ESTABLISHING A

BUSINESS
➢ Definition of entrepreneur…
➢ Functions of an entrepreneur
➢ Characteristics or an entrepreneur…
➢ Role of the entrepreneur in decision making
➢ Role of the entrepreneur in economic development…
➢ Reasons for establishing a business…
➢ Essential steps for establishing a business…
➢ Reasons for preparing a business plan…
➢ Elements of a business plan…
➢ Sources of information for conducting research…
➢ Feasibility study
➢ Need for short, medium and long term planning…
➢ Regulatory practices instituted by government for businesses…
➢ Factors that determine the location of a business
➢ Significance of collateral
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 DEFINE ENTREPRENEUR

Entrepreneur is the ‘risk bearer’. The one who combines the other factors of production to make a
profit.
◦ Another definition: Someone who shows vision and creativity and who takes on risks by creating a
business venture, with hopes of making a profit.
◦ Business in action: Identify an entrepreneur in your neigbourhood/family who has set up a
small business from scratch. Find out what it was like to set up a new enterprise.
 RESOURCES NEEDED TO START A BUSINESS

◦ What are factors of production?

◦ Factors of production are all the resources or inputs needed to create goods or services in an attempt to
make a profit.
◦ What are the factors of production?
◦ 1. Land (Natural Resources)
◦ 2. Labour (Human Resources)
◦ 3. Capital (Man-made Resources)
◦ 4. Entrepreneur(ship)
Functions of an entrepreneur
Con’t
Con’t
FUNCTIONS OR ROLE OF THE ENTREPRENEUR :

I. As a factor of production
- Risk bearer – (entitlement to the profits and losses)
- To combine all the other factors of production
-

II. In decision making (FUNCTIONS OF AN ENTREPRENEUR)

- Conceptualizing – come up with the business idea
- Planning – formulating the policies, activities and strategies to achieve the aim of the
business
◦
- Accessing funds or finance – source or obtain the finance needed to start and operate the
business
 Con’t
- Organizing the factors of production – buy land, hire and train workers, determine
how to use machinery to increase production, burrow monies etc.
◦
- Operating the Business – run the business as well as manufacture the good or service
◦
- Evaluating and Risk Bearing – check the performance of the business venture
through financial records, balance sheets etc. And undertaking the risk of investment
(to create and market a good or service)
I. In economic development
- Collaborating – to work together with his team to produce or create the good or service. For
example, the owner of a small restaurant works together with a chef. The owner also
collaborates with suppliers, decorators, etc.
- To provide goods and services to satisfy citizens: provides society with the services that it needs.
- To create jobs
- To contribute to nation building (taxes, sponsorships, community development, etc.)
- Earning foreign exchange
CHARACTERISTICS OR PERSONAL TRAITS OR LEADERSHIP QUALITIES OF AN
ENTREPRENEUR
 Con’t
1. Creative or Innovative – to produce a new or novel product or idea
2. Flexible – able to adapt to changes in the market and industry

3. Goal oriented – work purposely and aggressively to accomplish tasks or to meet objectives
4. Persistent – Stick at it/continue to work towards the objectives despite challenges/ keep on going in the
face of discouragement or adversity.
5.

6. Persevering – have a drive and determination to be successful

7. Propensity to take calculated risks – the ability to access and undertake risks or make realistic estimations
of the likelihood of the venture being a success.
REASONS FOR ESTABLISHING A BUSINESS
1. Financial independence – to earn monies to finance self and family
◦
1. Being one’s own boss/ increased control– make your own decision or cannot work for others
◦
1. To use skills and knowledge – wish to put what you have learnt into practice and not be idle
◦
1. Self-actualization or fulfilment – to get a satisfied feeling of accomplishment or develop a prestige in society.
2. To create employment – providing jobs for family or friends or communities with high unemployment levels
◦
1. To just give back to society
◦
1. To satisfy a demand or needs.

1. Increased income
◦
Needs satisfied through employment

◦ Employment serves as a form of motivation for workers.

