RIFT VALLEY

UNIVERSITY
Addis Ababa Gada Campus
Course Title: Entrepreneurship
And Small Business Management
Instructor: Behabtu Y.
(Bed,MBA,MAPA &PhD Candidate)
E-mail:natyyirsaw@gmail.com
Telegram:09-11-94-19-90
COURSE CONTENT

CHAPTER =1
 The Concepts of Entrepreneurship and Entrepreneur
 Definition of Entrepreneurship
 Role within the economy
 Misconceptions about Entrepreneurship/ Common Myths about Entrepreneurs
 Characteristics /Common Themes of Entrepreneurship
 The potential Drawbacks of entrepreneurship/
 The Entrepreneurial Process
 Entrepreneurs Classifications

CHAPTER =2
SMALL BUSINESS
 Definition and importance
 Economic social & political aspects of small business enterprise
 Small Business Failure factors.
 Problems in Ethiopia small business
 CHAPTER -3
Business Idea Generation
Sources of Business Idea
Feasibility planning
Ways of Changing Business Opportunities to
products/Service
 Chapter-4
FEASIBILITY ANALYSIS
• What is feasibility analysis
• Types/Areas of feasibility analysis
• Michael Porter Five Forces Model
Bargaining power of suppliers,
Bargaining power of buyers,
Threat of new entrants,
Threat of substitutes, and
Rivalry among competitors.
 CHAPTER -5
DEVELOPING BUSINESS PLAN
AND
MANAGING GROWTH
AND
TRANSACTION
– Preparing for the launch of the venture
– Managing early growth of venture
– New venture expansion strategies and Issues
(Mergers, Acquisitions, licensing and
Franchising)
EVALUATION METHOD
Test-I=10%
Test-II=20%
Attendance & Participation-10%
Project Work=20%
Final Exam=40%
TOTAL=100%
 Chapter One
The Concepts of Entrepreneurship and Entrepreneur
Entrepreneurship: Definitions and Historical Development
• Entrepreneurship is the symbol of business strength
and achievement. Entrepreneurs are the founder of
today's business success. Their sense of opportunity,
their drive to innovate and their capacity for
accomplishment have become the standard by which
free enterprise is measured. Entrepreneurs will
continue to become critical contributors to the
economic growth through their innovation, research
and development, effectiveness, job creation,
competitiveness, productivity, and formation of new
industry.
 Entrepreneurship is both the study of how new businesses are
created as well as the actual process of starting a new business .
 Entrepreneurship :the capacity and willingness to develop,
organize and manage a business venture along with any of its risks
in order to make a profit.
 Entrepreneurship refers to the process of creating a new enterprise
and bearing any of its risks, with the view of making the profit.
In economics, entrepreneurship combined with land, labor, natural
resources and capital can produce profit.
 Entrepreneurial spirit is characterized by innovation and risk-taking,
and is an essential part of a nation's ability to succeed in an ever
changing and increasingly competitive global marketplace.
 Entrepreneurship is defined as an activity that involves the
discovery, evaluation and exploitation of opportunities to
introduce new goods and services, ways of organizing, markets,
processes and raw materials through organizing efforts
An entrepreneur is someone who has an idea and who works to
create a product or service that people will buy, by building an
organization to support those sales.
 Characteristics /Common Themes
of Entrepreneurship
The concept of entrepreneurship varies from country to country as well
as from period to period and the level of economic development
thoughts and perceptions. A concise and universally accepted definition
has not yet emerged.
• Economic Activity: Entrepreneurship is an economic activity, as
it involves designing, launching and running a new business
enterprises in order to earn the profit, by ensuring best possible use
of resources.
• Profit: The activity of entrepreneurship is undertaken with the
sole objective of making the profit. It is also the reward of the
efforts made and risk taken by the entrepreneur.
• Risk Bearing: “Willingness to assume the risk” is the essence of
entrepreneurship without which he/she cannot succeed. It occurs
due to the creation and implementation of new ideas. Such ideas
are often uncertain, and so the result may or may not be positive
and instant.
The entrepreneur
 Entrepreneur is an individual that initiates and actively
operates an entrepreneurial venture. There is no doubt
that without a person who is willing to do what an
entrepreneur does, there would be no entrepreneurship!
• Creativity:
– The ability to come up with new idea and to identify new
and different ways of looking at a problem and
opportunities.
• Innovation:
– It is the implementation of new idea at the individual,
group or organizational level.
– Four distinct types of innovation:
 Invention - creation of a new product, service or process
 Extension - expansion of a product, service or process
 Duplication - replication of an already existing product, service or
process
 Synthesis - the combination of existing concepts and factors into a new
formulation
Organization creation
 Entrepreneurship involves organized effort and actions as an individual
or as a team of individuals. It demands initiative to do, take action to get
the entrepreneurial venture and running.
Creating Value
 Through entrepreneurship, new products, services, transactions,
approaches, resources, technologies and markets are created that
contribute something valuable to a community or a marketplace.
 We can also value created when, through entrepreneurship, resources
are transformed in to products and services. During this transformation
process, value is created because the entrepreneur is fashioning
something worthwhile and useful.
Profit or Non- Profit organizations
 Entrepreneurship can take place in both profit and non- profit
environments. Although we tend to assume that entrepreneurial activity
is geared at making a profit (and we agree that much of it is),
entrepreneurship also occurs in social service agencies, in community
