. The
objective is to find new ways and products to improve the living standards of this sector of
the population.

One example of an impact product is an inexpensive, solar-powered lantern developed by

a California company. These lamps are designed for use in impoverished countries where
electricity is not available and families depend on kerosene lanterns for light. Kerosene is
expensive, dangerous to use and gives off pollutants, which are trapped indoors and create
a poisonous environment.
Solar-powered lanterns eliminate all of these problems. This California business has
already sold several thousand of its lamps to countries such as Indonesia, Cameroon and
the Republic of Congo. In addition to improving people's lives, the company is also making
a profit.

Entrepreneurs Are Philanthropists

Entrepreneurs give back to their communities. They not only earn money for themselves
and their employees, they donate to local organizations and charities too. A common sight
on a baseball field is a Little League team with the name of a local company on its T-
shirts. That company probably paid for the bats, balls, equipment bags and uniforms. Kids
who may not have had the money to pay for gloves now have the opportunity to enjoy
America's greatest pastime, courtesy of an entrepreneur.

Mark Cuban, businessman and owner of the Dallas Mavericks, is an example of a self-made
entrepreneur philanthropist. He started the Fallen Patriot Fund to help military families
who had relatives injured or killed during Operation Iraqi Freedom. The Mark Cuban
Foundation has donated to support research to find treatments and cures for cancer,
autism, mental problems and AIDS.

Alfred Mann's father was a grocer, and his mother was a pianist who immigrated from
Poland. Mr. Mann made his first fortune designing solar cells for spacecraft, but he became
more well known for his work with cardiac pacemakers and other medical devices. His
charitable organization, the Alfred Mann Foundation, has donated millions of dollars to
several universities to fund more research in biomedical engineering.

Other recipients of entrepreneurs' generosity are libraries, veterans' groups, homeless

shelters and health organizations. None of this would be possible if entrepreneurs didn't
start new businesses and hire employees.

Entrepreneurs Change the Community

What role does the entrepreneur play in the local community?

A business started by an entrepreneur impacts the local community. The new company
reduces unemployment by hiring employees who spend their income in local stores,
generating more business for those owners. The success of one business drives the progress
of other organizations.

Suppose the new business needs highly educated employees with specific skills. A
community might respond by creating technical training schools and intern programs that
provide these workers. Everyone gains. The company gets the workers it needs, and the
community gets a more educated population with higher incomes.
 Entrepreneurs invest in community projects by giving to local charities, volunteering for
food drives, working at soup kitchens and building houses. They sponsor cleanups to create
green spaces and parks. These community-minded businessmen may even continue to
make donations for park and roadway maintenance. Over time, these entrepreneurs
become active members in the chamber of commerce and encourage other business
people to develop and grow their community.

Entrepreneurs Help Other Entrepreneurs

Mentorship: It's not always about the money. Entrepreneurs have an enthusiasm and
passion for their businesses that they like to share with other aspiring innovators.

Seasoned entrepreneurs can tell newcomers about the mistakes they made that could have
been avoided if forewarned by someone already experienced in a startup. When guided by
a mentor, a neophyte can avoid wasting time on mistakes as a result of ignorance or
business immaturity.

They form local groups that meet to discuss the problems of starting a business, finding
employees and overcoming the hurdles of introducing new markets for products and
services. These entrepreneurial booster groups serve as motivators. They are available to
constantly encourage other entrepreneurs when the path gets tough. Success breeds
success.

Entrepreneurs do more than just find innovative solutions for products and services. Their
work benefits society by hiring employees, buying supplies and materials from local
vendors and becoming active donors to charities and organizations. The businesses that
entrepreneurs form are engines that drive the economic growth of a community.

Skills required for entrepreneurship

Ten skills you need to have as an entrepreneur:

1. Curiosity. Great entrepreneurs are tasked to discover new problems, reveal potential
niche opportunities, refactor their original business process, and innovate. This is
contingent on being passionate about different fields of study and business cases outside
of one’s comfort zone.

2. Time management. Careful priority planning, defining milestones, execution, and

iteration are all important. None of that would lead toward progress without the right
project management and time allocation methodology that gets the work done.

