Factors influencing the growth of Entrepreneurship

Key considerations in starting a business

AT THE END OF THIS SESSION YOU
SHOULD BE ABLE TO:
Identify the elements in the macro and micro
environment that influence the spread of
entrepreneurship
Discuss the role of government in enabling the growth
of entrepreneurship
Discuss the challenges to the growth of
entrepreneurship
Identify areas for improvement in the entrepreneurial
landscape
 Identify the key considerations in starting a business
Factors influencing the growth of
Entrepreneurship
INCLUDE:
Personal attributes
Ideas
Capital
Technology
People
Market
Infrastructure
Competition (and Competitiveness)
Social Factors
Natural Entrepreneurial Spirit
Said to be part of the Jamaican Psyche
Very often necessity driven
The fulfillment of being your own boss
The desire for self-actualization
The role of schools and other training institutions
 Entrepreneurship training is being introduced especially at
the tertiary level
 HEART Trust/NTA trainees exposed to entrepreneurship
Social Factors (Cont’d)
The Role of Women in Entrepreneurship
More women are engaging in business now-a-days
 To support their families
 To fulfill their own aspirations

Home-based businesses
Flexi-time arrangements
Cultural Factors

Ethnic Groupings
Some ethnic groups (Chinese, Jews, Indians) have a
tradition of being involved in business in Jamaica
Cultural Penetration
Cable TV showing foreign cultures, promoting wealth
and affluence
Economic Factors
• A stable economy
– Helps business planning, gives confidence for starting
new businesses
• High inflation
– Wreaks havoc with business planning but encourages
trading (buy and sell) operations
• High Unemployment
– Increases the availability of unskilled and skilled labour
at reasonable pay rates
Economic Factors
Stable Exchange Rates
Help keep prices constant, build business confidence
Interest Rates
High rates reduce the ability to repay loans, making
loan financing unattractive as a means of funding
businesses
Economic Factors (Cont’d)
Globalization and Liberalization
Removal of trade barriers between and within countries
Increases trade with the rest of the world
Globalization
The ongoing process of integration of regional
economies, societies and cultures through
international exchange
Has economic, technological, socio-cultural and
political components
Includes the transnational dissemination of ideas,
language and popular culture
Globalization
General state of change and evolution
Paradigm shifts taking place in expectations and
possibilities
The world becoming ‘smaller’
Transportation and communication are easier and
faster; positive implications for business
Globalization (cont’d)
The impact of liberalization on local and
international markets
Lowering/Removal of barriers
Exporting Possibilities
Lower import Cost, increased specialization, increased
export possibilities
Globalization
Mobility of Labour/Jobs
Live anywhere/work anywhere possibilities increasing
via telecommuting and telemarketing
Regionalization
Regional Trading Blocks
CARICOM – Caribbean Common Market (Caribbean
Community)
 Allows free movement of capital and labour
CSME – Caribbean Single Market and Economy
 Deepening the integration process, provides a unified market
for goods within CARICOM
Regionalization
Regional Trading Blocks
FTAA – Free Trade Area of the Americas
 Opening up of markets (North America, Central America,
South America and the Caribbean)
 NAFTA – North American Free Trade Agreement (Canada,

USA, Mexico)
 EU – The European Union
COMPETITION - Porter’s five forces
The Five Forces were Threat of
Porter’s conclusions on the New
reasons for differing levels of Entrants
competition, and hence Rivalry Among
profitability, in differing Existing Firms
industries. They are
empirically derived, i.e. by
Power of Power of
observation of real companies
Suppliers Customers
in real markets, rather than
the result of economic
analysis.
Porter’s Five Forces model is
a useful generic structure for
thinking about the nature of Threat of
industries. The definition of Substitutes
an industry is as follows: “The
group of firms producing
products that are close The strength of the five forces will determine the level of
substitutes for each other” profit within an industry that a competitor can expect to
Michael Porter – Competitive Strategy make

© Guide to Business Planning

TECHNOLOGICAL FACTORS
Used to do things better; to do new things
Mobile Technology
 Communication; reduces the size of the market place
 Helps you to control your view of the world

Management Information Systems

 Data gathering
 Decision making

Marketing Possibilities
 Internet; mobile phone
 Products and services can be showcased to and accessed by

the world at much lower costs

POLITICAL
What have governments done to promote
entrepreneurship?
Adopted a capitalist/free market economy for Jamaica
Encouraged the private sector to be the engine of
economic growth
POLITICAL
Government policies
Have been reducing government ownership of
businesses by privatizing stated owned enterprises (JPS,
Air Jamaica, Jamaica Pegasus, Sugar Companies etc).
POLITICAL
Government policies
The role of government is slowly changing to that of
facilitator and referee rather than owner and
operator.
 Office of Utilities Regulation (OUR)
 Fair Trading Commission

 Consumer Affairs Commission

 Anti-Dumping Commission

 Financial Services Commission

POLITICAL
Business Facilitation Strategies
E-government initiatives e.g. Jamaicatradepoint.com to
reduce bureaucracy and lost manhours; one-stop shop
for importers/exporters. Certain taxes can be paid on-
line
Governments entering into bi-lateral agreements with
friendly governments to facilitate business
POLITICAL
Business Facilitation Strategies
Low interest rate schemes for business loans
Lowering of import duties, removal of unnecessary red-
tape
Access to loans or grant funding via government
agencies (JBDC; JAMPRO)
Provision of business and technical assistance
National Infrastructure Improvements
 Highway 2000; North Coast Improvement Project and their
multiplier effects
ENTREPRENEURSHIP IN JAMAICA
CHALLENGES
High Cost of Inputs
Depreciating exchange rate - e.g imported material etc.
Security
Utilities
Transportation
Manufacturing Costs
Labour
CHALLENGES
Social
Crime
 Extortion
 Robbery & Murder