arts organizations, or in other types of not-for-profit settings.
Growth
 Entrepreneurship is about growing a business and pursuing
opportunities as they arise. It is not about standing still or
being content to stay in one market or with one product.
Entrepreneurship implies growth.
Uniqueness
 Through entrepreneurship, unique products are created and
unique approaches are tried. Entrepreneurship is not merely
imitating what others have done. It is doing something new,
something untested and untried-something unique.
Process
 A process, very simple, is a set of ongoing decisions and
actions. Entrepreneurship is not a one-time phenomenon; it
occurs overtime. It involves a series of decisions and actions
from initial start-up to managing venture to even, at some
point, exiting it. Later, in this chapter, we will look at the
specific steps involved in the entrepreneurial process.
 Misconceptions about Entrepreneurship
1. Successful entrepreneurship needs only a great idea
 Having a great idea is only part of the equation for
successful entrepreneurship. Understanding of the
different phases of the entrepreneurial process, taking
an organized approach to developing the
entrepreneurial venture, and copying with the
challenges of managing the entrepreneurial venture are
also key ingredients to successful entrepreneurship.
2. Entrepreneurship is easy
 Be warned that entrepreneurship is not easy! It takes
commitment, determination, and hard work. And
even if you have these qualities, it still is not effortless!
 3.Entrepreneurship is a risky gamble
 Although entrepreneurs are not afraid to take risks,
entrepreneurship involves calculated risks, not unnecessary
ones. In fact, there are times when successful
entrepreneurship means avoiding or minimizing risks.
4. Entrepreneurship is found only in small businesses reality
 Entrepreneurship can be found in any size organization.
Because an organization is small does not automatically make
it entrepreneurial.
5. Entrepreneurial ventures and small businesses are the same
thing
 Entrepreneurial ventures: An organization that is pursuing
opportunities; is characterized by innovative practices, and
has profitability and growth as its main goals. Many small
businesses lack these features.
 Benefits of being an entrepreneurship
 Employment Generation:
– Directly, self employment as an entrepreneur and indirectly by starting
many industrial units which can offer jobs to millions.
 Capital formation:
– Mobilizing the idle saving of the public & put it under continues
transaction so as to improve the value of the capital by utilizing in a
profitable way under different stages of enterprise.
 Provide Market Efficiency:
– Efficient means resources are distributed in an optimal way to
maximize satisfaction.
 Balanced Regional Development:
– Entrepreneurs setup enterprises in the smaller towns away from big
cities.
 Better standards of living:
– Entrepreneurs are able to produce goods at lower cost and supply
quality goods at lower price to the community according to their
requirements.
– When the price of the commodities decreases, the consumers get the
power to buy more goods for their satisfaction
 Dispersal of economic power:
– Developing a large number of entrepreneurs helps in dispersing the economic power
amongst the population by weakening the harmful effects of monopoly.
 Creativity and innovation:
– An entrepreneur introduces new ideas and new combination of factors.
– S/he always tries to introduce newer and newer technique of production of goods and
services.
 Economic Independence:
– Import substitution and export promotion results in more economic independence to
the country.
 Inspire others Towards Entrepreneurship:
– Employees to have a first-hand experience of getting involved in an entrepreneurial
Venture.
 Provide Diversity in Firms:
– Diversity in firms fosters economic development and growth
 Greater self-confidence
Nothing boosts your confidence more than battling self-doubt and coming out on
top. Many entrepreneurs become more confident in their self-sufficiency as time
goes on and they see what they are truly capable of.
 Leadership experience
Self-discipline, communication skills, passion, optimism, patience, and
unrelenting work ethic. Building a company from the ground up hones these
leadership traits, which means that entrepreneurship can transform you into an
inspiring leader both professionally and personally.
 The potential Drawbacks of
entrepreneurship
• Although owning a business has many benefits and
provides many opportunities, any one planning to enter the
world of entrepreneurship should aware of its potential
drawbacks.
• Uncertainty of income: Opening and running a business
provides no guarantees that an entrepreneur will earn
enough money to survive. Some small businesses barely
earn enough to provide the owner-manager with an
adequate income. In the early days of a start-up, a business
often has trouble meeting financial obligations and may
have to live on savings for a time. The regularity of income
that comes with working for someone else is absent because
the owner is always the last one to be paid.
Risk: Starting or buying a new business involves
risk, and the higher rewards, the greater the risk
entrepreneurs usually face. This is why
entrepreneurs tend to have evaluated risk
carefully. It should be noted that people who
successfully innovate and start businesses come
in all shapes and sizes but they do have a few
things others do not. In the deepest sense, they
are willing to accept risk for what they believe in.
They have the ability to cope with a professional
life riddled by ambiguity, a consistent lack of
clarity.
Financial Risk In most new ventures, the individual puts a
significant portion of his or her saving or other resources at stake. This money
or resources will, in all likelihood, be lost if the venture fails. The entrepreneur
also may be required to sign personally on company obligations that far
exceed his or her personal bankruptcy