3. Strategic thinking. Learning to decompose a problem to its core and reveal

opportunities for growth. Figuring out creative solutions and identifying the low-hanging
fruits. Defining the scope for an MVP and testing concepts within limited time and with a
low budget.
 4. Efficiency. You need high performance when it comes to solving a problem. Applying
the 80/20 rule and other techniques for yielding higher results in less time. Switching
between different chores and progressing effectively day-to-day.

5. Resilience. Handling rejections, stress, burnouts, lack of focus, slow progress.

Determination and eagerness to fight the same dragon every morning are instrumental
when it comes to building a business from scratch.

6. Communication. Crisp and concise communication is paramount for each and every
interaction with clients, partners, peers, clients, prospects.

7. Networking. Growing a network facilitates business opportunities, partnership deals,

finding subcontractors or future employees. It expands the horizons of PR and conveying
the right message on all fronts.

8. Finance. Finance management will make or break a business. Handling resources

properly and carefully assessing investments compared to ROI is a solid requirement for
entrepreneurs.

9. Branding. Building a consistent personal and business brand tailored to the right
audience. Igniting brand awareness in new verticals.

10. Sales. Being comfortable doing outreach and creating new business opportunities.
Finding the right sales channels that convert better and investing heavily in developing
them. Building sales funnels and predictable revenue opportunities for growth.

The resources needed to start a business

There are five resources you need upfront to start a business that has
staying power. Business knowledge is one of course, but the other four
are equally as important. To turn a startup venture into a successful
business, you must be equipped to follow through as well as gain
business-related knowledge and skills.
Fully Commit
Successful entrepreneurs are fully committed to their business
ventures. You need to do the same. You have to put your heart and soul
into what you’re doing, truly believe in your product or service, and be
prepared to work long hours to get all the tasks done that are required
to grow and sustain a business.

When you start a business, you have to be ready to make sacrifices,

such as not having holidays or even a salary for what may seem like an
endless stretch of time. And you have to do all this without the safety
net that salaried employees are used to, such as benefits and pension
plans, unless you pay for them yourself. In fact, you have to have a
whole different mindset than an employee does.

Be a "Type D”
But just being able to make a commitment doesn’t automatically lead
to business success. To create a profitable business that endures, you
also have to be a "Type D” person--someone who has a desire for
success coupled with drive, discipline, and determination.1

You have to not only have the business ideas but also be able to
execute them, even when you run into problems. Successful business
people are tenacious; obstacles are temporary barriers to work around,
not roadblocks. They may take “no” for an answer, but they're
constantly looking and asking for the people who'll say "yes."

Plus you need discipline and determination as these traits are what give
successful business people the fuel to follow through on their business
ideas and endure the ups and downs of the economic climate.

Desire, drive, discipline, and determination are all required for business
success!

Get the Business Knowledge You Need

Business knowledge before you start a business is critical. All the drive
and determination in the world isn’t going to help you if you don’t have
the knowledge to run a business and don’t research and plan for your
success appropriately.

Many people have tried to start a business without acquiring the

business knowledge they need to make their business a success and, as
a result, their businesses have failed.

To start a business, you have to be knowledgeable about many different

aspects of business and have a variety of skills, or hire people who have
the skills you lack.2

If you aren’t knowledgeable enough about accounting to keep your own

books, for instance, you'll need to hire a bookkeeper and/or an
accountant. If your business is internet-based and you're not an expert
in website development, you’d be wise to hire a company to design and
maintain your website.

When you’re creating your business plan, one of your first steps needs
to be a frank assessment of your skills and expertise. Which aspects of
the business are you qualified or willing to handle and which will
necessitate either getting informed or calling in outside help?

Areas you need to know about include:

Managing people such as your staff or freelancers you hire to help you
Sales and marketing, which requires knowing who your competitors are
and how your product or services compare, as well as who your target
market is, and then developing a feasible marketing plan and creating
promotional material
Business operations such as how to manage inventory and fill orders,
inventory management, product or service delivery, and customer
service policy
Resource management such as suppliers and support services
Find Adequate Startup Money
Unless you have deep pockets or have saved in advance, you're going to
need financing to start your business.

Finding adequate business start-up money is especially critical because

there’s no guarantee that your business is going to make money right
away, and often initial income is too low to live on. In fact, the lack of
adequate funds is a top reason most small businesses fail. 3

To get started, you need an initial capital investment--the total amount

of money you need to open your doors for business and keep them open
until sufficient ongoing revenue is produced.