Population size
 Small society, reduces willingness to continue after failure
 Small local market (the export market has ability to

significantly increase the market size)

Geography
 Where people live and operate from can determine their
access to opportunities
CHALLENGES
EDUCATION & SOCIALIZATION
Education system not yet pro-entrepreneurship
Traditionally presented as an option for persons who
are unable to be successful in the educations system;
hence an option for ‘drop-outs’ and failure.
(Admittedly this is changing with the wave of
entrepreneurial success on the global front)
System has traditionally presented the sciences as
superior to the Arts and Business
Children are encouraged (from home and school) to
select more traditional, less risky careers
 Key Considerations
In starting a business
1. What will it be
Entrepreneurship or self
employment?

Hobby or business?

Businessman or Hustler?
2. AM I READY
Do I experiment with new
ways of doing things?
Am I willing to lower
My standard of living
if necessary?
Am I willing to invest
my savings?
Can I weather the
potential impact on my
family?
Do I enjoy competition?
Am I willing to go at it until…..?
2. AM I READY?
How risk-averse am I?
Are you committed to your vision?
Do you plan ahead of time?
How much am I willing to sacrifice?
3. Do I have a market?
What need am I filling?
Who will buy?
How much will they be willing to pay?
Is the market large or growing?
What entry strategy will I use?
Who are my competitors?
What are their strengths and weaknesses?
4. Legal Considerations
Deciding on your Business Structure
 Sole Proprietorship
 Partnership

 Limited Liability Company

 One man company

Registering Trademarks
Required Licenses
Tax Registration
Registering your small business
For a micro or small business: Sole Trader
For a group of sole traders: Partnership
Requirements to register:
Fee of approximately $2,500.00
Tax Registration Number (TRN)
Fill out BN1 or BN2 Form (available online)
Identification
For more info: www.orcjamaica.com
Companies Office of Jamaica – 1 Grenada Way
5. THE PLAN
Formal business plan?
Vision
Goals and Objectives
Key Success Factors
SWOT analysis
Business Environment
Why a Business Plan?
To Secure Financing
To know where you are going and how to get there
Forces you to set goals
Helps to determine needed resources
Helps in foreseeing problems
6. LOCATION
Proximity to the market
Can I operate from home?
Can operations and administration happen at the
same location?
How will my equipment needs impact my location
choice?
7. THE PEOPLE
Self assessment
The Team:
Market-oriented people a must for any team
Passion, commitment, dependability, loyalty
The power of teamwork and diversity
Forming, storming, norming, high performing stages of
team building
8. Marketing and Branding
Creating a logo
Website?
Advertising and/or promotion
8. FINANCIAL
CONSIDERATIONS
Funding Options

Debt Financing
Most businesses funded this way

Institutions look at your cash flow, collateral

and the liquidity of your assets.

Establish a relationship with your banker prior

to your loan request (may factor in the
decision to lend)
Funding Options
Debt Financing
Upside:
You don’t have to give up a stake in the
business

Downside:
Cost of borrowing – i.e. - interest
Collateral required
Funding Options
Grants
Designed to assist fuel the growth of small
businesses.
Research is critical to identifying

Upside:
Free money
Downside:
Highly competitive
How you use the funds is strictly defined
Funding Options
Equity Financing
 Investment in exchange for an equity or ownership
stake in the business
Upside:
 May be more convenient
 May have less “strings” attached
 May be available quickly
Downside:
 Limited one-time source of funding
 Can hurt family relationships
BEST BUSINESS
PRACTICES
1. Outstanding Customer Service management
2. Innovation in product/service development
3. Awareness of your competitive environment
4. Effective costing & pricing strategies
5. Use of new technological solutions
BEST BUSINESS
PRACTICES
6.Managing your cash flow
7.Business Management
8.Marketing Practices
9. Effective records management
10.Financial Management
COMMON REASONS SMALL
BUSINESSES FAIL
Insufficient demand (starting with the product)
Insufficient planning prior to starting or before
seeking to move business through different
growth stages (business cycles)
Poor record keeping/financial management
Insufficient cash reserves to sustain business
operations and growth
Improper costing and pricing methodologies
COMMON REASONS SMALL
BUSINESSES FAIL
Unplanned/ Poorly planned expansion
Management inefficiencies
Declining markets – inability to respond/innovate
Mistaking a business for a hobby
Entrepreneur is uncommitted
Ignoring Customer Needs
Ignoring Competition
The Entrepreneurial Process: the
full cycle
1. Plan your business
2. Document this into the business plan
3. Mobilize the needed resources: funds, team,
suppliers, etc.
4. Start-up
The Entrepreneurial Process:
1. Attain stability and expand
2. Harvest; exit?
3. Next idea?
TIPS FOR NEW
ENTREPRENEURS
Always educate yourself and learn related
skills
Look for New Markets
Present the best product to the most suited
market
Give Good Customer Service
Listen carefully to feedback & act
accordingly
TIPS FOR NEW
ENTREPRENEURS
Continually improve
Monitor to ensure that expenses are
less than sales
Innovate