Career Risk: a question frequently raised by would-be entrepreneurs

is whether they will be able to find a job and go back to old job if their ventures
fail
Family and Social Risk Starting anew venture uses much of the entrepreneur's
energy and time. Consequently, his or her other commitments may suffer. Entrepreneurs, who are
married, and especially those with children, expose their families to risk of an incomplete family
experience and the possibility of permanent emotional scars. In addition, old friends may vanish
slowly because of missed-get together.

Psychic Risk: The greatest risk may to the well being of

the entrepreneur. Money can replaced, a new house can
built, children, and friends can be adapted. However, some
entrepreneurs who have suffered financial catastrophes
have been unable to bounce back, at least immediately. The
psychological impact has proven to be too severe for them.
Long hours and hard work:
Lower quality of life until the business gets
established:
High level of stress
Complete Responsibility
 Characteristics of Successful Entrepreneurs
• Self-Motivation. One of the most important
traits of entrepreneurs is self-motivation. ...
• Understand What You Offer. As an
entrepreneur, you need to know what you offer, and
how it fits into the market. ...
• Take Risks. ...
• Know How to Network. ...
• Basic Money Management Skills and
Knowledge. ...
• Flexibility. ...
• Passion.
 Entrepreneurial Motivation
The reasons /factors for small firm formation can be
divided between "Pull" and" Push" influences.
Pull Influence
Some individuals are attracted towards small business
ownership by positive motive such as a specific
 Desire for independence: In several research
studies, this future is prominently taken as the key
motivator. The bolon report singled out the need to
gain and keep independence as a distinguished
feature of small business owner managers. A study of
female entrepreneurs in Britain found that women
were motivated particularly by the need for
autonomy, which had been frustrated by the
individual’s prior training and background.
Desire to exploit an opportunity: The
identification of a perceived gap in the market
place through personal observation or experience
is also a common reason for starting a business.
Entrepreneurs may seek to exploit this opportunity
through special knowledge, product development
or they may hire the appropriate technology and
skills.
Financial incentive: The promise of long-term
financial independence can clearly be a motive in
starting a new firm, although it is usually not
quoted as frequently as other factors.
Push influence
• Many people are pushed into finding a new enterprise
by variety of factors including;
Redundancy (Being without a job, idleness): This has
proved a considerable push in to entrepreneurship
particularly when accompanied by a generous handshake in
a locality where other employment possibilities are low.
Unemployment: job insecurity and unemployment varies in
significance by region, and by prevailing economic climate.
The latest researches shows that at least 50% of
entrepreneurs pushed in this way to the entrepreneurial
ventures.
Disagreement with previous employer: Uncomfortable
relation at work has also pushed new entrants into small
business.
 The Entrepreneurial Process
• The entrepreneurial process we discuss in this
book consists of four steps:
Step 1: Deciding to become an entrepreneur/interest
Step 2: Developing successful business ideas
Step-3 Conducting feasibility analysis
Step-4-Developing Business plan
Step 5: Moving from an idea to an
entrepreneurial firm/Establishing the firm
Step 6: Managing and growing the entrepreneurial firm
Step-7-Evaluation and Monitoring