You’re also going to need operating capital to start a business, which is

the money it takes to keep the business going. Operating capital
includes expenses such as salaries, wages, rent, business expenses,
supplies, utilities, advertising, depreciation, and interest payments.4

A fast easy source of start-up money for small businesses is your

personal assets, such as savings, including Registered Retirement
Savings Plan (RRSP), pension funds, severance allowances, along with
remortgaging a property, credit cards, and personal property. 5 Even if
you want a small business loan or investors, many will want to see that
you've invested in yourself as well.

You can also borrow money from family, relatives, and friends, but
avoid misunderstandings and bad feelings by always getting agreements
about loans in writing and making sure that all loans are set up with
proper security, terms and conditions, and a payment schedule.

The Business Support You Need

You may be in business by yourself, but no business succeeds without a
good support system. As an entrepreneur, you need interpersonal skills,
teambuilding skills, and leadership skills, as you'll need to work with
others including vendors, employees or freelancers, customers, and
other support resources to have business success.

When you're thinking of business support, look first to the home front.
Your family should be your number one cheerleader when it comes to
 your success. A supportive spouse can be there to listen to your ideas or
problems and provide the encouragement or advice that keeps you
going.

Your spouse may also offer direct business support, such as providing
the capital needed to start a business or working in the company
without pay to keep costs down. Spouses who contribute financially by
working outside the business are also a common small business
scenario.

Having a supportive spouse is especially critical if you want to start a

home-based business. You can’t start a home-based business without
considering what your family members think about the idea, what
role(s) your family members might play in your business, and how your
business is going to affect your home life. Without the active support of
your family, your home business will fail. Talk out these issues with
your family beforehand and explore how supportive your family is
before you start a business.

Support can come from other sources including other business people
who have been where you are and achieved what you're striving for.
Talking to other successful business people help you avoid pitfalls and
provide insight into what works and what doesn’t.

If you can’t find someone locally to talk to, there’s an ever-growing

network of business communities online where you can get the
information you need, and sometimes good advice, too. You can get a
free mentor through SCORE, which also offers webinars and courses. A
final option would be to hire a business coach.

Activity 2

 Time Required: 15 minutes.

Activity Identify ways that an Entrepreneur would look for business

opportunities

How long?

Feedback

Identify new business opportunities

To be successful entrepreneurs, we need to be continually innovating
and looking for opportunities to grow our startups.

But how do you find new opportunities to take your startup to new
markets and growth levels? Here are four ways to identify more
business opportunities.

1. Listen to your potential clients and past leads

When you’re targeting potential customers listen to their needs, wants,
challenges and frustrations with your industry. Have they used similar
products and services before? What did they like and dislike? Why did
they come to you? What are their objections to your products or
services?

This will help you to find opportunities to develop more tailored

products and services, hone your target market and identify and
overcome common objections.

2. Listen to your customers

When you’re talking to your customers listen to what they saying about
your industry, products and services. What are their frequently asked
questions? Experiences? Frustrations? Feedback and complaints?

This valuable customer information will help you identify key business
opportunities to expand and develop your current products and
services.

3. Look at your competitors

Do a little competitive analysis (don’t let it lead to competitive
paralysis though) to see what other startups are doing, and more
importantly, not doing? Where are they falling down? What are they
doing right? What makes customers go to them over you?

Analysing your competitors will help you identify key business

opportunities to expand your market reach and develop your products
and services.

4. Look at industry trends and insights

 Subscribe to industry publications, join relevant associations, set
Google alerts for key industry terms and news and follow other industry
experts on social media.

Absorb yourself in your industry and continually educate yourself on the

latest techniques and trends.

THE E-MYTH REVISITED: WHY MOST SMALL BUSINESS DON'T WORK

AND WHAT TO DO ABOUT IT
By Michael E. Gerber (Harper Business, 2015)
References
THE GREAT GAME OF BUSINESS: THE ONLY SENSIBLE WAY TO RUN
A COMPANY (REVISED, 20TH ANNIVERSARY)
By Jack Stack (Crown Business, 2013

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Unit summary
In this unit you learned that there are five resources you need upfront

 to start a business that has staying power. Business knowledge is one of

course, but the other four are equally as important. To turn a startup
venture into a successful business, you must be equipped to follow
through as well as gain business-related knowledge and skills.
Summary
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