◦
◦ Definition of Motivation
◦
◦ Motivation refers to the reason(s) one has for acting or behaving in a particular way.
◦
◦ Types of Motivation
◦
1. Intrinsic motivation –performing an action or behavior because you enjoy the activity itself/ naturally satisfies you. For
example,learning a new language because you like experiencing new things, fun, interest
◦
1. Extrinsic motivation –performing an action or behavior for the sake of some externaloutcome. Forexample; money,
grades, praise/fame
 Motivational Theories
◦ Abraham Maslow hierarchy of needs
◦ Herzberg motivation two factor theory
◦ Carrot and stick
◦ Mc Gregor X and Y theory
Abraham Maslow Hierarchy of needs
Two factor theory
Carrot and Stick theory
Characteristics of Abraham Maslow’s Hierarchy of
needs

i. Maslow believed that the fundamental goals, drives or needs of humans could be
classified into five basic needs
ii. Maslow stated that every person tries to satisfy these needs in order of their
ranking (lowest to highest)
iii. Maslow believes that one does not move towards satisfying a higher-order need
before lower-order needs have been reasonably satisfied
Diagram of Maslow’s Hierarchy of needs
 Explanation of needs
i. Physiological needs – relate to survival and physiological maintenance of the human being
ii. Safety needs – refer to the desire for freedom from threatening events and surroundings, as
well as job or employment continuity.
iii. Belongingness, Love and Affection needs – refer to the need for friendship, affiliation,
interaction and warm feelings from others
iv. Esteem needs – refer to the need of an individual to feel self-worth, self-respect and to want
respect of others
v. Self-actualization needs – relate to the desire to reach one fullest potential, taking into
consideration legacies (those left behind)
 How can businesses or management assist workers in achieving Maslow’s
Needs?

(a) Physiological needs:

◦
- Pay adequate income
- Provide rest rooms
- Provide proper ventilation
◦
(a) Safety needs
- Provide compensation for health and safety of workers

- Provide long-term employments

- Maintain an adequate flow of income

◦
(a) Belongingness, Love and Affection needs
- Provide opportunities for team work
- Allow breaks (canteen or lunch breaks)
- Have social clubs or activities
◦
◦ (d) Esteem needs
◦- Publicly reward workers as a form of motivation
◦- Use varying difficulty level in the job
◦- Treat workers fairly and with respect

◦ (e) Self-actualization needs

◦- Restrict job to allow greater challenge
◦- Include workers in decision-making processes
◦- Assign tasks that require special skills of a problem-solving nature
◦ Homework
STEPS FOR ESTABLISHING A BUSINESS
 Con’t
1. Conceptualization – the entrepreneur identifies a need in the market and comes up with an idea
(business idea)
◦
1. Market Research – probe or gather information about a potential market or the extent of need for the
product or service. For example, What features are customers looking for?, how much are they
willing to pay?
◦
◦ Identification of Resources – if the market research is favorable, the entrepreneur must find land, labour,
capital etc. For example, what type of people do we need, how many people, what skills should they have?
 Con’t
1. Creation of the Business Plan – a document that outlines the goals of the business and the strategies
that will help to achieve them
◦
1. Acquisition of Funds – getting the money to start the business
◦
1. Operation of the Business – starting and managing the business effectively and efficiently to ensure
customer satisfaction
 What is a Business Plan?

◦ A business plan is a written document setting out a business’ (new business) future objectives and the
strategies for achieving its goals Or a complete description of the business and plans for next one to three
years.
Reasons for preparing a business plan
i. To ensure that careful research is conducted into the feasibility of the business
◦
◦ NB: Feasibility the possibility that can be made, done, or achieved, or is reasonable
◦
i. To attract potential investors
ii. To source financing
iii. To guide the operations of the business when making decisions
ELEMENTS OF A BUSINESS PLAN
 FEASIBILITY STUDY

◦ What is a feasibility study?

◦ A feasibility study is an analysis of the viability (ability to survive or yield sufficient profits) of a
business idea or research done to find out if the business project will work. It aims to identify the
strengths and weaknesses of a proposal to see if it should go ahead.
 Reasons why a feasibility study is important

a. To ascertain the viability: determining whether the project or plan is practical or doable
b. Narrows business alternative
c. The possible costs attached to the project; materials, equipment, transport , labour
d. Possible source of finance: how much will be needed, how much would be available, when repayments
can be made
e. Examine market demands, distribution channels etc.
◦
◦ The feasibility study is carried out before the entrepreneur create a business plan or the business
plan should only be prepared if the feasibility study shows that you have a viable business
opportunity.
SOURCES OF INFORMATION FOR CONDUCTING RESEARCH

◦ There are two types of researches

a. Secondary Research or Desk Research
b. Primary Research or Field Research
◦
 Secondary or Desk research
◦ Secondary or Desk research is collecting information that already exists in some form. The data has
already been collected

Sources of Secondary or Desk Research

Internet
Reports (sales, stock exchange, annual reports etc.)
Books
Brochures (on information about competitors)
Government Publications
 Primary or Field Research
◦ Primary or Field Research is the collection of data that does not already exists.

Sources of Primary or Field Research

Surveys using questionnaires
Personal or telephone interviews
Observations
Consumer panels
Market testing
SIGNIFICANCE OF COLLATERAL IN ESTABLISHING A BUSINESS

◦ What is Collateral?
◦ Collateral are assets offered as security for a loan.
◦
◦ Examples of Collateral or Things that can be used as collateral
i.
Land deeds
ii. Mortgage
iii. Motor Vehicles
iv. Cash
v. Stocks
vi. Bonds
vii. Insurance Policies
viii. Property
ix. Money
x. Appliances
Regulatory practices instituted by the Government
for establishment and conduct of businesses
Regulatory practices instituted by the Government for
establishment and conduct of businesses
◦ a. Monetary policy consists of the actions of a central bank, currency board or other
regulatory committee that determine the size and rate of growth of the money supply, which in
turn affects interest rates For e.g. interest rates
◦ b. Fiscal policy is the means by which a government adjusts its spending levels and tax
rates to monitor and influence a nation's economy.
◦ Monetary and fiscal policies:
◦ • cover the amount of money available in a country and the price of borrowing money
from the government (interest rates)
◦ • the government issues notes and coins within its territory
◦ the government decides how much money to put into circulation through its central bank
◦ • relates to government spending and government taxation.
Consumer protection agencies:
• protect consumers against unfair business practices
• practices might include offering inaccurate weights and measures of goods, offering
goods that are unfit for sale, selling products that are harmful to consumers, or unfair
advertising
Environmental policies:
• create rules relating to the environment
• monitor how effectively these rules are being applied
• prosecute businesses and individuals who flout these environmental regulations
 Examples of general procedures that businesses should adhere to

• Decide on ownership structure or type of business

• Register with the Office of the Registrar of companies ( registered companies can be monitored
and provided with assistance by the government).
• Provide necessary documentation, along with a fee to the Registrat in order to be registered
Examples of legislations that businesses should
adhere to
❖ Labour laws and regulations ( wages, work safety, compensation, unions etc.)
◦
❖ Food Handler’s Permit ( for businesses where employees come in contact with food)
◦
❖ Pricing Regulations (restrictions on the prices that can be charged for goods and services in a market)
◦
❖ Income tax (exemptions, stamp duties, payments of income tax, consumption tax, property assessment tax, custom and
excise etc.)
◦
❖ Zoning legislations (restricted and preserved areas, open and closed seasons)
◦
❖ Factories act (workplace health, safety, child labour)
◦
❖ Intellectual property rights (copyright, patents, trade marks etc)
◦
❖ Consumer Protections measures (Sale of good act, ombudsman, weights, measures, food safety, Quality control
inspection, Bureau of Standards etc.)